Vendor finance in QLD: how it works and what to watch out for

TL;DR: Vendor finance is when the seller acts as the bank. You pay them directly, in instalments, instead of borrowing from a lender. In Queensland it is almost always an instalment contract under the Property Law Act 2023. That gives buyers real statutory protections, but under section 90 some of those protections do not switch on until the buyer serves a written notice. Meanwhile transfer duty is assessed on the full price from the day you sign, land tax moves to the buyer on possession, and the seller is taxed on the whole capital gain in the year of the contract, not the year they get paid. Get it drafted properly or do not sign.

What is vendor finance and how does it work?

Picture buying a house, but instead of a bank handing over the money, the seller does. You move in, and you pay the seller back over time, usually in regular instalments with interest, until the price is paid off. The seller keeps the title until you have paid in full.

You will also hear it called seller finance, vendor terms, owner finance or a terms contract. Same idea: the person selling the property is also the one financing it.

It is not the norm. Most people buy with a bank loan. But vendor finance turns up when a buyer cannot get traditional finance, or when a seller wants to widen the pool of people who can say yes.

Why would a seller offer vendor finance?

A few reasons. The property might be tricky to sell the usual way. The seller might prefer earning interest on the sale to taking a lump sum. Or they simply want to get a deal across the line with a buyer the banks have knocked back.

For the buyer the pitch is simple: you get into a home without jumping through the usual lending hoops, often with a smaller deposit. For someone self-employed, new to the country or rebuilding credit, that can be a genuine opportunity.

The catch is that you are trusting an individual, not a regulated lender. The interest rate is usually higher than a bank’s, the terms are tighter, and the consequences of missing a payment are more serious than a polite letter. The deal is only as good as the contract behind it.

Is vendor finance the same as an instalment contract?

In Queensland, nearly always. Section 89 of the Property Law Act 2023 defines an instalment contract as a contract for the sale of land where the buyer is bound to make one or more payments of the purchase price by instalment, other than a deposit, and is not entitled to a transfer of title in exchange for those payments.

The word doing the work is deposit. Under section 87 a deposit means a sum of not more than the prescribed percentage of the price, refundable if the seller breaches. The prescribed percentage is 10%, or 20% for a proposed lot. Push the deposit past that line, or make it non-refundable, and it stops being a deposit and starts being an instalment. That is how ordinary-looking contracts become instalment contracts by accident. We have set out the mechanics in detail in our guide to instalment contracts in QLD.

What protections does a buyer get under an instalment contract?

Four that matter, and they are genuinely strong:

The seller cannot terminate the moment you fall behind. Under section 91 the seller must give you a notice in the approved form and wait 30 days. Pay the outstanding amount inside those 30 days and the seller’s right to terminate ends, and you are treated as never having been in default.

The seller cannot sell or mortgage the land behind your back. Section 92 requires your consent, and consent only counts if the seller has told you the terms first and you have said yes to those terms in writing. Break that rule and the contract is voidable by you before settlement, and you can recover your deposit and instalments as a debt.

You can caveat the title. Section 93 lets you lodge a caveat forbidding registration of any dealing until settlement. It is a specific statutory caveat, not the ordinary kind. If you want the background, see our explainer on caveats in Queensland.

You can force the transfer. Under section 94, a buyer who is not in default can give the seller notice requiring transfer on a stated day in exchange for the balance owing. The notice has to make time of the essence and be given at least three months ahead.

Have your buyer protections actually started yet?

This is the part almost nobody mentions, and it is the single most important thing on this page.

Section 90 says that where a contract may, at the buyer’s election, be performed in a way that would make it an instalment contract, the contract is not an instalment contract unless and until the buyer gives the seller a notice electing to perform it that way.

Read that again. If your contract binds you to pay by instalments, section 89 applies and you are protected from the start. But if the contract merely gives you the option of paying that way, you get none of the section 91 to 94 protections until you serve that notice. No 30 day grace period. No caveat right. No restriction on the seller mortgaging the property.

Plenty of buyers assume the protections are automatic because that is how the old Property Law Act 1974 worked. It was repealed on 1 August 2025. If you are in a vendor finance arrangement right now, the question to ask your solicitor today is whether that notice has been served.

When is stamp duty payable on a vendor finance deal?

Immediately, on the full price, years before you own anything.

Transfer duty attaches to the agreement, not the transfer. Under the Duties Act 2001 the liability arises when the agreement is made, and the dutiable value is the consideration or the unencumbered value if that is higher. Nothing about the deferred title reduces it or spreads it across the instalments. The documents have to be lodged within 30 days of the liability date.

So a buyer paying off a $700,000 house over eight years owes duty on $700,000 in the first month, while still holding no title. Work out the number before you sign with our QLD stamp duty calculator, and read how transfer duty actually works if the timing surprises you.

And do not plan on deferring it. Queensland Revenue Office Public Ruling DA019.1.5 says an extension of time to lodge will not be granted where the condition is part of an arrangement to defer duty, and it names contracts conditional on payment of the purchase money as an example.

Who pays land tax and rates before the title transfers?

This one catches people, because the two answers point in opposite directions.

Land tax follows possession. Section 11 of the Land Tax Act 2010 says that where an agreement has been made for the sale of land, the buyer is taken to be the owner as soon as the buyer is in possession, and it applies whether or not the agreement has been completed. So the buyer can pick up a land tax liability years before the title is in their name, and land tax is assessed at midnight on 30 June. Our QLD land tax guide covers the thresholds.

