ByLawyers News and Updates

Adjustment for cladding agreements

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Recent amendments to the Local Government Act mean that solicitors acting for buyers and sellers of real estate will need to take into account any charges recorded against the property relating to funding for cladding rectification.

Recent concern about defective cladding used in the construction of high-rise residential buildings has resulted in the government adopting a legislative solution that may provide some solace to the unfortunate unit owners who are faced with massive rectification costs, but it also has an impact on third-party purchasers of such properties. After a lengthy inquiry in relation to the cause and consequences of the defective cladding material it became clear that any solution that depended upon allocation of blame would involve years of legal proceedings and an immediate solution had to be found to allow the owners of units affected by the defective cladding to move on with their lives.

Responsibility for administration of the solution has been allocated to municipal Councils, with a new Part 8B inserted into the Local Government Act. This authorises Councils to enter into a ‘cladding rectification agreement’ with the owner of rateable land (or an Owners Corporation) and a lending body, presumably a conventional financier. Council may also be the lending body, but it is difficult to imagine, in the short term at least, that Councils will assume this entrepreneurial role. Thus, the standard agreement will be tripartite, between the owner (or Owners Corporation), the Council and a lender.

The agreement will provide that the lender will advance the funds to pay the rectification works and Council will levy a charge on the land to recover the loan advance, interest and fees associated with the levy by instalment over a period of not less than 10 years. Thus, in a perfect world, the owner (or Owners Corporation) will be happy as the cladding will have been rectified, the lender will be happy as the loan, plus interest will have been repaid and Council will be happy as it will have charged an administrative fee. But we do not live in a perfect world.

Owners will still feel aggrieved by being required to bear the cost of rectifying a building defect, lenders will inevitably face some bad debt scenarios and Councils will be regarded as the bad guys by all other parties simply because Councils put the deals together. How dissatisfied owners relate to each other in an Owners Corporation environment is another can of worms and time may reveal that the solution turns out to be worse than the problem.

Given that Councils must be satisfied about the amounts due pursuant to any rates, taxes or levies and any mortgage relating to the land before entering into an agreement, it is difficult to see, particularly in an Owners Corporation environment that requires 75%-member approval, these agreements being particularly easy to set up, let alone administer for 10 years. The Act is silent as to whom the loan amount is paid and when repayments are to be made to the lender, presumably leaving it to each particular agreement to deal with these ‘site specific’ details.

However, the property lawyers concern is not so much as to how the agreements will work between the original parties, but how they will affect departing and incoming owners. Presuming that a 10-year levy has been struck, with quarterly instalments link to normal rates, what are the duties of the vendor and expectation of the purchaser in relation to the treatment of the amounts due under the levy?

The Act (s.185L) treats the cladding rectification levy as a “service charge”. Section 162 authorises the imposition of a service charge and s.185L(6) requires a cladding rectification charge to be paid by instalments. A vendor is obliged to disclose statutory charges pursuant to s.32A(b) Sale of Land Act and also charges “for which the purchaser will become liable in consequence of the sale” pursuant to s.32A(c). Disclosure of current charges (and any arrears) may be achieved by annexing a rate notice, a land information certificate or giving a not-more-than estimate, but the vendor is also obliged to disclose future liabilities due under the cladding rectification charge and information provided by Council may be crucial in this regard.

Any arrears under the levy will be the vendor’s responsibility, the current instalment will be adjusted between the parties at settlement and the outstanding levy will become the responsibility of the purchaser as a charge on the land (s.156(6)).

By s.175, a purchaser may continue to pay charges by instalments. A purchaser will therefore need to adjust the price that the purchaser is prepared to pay for the property to take account of the outstanding cladding rectification levy that the purchaser will become liable for and full disclosure in this regard is essential so as to allow the purchaser to set its price.

Tips

  • cladding rectification charges may apply to multi-storey units
  • cladding rectification charges must be disclosed by vendors
  • purchaser will be liable for charges due after settlement

Workers Compensation amendments – NSW

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The next tranche of workers compensation amendments under Schedules 1 and 2 of the Workers Compensation Legislation Amendment Act 2018 commence 1 January 2019, providing for the abolition of the administrative system of dispute resolution and reinstatement of the jurisdiction of the Workers Compensation Commission to determine disputes and make determinations of permanent impairment.

