Practice Question:

Mortgage broker Bishnu Aryal moved to Australia from Nepal for a new life and saved diligently for a decade to buy a plot of land in Edmondson Park, south-west Sydney, for $398,000. The father-of-two signed a building agreement with construction company Zac Homes in 2016 for a custom off-plan build, which set him back a further $322,000.

A communication bungle, however, between the excited Bishnu and the building company, Zac Homes, was to put an end to his dreams of the perfect house - leaving him to nearly faint when Bishnu finally saw the unusual property.

The agreement was for a free-standing home but, three years later, when Bishnu checked, he was horrified when he came to know that contractors had built a duplex on half the block - with a huge windowless grey wall erected down the middle.

Rather than having another building attached to the side, like with a regular duplex, the lot sits empty - giving the Bishnu family home an unfinished look. Bishnu said although my English is not perfect, I have definitely not signed up to have half a house. One side of the house is a grey and windowless wall where the other half of the building looks like it should be.

Construction company Zac Homes said that the plan when construction began was to build a free-standing home on the block, but claimed Liverpool Council later said Bishnu's block had to be an attached dwelling. The construction company said that Bishnu had multiple opportunities to pull out of the agreement, while Bishnu claimed he trusted the process and did not look at the new plans for half a duplex when they were sent over and instead forwarded them to the bank.

Bishnu had to move in during Covid because his wife was pregnant, and they had nowhere to go after he began losing work, but he says he's been waiting nine months for an occupation certificate - which authorises the use of a new building. A spokesman for Zac Homes told the program it had done everything it could to secure an occupation certificate and has been trying for months to get it signed off.

It said the certifier and the council are at a crossroads because the council wants the other half of the duplex built. A spokesman said the company 'appreciates the frustrations of Bishnu and family surrounding the delay in the issue of the Occupation Certificate, and these delays are not caused by Zac Homes.'

Property expert Michael Pallier said the land would go up in value, but the building itself is likely to depreciate. 'It might actually get to the point where the house is a liability, and it'll cost money to take the house down for someone to buy the land and build a free-standing home with doors and windows,' he said. He urged anyone buying a home to ensure a solicitor looks at the documentation before they sign.

Requirement

Discuss the process of how to determine the fair value of the asset (land and building) acquired. This question is to be answered in essay form (no calculation required).

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