ByLawyers News and Updates

Precedent update – Conveyancing – NSW

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A precedent update has followed recent user feedback. Significant amendments have been made to the ‘Letter to purchaser after exchange’ in the Purchase of Real Property Guide.

This useful precedent letter now includes headings and reflects the process of payment of transfer duty where settlement is to occur electronically.

The areas covered, now organised under the new headings are as follows:

  • GST
  • Investigation of title
  • Transfer duty
  • Insurance
  • Pre-settlement

The ‘Letter to purchaser after exchange when no initial letter done’ has also been amended to reflect these changes.

At By Lawyers we love to receive feedback from our users and they are often the reason that we conduct a precedent update.

Initial letters – Conveyancing – TAS

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The Initial letters to vendor and purchaser precedents have been updated in the By Lawyers Conveyancing (TAS) Guide.

These letters have been enhanced for improved readability and now also include provisions for both sale by agent and private sale procedures.

The initial letters to client are a key step in the conveyancing process, as they address the important issues to be dealt with on commencement of the matter including:

  • Costs
  • Authority to inspect council records (sale)
  • Mortgage discharge authority (sale)
  • Contract considerations – including deposit (purchase)
  • Finance requirements (Purchase)
  • Pest and building reports (Purchase)
  • Stamp duty and any applicable grants and concessions (Purchase)
  • Foreign resident capital gains withholding
  • GST withholding

All By Lawyers publications are updated in relation to changes to legislation, developments in case law and when subscribers ask us for new content. We also routinely enhance and develop our publications as part of our commitment to continual improvement.

Conveyancing – supplier notification – All states

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Supplier notification obligations for GST withholding

By Lawyers frequently receive questions from subscribers about supplier notification and GST withholding obligations for residential conveyancing. Commentary on GST withholding requirements for residential properties can be found in all By Lawyers Sale and Purchase Guides.

A vendor/supplier will have a notification obligation if supplying, by way of sale or long-term lease, either existing or new residential premises or potential residential land where the purchaser is not a registered entity acquiring the land for a creditable purpose. There is no requirement that the supply be a taxable supply.

Where a notification obligation exists, the vendor/supplier is required to provide the purchaser with a written notice, called a Supplier notification, containing information to help the purchaser comply with their GST withholding obligations.

The notice must state whether or not the purchaser has a withholding obligation. If the purchaser does not have a withholding obligation, the notice must make it clear that ‘no withholding is required‘.

If the purchaser does have a withholding obligation then the notice must include additional information. The requirements are set out in Schedule 1 of the Taxation Administration Act 1953 – section 14-255.

The By Lawyers Contract for the sale of land includes a clause satisfying supplier notification obligations.

A Supplier notification precedent is available in all By Lawyers Conveyancing – Sale matter plans, in ‘The contract’ folder.

 

Nomination

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By Russell Cocks, Solicitor

First published in the Law Institute Journal
It is common for a named purchaser under a contract of sale of land to nominate an additional or substitute purchaser. What if disputes arise between the parties to the nomination?

Such a nomination, in its simplest form, is a two-party agreement between the named purchaser and the nominated purchaser. It is a contract that exists primarily in a written form, but it may be that there are also implied conditions arising from verbal agreements between the parties or the surrounding circumstances. It is possible to make a nomination a tripartite agreement, involving the vendor as the third party, but this is unusual and a conventional nomination binds the named purchaser and the nominated purchaser but does not bind the vendor, who stands aloof from such agreements.

There is no specified form of nomination. A form in common use simply recites the parties and records that the named purchaser nominates the nominated purchaser to take a transfer of the property in the place of the named purchaser. It is important to realise that the effect of such a nomination is NOT to replace the named purchaser with the nominated purchaser in the contract. Such a substitution of the named purchaser with the nominated purchaser can only be achieved with the consent of the other party to the contract, the vendor, and would result in the named purchaser exiting the contract and the nominated purchaser becoming a party to the contract and assuming all the rights and obligation of the purchaser pursuant to the contract. In a conventional nomination environment, the named purchaser remains as a party to the contract and the nominated purchaser assumes no rights or obligations under the contract, other than being nominated to take a transfer in the place of the named purchaser.

