Reviewed by Tan Chua
Many property deals sit between a simple sale and a full development. A family buys a block to split. Two business partners take an option over a site. A seller agrees terms on a single page before lawyers are involved.
These deals carry more risk than a standard purchase. Small drafting gaps can become large disputes.
Chua Tan Associates acts only on property located in Victoria. Our clients may live anywhere in the world.
Heads of agreement: what binds and what does not
A heads of agreement (or term sheet) records the main commercial terms. Buyers, sellers and co-investors often sign it before a full contract is drafted.
The key question is whether it is binding. Australian courts look at the words used and at how the parties behaved. A document marked “subject to contract” is usually not binding on the main deal. But conduct after signing can sometimes change that result.
Many heads of agreement mix binding and non-binding parts. Commonly binding clauses include:
- confidentiality;
- exclusivity, or a period during which the seller will not deal with others;
- who bears costs;
- the law that governs the document.
Price, settlement and conditions are often stated as non-binding. Whatever you intend, say it clearly.
A land sale contract must also meet formal requirements, so a loose heads of agreement may not be enforceable.
Option deeds and put and call option deeds
An option deed gives one party the right, but not the obligation, to buy (a call option) or to sell (a put option). A put and call option deed combines both. If one side does not exercise, the other usually can.
Why use options instead of a contract of sale? Common reasons include:
- giving a developer time to obtain planning permission before committing;
- securing a site while finance or co-investors are arranged;
- allowing the parties to agree on price now and settle later;
- managing timing for tax or family reasons.
The exercise window, option fee, attached contract, and what happens on death or insolvency all matter. So does whether the option can be assigned or nominated.
Victorian duty law contains specific rules for options, nominations and sub-sales. Duty can arise in ways that surprise people, including on assignment. These rules change, so take advice on your structure before signing.
Subdivided lots and off-the-plan contracts
When land is subdivided, lots are often sold before the plan of subdivision is registered. These are off-the-plan sales. They are regulated by the The Sale of Land Act 1962 (Vic).
In general terms, the Act controls how deposits are held, what the vendor must disclose, and when a purchaser may end the contract. The vendor’s statement (often called a section 32 statement) must contain prescribed information. Off-the-plan contracts carry extra disclosure, including the proposed plan and owners corporation details.
Sunset clauses set a date by which the plan must be registered. Victorian law now restricts a vendor’s ability to rescind under a sunset clause without the purchaser’s consent or a court order. Purchasers may also have rights if the registered plan differs materially from what was shown.
A non-compliant contract can be unenforceable, and missed disclosure may let a buyer rescind.
Joint purchases and joint ventures
Families and business partners often buy together. The two basic forms of co-ownership in Victoria are joint tenancy and tenancy in common.
Under a joint tenancy, when one owner dies, their interest passes to the surviving owners. It does not pass under their Will. Under a tenancy in common, each owner holds a defined share, which passes under their Will.
The title alone rarely tells the whole story. A written co-ownership agreement should cover:
- who contributed what, and how that affects each share;
- who pays the mortgage, rates, insurance and repairs;
- who decides on development, leasing and sale;
- how one owner can exit, and how value is fixed;
- what happens on death, divorce, incapacity or bankruptcy;
- how disputes are resolved, ideally starting with mediation.
Larger projects may use a company, a unit trust or a joint venture agreement. Each has different tax, liability and control outcomes.
Duty and land tax in general terms
Stamp duty (land transfer duty) applies to most Victorian land transactions. Foreign purchasers may pay additional duty. Nominations, options and changes in ownership of companies or trusts holding land can all have duty consequences.
Land tax is assessed on land held each year. Trusts and foreign owners may be treated differently, and surcharges can apply. Rezoning can also trigger a separate tax on uplift in value.
Rates and thresholds change often and depend on your facts, so coordinate early with your accountant and with us.
Owners corporation issues
Most subdivisions with common property create an owners corporation. Owners corporations in Victoria are governed by the Owners Corporations Act 2006 (Vic).
Developers set the first rules, lot entitlements and early contracts, and buyers inherit them. Common issues include unfair fee allocation, common property defects, and rules limiting later use. Developers should structure this carefully; buyers should review it before signing.
When family and friends invest informally
In many Asian business families, deals are done on trust. A handshake between brothers or an old friend feels enough. Writing it down can feel rude.
The problem appears years later. One party dies, divorces, or needs cash, and nobody recorded what was agreed.
Illustrative example, not a real case: two brothers and a cousin buy a Melbourne block to build townhouses. Only one brother is on title. The others send money from overseas with no written agreement. When the titled brother’s marriage breaks down, his spouse claims the whole property is his asset. The others must now prove their interest, often at great cost and family strain.
A short, clear agreement at the start protects relationships as much as money.
Investors living overseas
If you live outside Australia, you may be a “foreign person” for foreign investment purposes. Many residential and some commercial acquisitions require approval under the Foreign Investment Review Board (FIRB) framework before you sign or before the contract becomes unconditional. Rules for established dwellings have tightened in recent years.
Overseas investors also face foreign purchaser duty and land tax surcharges. Banks will ask detailed source-of-funds questions. See our guide on buying and selling Victorian property from overseas for more.
Common concerns of Asian families
“We are overseas. Can we do this without flying to Melbourne?” Yes, in most cases. We meet online across time zones, and our in-house notary public can help with documents needing formal witnessing.
“My father wants to keep it simple and trust the family. How do I raise a written agreement?” We often explain to elders that an agreement protects the next generation. It is about clarity and harmony, not distrust.
“How do we keep things fair between siblings who contributed different amounts?” A co-ownership agreement can record each contribution and set clear exit terms. This reduces later arguments over who is owed what.
“The bank keeps asking where the money came from.” Source-of-funds questions are normal for cross-border transfers. We help you prepare a clear paper trail early.
“We value privacy. Will our affairs be discussed widely?” No. We handle family and business information with discretion and confidentiality.
Why Asian families choose Chua Tan Associates
Our lawyer Tan Chua has more than three decades of experience in Victorian property law. That experience shapes how we draft from the start.
The real value of good advice is the costly mistake you avoid. A poorly drafted option or an informal family deal can cost far more than doing it properly.
- Family firm practising since 1990
- Deep cross-border experience with clients across Asia
- One firm for property, wills and estates, family law and immigration
- Mandarin, Cantonese and English
- Notary public in-house
- Discretion and confidentiality
Frequently asked questions
Is a heads of agreement legally binding? It depends on the wording and the parties’ conduct. Many contain both binding and non-binding clauses, so the drafting is critical.
Why use a put and call option instead of a contract of sale? Options can provide time for planning approval, finance or co-investors, while fixing key terms now. Duty and assignment rules need careful attention.
Can a developer cancel my off-the-plan contract under the sunset clause? Victorian law now limits this. Generally, the vendor needs your consent or a court order, but your contract and facts must be reviewed.
Should family members buying together be joint tenants or tenants in common? It depends on your goals. Tenants in common with a written co-ownership agreement is often more suitable for investment, but advice is needed.
Do you act on property outside Victoria? No. We act only on property located in Victoria. Our clients can live anywhere in Australia or overseas.
See all our Melbourne property and conveyancing services.
Book a consultation
Planning a development deal, joint purchase or option in Victoria? Speak with us before you sign. We offer a paid initial consultation, and clients and family members overseas can join online. Once we understand your matter, we will give you a quote.
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This article is general information only. It is not legal or tax advice and should not be relied upon. Laws change and outcomes depend on individual circumstances. Obtain advice specific to your situation before acting.
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