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ARTICLE · 31 OCTOBER 2013

Split contracts create an issue for financiers of medium density townhouse developments

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The property industry has seen a new rising trend in medium density townhouse developments sold on 'split contracts'.

AustraliaReal Estate and Construction
Ted Fitzgerald
Ted Fitzgerald
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Overview

The property industry has seen a rise in medium density townhouse developments sold on 'split contracts'.

The term 'split contract' refers to the sale of a property 'off the plan' whereby the land is sold and settled under a contract of sale of real estate and is subject to the purchaser entering into a building contract for construction of the dwelling with a designated builder.

Although the land is subdivided, its use is tied to the planning approval allowing construction in accordance with a specific design.

Split contracts are common for traditional single dwelling homes, however, the implementation of split contracts for townhouse developments is a departure from the typical off-the-plan '10/90' contract where a purchaser pays a 10% deposit and the balance on completion of the development.

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