The nominated purchaser is therefore entirely dependent upon the named purchaser for enforcement of the contract and it is unwise for the nominated purchaser to allow any reimbursement of the named purchaser’s deposit to be released to the named purchaser prior to completion of the contract. If the named purchaser receives the reimbursement of deposit prior to completion, the named purchaser may be reluctant to enforce the contract at a later stage, leaving the nominated purchaser without any ability to require the vendor to complete the contract. This is a matter that should be, but rarely is, dealt with in the written nomination agreement.

The abbreviated form of standard nomination agreements means that if a dispute arises between the parties to the nomination, a Court may be required to look behind the written agreement to determine the full extent of the rights and obligations of the parties to the nomination. Ran Bi and Sortop P/L v Yingde Investments P/L [2019] VSC 324 is a case involving just such a dispute.

The named purchaser nominated the nominated purchaser to take transfers in relation to a number of properties that the named purchaser had entered into terms contracts to acquire for land development purposes. Substantial amounts by way of deposits were due under the contracts and the named purchaser was unable to fund those deposits, thus the nominated purchaser was introduced to the project to provide funding and proceed with a development via a land holding company owned by the named purchaser and the nominated purchaser. Disputes arose between the named purchaser and the nominated purchaser after the nominations had been signed, but before final settlement. The named purchaser argued that the nomination had been terminated by the parties and was no longer effective, leaving the named purchaser as the party entitled to take the transfers.

The Court was not satisfied that the nomination had in fact been terminated and held that the nominated purchaser was entitled to be the transferee when those contracts came to settlement. The Court had no problem with the concept of the nomination being retracted, it simply found that such an outcome could only be achieved by the agreement of the two parties to the nomination and that there was no such agreement in this case.

If the parties can agree to retract a nomination, could the named purchaser make another nomination? There appears to be no reason in principle why a second nomination cannot occur. Subject to the vendor being informed of the retraction and second nomination, the vendor has no role in the process other than to comply with the purchaser’s written direction in relation to the transferee.

Some vendors insert complex nomination conditions into contracts that impose specific notification requirements and/or require payment of a fee to the vendor. Section 42(3) Property Law Act prohibits the imposition of such a fee on the purchaser, but a requirement that the nominee pays a fee is enforceable.

Tip Box

•The right to nominate is regulated by the contract

•The nominee does not become a party to the contract

•A nomination may be withdrawn and a fresh nomination made.

Retirement Villages – NSW

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From 1 July 2019 the Retirement Villages Amendment Act 2018 amends the legislation relating to retirement villages in NSW.

The amendments provide further protections for current and prospective residents. These amendments are intended to increase transparency, improve dispute resolution, provide more certainty around costs and strengthen villages’ safety and emergency planning and procedures.

The reforms include:

  • annual contract ‘check-up’ meetings;
  • enhanced sharing and publication of information;
  • binding Rules of Conduct for Operators of Retirement Villages with which operators must comply. These supplement the provisions in the Act and the regulations, with certain rules to commence 1 January 2020;
  • provisions for mediation of disputes;
  • new requirements for emergency plans, annual evacuation exercises and display of key safety information;
  • new auditor appointment processes.

Yet to commence are provisions requiring village operators to prepare and maintain an asset management plan for items of capital at the village for which the operator is responsible.

See the By Lawyers Retirement Villages (NSW) publication for further details.

Working order condition

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By Russell Cocks

First published in the Law Institute Journal
A purchaser pursuant to a contract of sale of land may sometimes request that a ‘working order’ condition be added to the contract

Parties to a contract of sale of land are free to negotiate the terms of their contract and include whatever conditions they agree to. In the context of the standard contract of sale of land, such an agreement will be recorded by way of a Special Condition added to the 28 General Conditions. Such Special Conditions usually provide that all fittings, fixtures and chattels included in the sale are to be in working order as at the date of settlement. The focus of the purchaser is usually on such items as heating and cooling equipment, hot water services, swimming pool equipment and even stoves and lighting.