Council rates generally follow the title. The council will usually still look to the registered owner, which is the seller. That makes rates a contract problem rather than a statutory one, and it needs to be dealt with expressly in the drafting.

Does a seller need a credit licence to offer vendor finance?

Possibly, and getting this wrong is the most expensive mistake on this page.

Section 10 of the National Credit Code treats an instalment land contract as the provision of credit, with the seller as the credit provider. Whether the Code actually bites turns on section 5, and in practice on one limb: whether the credit is provided in the course of a business of providing credit, or as part of or incidentally to another business.

ASIC’s Regulatory Guide 203 gives the example of a private landowner selling a single parcel by instalment contract and says they are unlikely to be carrying on a business of providing credit. But it also says that a landowner who subdivides and sells several parcels this way is more likely to be. And section 13 presumes the Code applies unless the contrary is established, so the onus sits with the seller.

If you land on the wrong side of it, section 29 of the National Consumer Credit Protection Act 2009 carries a civil penalty of 5,000 penalty units. At the Commonwealth penalty unit of $364 from 1 July 2026, that is a maximum of roughly $1.82 million for an individual. This is not a corner to cut, and it is exactly why the agreement needs proper drafting. See our loan agreements service.

When does the seller pay capital gains tax?

In the year of the contract, not the year the money arrives.

Under section 104-10 of the Income Tax Assessment Act 1997, CGT event A1 happens when you enter into the contract for the disposal. Taxation Determination TD 94/89 confirms the gain belongs to the year the contract was made, and that a seller is not required to return it until settlement actually occurs, at which point the assessment for that earlier year may need to be amended.

On a ten year instalment contract that means going back and amending a decade-old assessment, at that year’s rates and thresholds, with interest exposure if you are slow about it. The whole gain lands in one early year while the cash trickles in over ten. Model it first with our capital gains tax calculator, and get advice from your accountant before you agree to anything.

Do you still need a seller disclosure statement?

Yes. There is no vendor finance exception.

Since 1 August 2025, section 99 of the Property Law Act 2023 requires a seller to give the buyer a disclosure statement in the approved form, the Form 2, together with the prescribed certificates, before the buyer signs. The exceptions in section 100 cover related parties, government buyers, court orders, transmissions on death and very high value sales. An instalment contract is not among them.

Get it wrong and the buyer may have a termination right. See our seller’s disclosure service and what the Form 2 means for buyers.

Is rent to buy the same as vendor finance?

Not quite, and the difference matters. Under a rent to buy or rent to own arrangement you are usually a tenant paying rent, with an option to purchase later at an agreed price. Under vendor finance you are a buyer under a contract of sale from day one, paying down a purchase price.

The labels get used loosely and the legal consequences are completely different: who can evict you, what happens to the money you have already paid, whether you have any interest in the land at all. If someone is offering you a rent to buy deal, have the paperwork read before you hand over anything. An option structure has its own rules, which we cover in our guide to put and call options in QLD.

How do you protect yourself before you sign?

Whether you are the buyer or the seller, the rule is the same: get advice before you sign, not after.

For buyers, that means knowing the interest rate, the payment schedule, what happens if you fall behind, when and how you actually get the title, and whether the section 90 notice needs serving. For sellers, it means a contract that protects you if the buyer stops paying, a clear position on the credit licence question, and an accountant’s view on the CGT timing before you commit.

This is what our free pre-contract review is for. Send us the paperwork before you commit and we will tell you straight whether it stacks up. Vendor finance sits outside a standard conveyance, so it is quoted separately rather than at our standard fixed conveyancing fees.

Frequently asked questions

Is vendor finance legal in Queensland?

Yes. These arrangements are legal, and in Queensland they are usually instalment contracts governed by Part 7 Division 3 of the Property Law Act 2023. The rules apply despite any agreement to the contrary, so the parties cannot contract out of them.

What makes a contract an instalment contract in QLD?

The buyer being bound to pay the price in instalments, other than a deposit, without being entitled to a transfer of title in exchange. A deposit is capped at 10% of the price, or 20% for a proposed lot, and must be refundable if the seller breaches. Exceed that cap or make it non-refundable and the payments become instalments.

What happens if I miss a payment under vendor finance?

If the contract is an instalment contract, the seller cannot terminate for a missed instalment until 30 days after giving you a notice in the approved form. Pay within those 30 days and the seller’s right to terminate ends. Outside that regime, the ordinary contractual default provisions apply, which are far less forgiving.

Can a vendor finance buyer lodge a caveat?

Yes, a buyer under an instalment contract can lodge a caveat under section 93 forbidding registration of any dealing until settlement. It can be removed with the buyer’s consent, if the contract ends, or on other grounds shown to the registrar or the court.

Do you pay stamp duty twice on vendor finance?

No. Duty is assessed once, on the agreement, when it is made. The later transfer of title gives effect to the same dutiable transaction. The trap is not paying twice, it is paying the full amount years before you get the title.

Do I need a solicitor for a vendor finance deal?

Yes, and both sides need their own. Empire Legal never acts for both the buyer and the seller in the same transaction. Between the section 90 election, duty timing, land tax, seller disclosure, the credit licence question and CGT, this is not a deal to do on a handshake.