There is no commencement date yet for Schedule 3 of the amending Act, which provides for the introduction of a simplified process to determine an injured worker’s pre-injury average weekly earnings, with new Schedule 3 to the Workers Compensation Act 1987 providing the method for determining PIAWE and allowing insurers and workers to agree on the figure for PIAWE.

Provisions removing limitations on workers injured in motor vehicle accidents obtaining statutory benefits for treatment and care under that Act where their entitlement to workers compensation has ceased, or where they recover damages from the employer in respect of the injury, have already commenced.

The By Lawyers Workers Compensation (NSW) publication has been updated to deal with these amendments.

Foreign Buyers Duty – Western Australia

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From 1 January 2019 Foreign Buyers Duty applies, being additional duty imposed on certain transactions and acquisitions involving foreign persons or entities acquiring residential property in Western Australia. An additional duty of 7% is imposed on direct acquisitions (foreign transfer duty) and indirect acquisitions (foreign landholder duty) of residential property by foreign persons.

Foreign Buyers Duty will not apply to purchases of commercial, industrial or mixed used properties used primarily for commercial purposes.

An exemption from foreign transfer duty and foreign landholder duty for residential developments applies where certain conditions are met.

A Foreign Transfer Duty Declaration form is used to declare whether each purchaser or transferee is a foreign person. This form must be completed by each person acquiring an interest in any land in Western Australia.

The By Lawyers Purchase of Real Property (WA) guide has been updated as follows:

  • Comprehensive commentary has been added on Foreign Buyers Duty.
  • New forms added to the matter plan include Foreign Transfer Duty Declaration, Foreign Landholder Duty – Developer Exemptions and Foreign Transfer Duty – Developer Exemptions.
  • The To Do List – Purchase of Real Property now includes an item on the obligation to complete a foreign transfer duty declaration form.

By Lawyers keep on top of changes in the law so you can focus on getting the job done.

Standardised bail conditions – Criminal QLD

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The Queensland Supreme Court has developed and made available standardised bail conditions, through its Streamlining Criminal Justice Committee and Rules Committee.

The document is not a practice direction or court form and has no formal application; it is simply an attempt by the court to provide examples of clearer proposed bail conditions so that clients granted bail can better understand their obligations. The document is a useful aid in the drafting of proposed orders when bail is sought and might assist practitioners and their clients in seeking and obtaining bail before the Magistrates Court.

See the By Lawyers Criminal Magistrates Court matter plan for a copy of the Standardised Bail Conditions – and helpful commentary on bail applications generally.

Celebrating Guy Dawson’s 50 years in legal practice

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bylawyers_guy_dawson_50_years_legal_practice_founder

By Lawyers was proud this year to celebrate our co-founder and Editorial Director, Guy Dawson achieving 50 years as a continuously practising member of The Law Society of New South Wales. Guy was admitted on 31 May 1968.

Guy completed his articles at Robilliard & Robilliard and practised as a solicitor with Marsdens, Shailer Dawson, Pedley Dawson, Dawson & Butt and Our Lawyers before co-founding By Lawyers.

During this time Guy dedicated himself to general practice, developing a wealth of knowledge and experience across many areas of law.

Guy Dawson is well known for his collegiate and practical approach to his dealings with other lawyers, focusing on creating cost-effective and timely solutions for clients and building working relationships that are founded on trust and honesty.

Drawing on his experience and regard for the legal profession inspired Guy to create By Lawyers with the goal of making the practice of law more enjoyable and reducing the risk that small law firms face. Today, By Lawyers Legal Guides and Precedents are used by more than 10,000 subscribers across Australia, making Guy one of the most read legal authors in the country.

Guy’s years of dedication and hard work in bringing By Lawyers to firms across Australia is a significant contribution to the legal profession and the betterment of law and justice in the community. The By Lawyers team is proud to be a part of Guy’s bold vision.

Matter type changes

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There has been a technical change to the structure of our Defamation & Protecting Reputation and Neighbourhood Disputes publications. They have been changed from federal matter types to state-based matter types.

Subscribers may notice that the title of the Defamation publication now includes a state name. This is nominative only. The content of the Defamation publication is unchanged and remains the same across all states.

For state-based guides and precedents to be visible from existing matters, LEAP Desktop users will need to change their matter type from Other areas of law > Miscellaneous > Disputes to Other areas of law > Disputes.

Interest on unpaid legal costs – TAS

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Under new regulations, the maximum rate of interest on unpaid legal costs that can be charged by Tasmanian lawyers has increased significantly. The Legal Profession Regulations 2018 came into force on 28 November 2018 and replaced the Legal Profession Regulations 2008.

Rule 66 now provides that the applicable rate for interest on unpaid legal costs is that prescribed by the Rules of Court for the purposes of section 165 of the Supreme Court Civil Procedure Act 1932. The current rate is 7.5%. The previous rate was 3.5% and was tied to the Reserve Bank of Australia Cash Rate Target.

All By Lawyers Tasmanian costs agreements have been updated accordingly.

By Lawyers is presenting at the Small Law Industry Summit

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We are proud to be presenting as summit partners at the inaugural Small Law Industry Summit hosted by LEAP on 14 March 2019.

Tickets are selling fast – Secure your place at the Small Law Industry Summit here and be a part of the conversation on the future of the legal industry.

Our Managing Director Brad Watts will be presenting on law firm innovation through the four pillars of improved practice management.

The summit will also feature a number of not to be missed presentations from industry leaders on a range of key issues including leadership, risk mitigation, high-performance culture and the fundamental role of technology in shaping the future of the legal profession.

Get your early bird pass for a special rate of $95 and Claim 6 CPD points.

50% of each ticket sold will go towards supporting cyber security education – through a scholarship at Western Sydney University (WSU).

We hope to see you there!

 

Electronic lodgement of leases – NSW

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From 10 December 2018 electronic lodgement of leases commences via PEXA.

Summary of the procedure for electronic lodgement of leases

The annexures to the Real Property Act lease form are prepared in the usual way outside PEXA and then uploaded for attachment to the RPA lease form in PEXA .

The RPA lease form is created in PEXA, the annexures attached and the lease document is then signed and lodged electronically.

A lease may be lodged electronically:

  • as a stand-alone registration;
  • in combination with a transfer of land; and
  • in a series with other leases.

Sub-leases, surrenders of lease and variations of lease are not yet available in PEXA. This functionality is expected mid-2019.

The Office of the Registrar General has granted a partial waiver of a subscriber’s obligations to comply with rule 1 of Schedule 3 – Certification Rules of the Model Participation Rules relating to verification of identity for lessors and lessees, in that there is no requirement to take reasonable steps to verify the identity of the parties. The waiver will continue until either the Model Participation Rules are amended or the partial waiver is revoked.

By Lawyers Leases (NSW) guide updated for electronic lodgement of leases

The relevant sections of the By Lawyers Leases (NSW) commentary, as well as the following applicable precedents, has now been updated for the electronic lodgement of leases:

  • To do list; and
  • Retainer instructions.

A new folder E. If required – Electronic lodgement has been added to both the Act for lessor and Act for lessee matter plans and includes:

  • A brief explanation of the transition to E-conveyancing;
  • Letter to lessor/lessee enclosing lease to be registered and client authorisation; and
  • Client Authorisation forms.

Enjoy practice more with By Lawyers!

Access to criminal case information – WA

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There is now a greater public right of access to criminal case information in the WA Magistrates Court. Practitioners acting for accused persons in the WA Magistrates Court should be aware – and, where appropriate, advise their clients – that an amendment to the Magistrates Court (General) Rules 2005 (new rule 40) now allows any person to request from the court the following information relating to a particular case:

  1. the charge;
  2. any conviction or order made in respect of the charge; and
  3. any penalty imposed on the accused in relation to the charge.

However, this rule is expressly subject to the non-publication provisions of s 171 of the Criminal Procedure Act 2004. In appropriate circumstances, consideration should be given to seeking a non-publication order under s 171(4) to avoid the effect of this rule.

Also, this rule does not allow anyone to generally access the accused’s criminal history other than the outcome of the specific case.

The commentary in the By Lawyers Criminal Magistrates Court (WA) guide has been updated accordingly.

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