Because there is no General Condition applicable to this situation, the wording used often varies between contracts and the first difficulty is to determine the exact meaning and application of the Special Condition. No Court has had cause to interpret such a Special Condition, so no assistance can be gained from decided cases and as Working Order conditions are often drafted by estate agents on an ad hoc basis, interpretation is often a difficult task.

Such Special Conditions effectively seek to amend General Condition 24 of the standard contract, which provides that the vendor is obliged to deliver the property (which includes fittings & fixtures and arguably includes the chattels listed in the contract) to the purchaser at settlement in the same condition that it was in on the day of sale, fair wear and tear excepted. A Working Order Special Condition seeks to amend this general condition in two ways:

  1. General Condition 24 does NOT require the vendor to improve the property after contract, merely maintain it. Something that was not working on the day of sale does not have to be working at settlement, as it complies with General Condition 24 by being in the same condition at settlement as it was upon sale.

A Working Order Special Condition will require the vendor to improve an item that was not working on the day of sale, unless the vendor specifically excludes that item. Thus, an air conditioning unit that was not working on the day of sale must be repaired (or replaced) by the vendor prior to settlement, unless the vendor specifically excludes that unit from the Working Order Special Condition.

  1. The ‘fair wear & tear’ exception in General Condition 24 will be overridden by a Working Order Special Condition, such that the vendor will have an absolute obligation to have all aspects of the property in working order at settlement, irrespective of the cause of the deterioration. An air conditioning unit that was working at contract but stops working before settlement is an example of fair wear and tear, but under a Working Order Special Condition there is usually no provision for fair wear and tear and the vendor would be obliged to repair or replace the air conditioning unit prior to settlement.

Consequences of Breach

General Condition 24(a) provides a limited right to compensation for breach, but that right relates to a breach flowing from a failure to deliver the property in a significant sense, not the breach of a relatively insignificant provision such as a Working Order condition. (see April 2019 Property column) Therefore, the purchaser’s remedy for a breach of a Working Order condition is to rely on common law rights flowing from the breach and to sue the vendor AFTER settlement for consequential loss. There is certainly nothing in the standard contract that will allow the purchaser to refuse to settle for breach of a Working Order condition, or to claim a reduction in the purchase price. Even if the Working Order condition is framed as a warranty by the vendor, the common law remedy for breach of warranty is by way of damages to be pursued after settlement.

In those circumstances, a Working Order condition may be more trouble than it is worth. It reflects an unrealistic purchaser expectation that a second-hand property will be in an as-new condition at settlement and it simply creates disputation at the time-poor end of the transaction. Given that the purchaser’s right is limited to proceedings after settlement, the prospect of a pyrrhic victory looms large.

Conveyancing needs to be a smooth process, for both the clients and their representatives. Adding additional speedbumps to that process is not in the interest of either the clients or their representatives.

Tip Box

•Working Order conditions may be added to contracts

•Vendor may need to improve the property

•Purchaser can only sue after settlement

Retail Lease Summary – VIC

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By Lawyers Leases guide in Victoria now includes a summary precedent for the By Lawyers Retail Lease.

This helpful document is similar to the LIV Schedule, however this precedent is not intended to form part of the lease – it is strictly a summary of the central terms.

Amendments and additions are to be made in Item 24 of the Disclosure Statement.

This Retail lease Summary is particularly useful when explaining the lease to the client.

The corresponding item number from the disclosure statement and/or relevant clause of the terms and conditions is displayed on the left.

This precedent was created as a result of a user request. By Lawyers loves to respond to feedback from our users.

 

E-conveyancing from 1 July 2019 – NSW

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In a continuation of the transition to E-conveyancing version 5 of the Conveyancing Rules replace version 4 from 1 July 2019.

Version 5 of the rules provide that all mainstream dealings including transfers, mortgages, discharges of mortgage, caveats, withdrawals of caveat and transmission applications, or combinations thereof, must be lodged electronically when signed on or after 1 July 2019, except where a waiver applies.

Waivers

Waivers apply to certain transactions that are not able to be lodged electronically.

The following waivers which operate from 1 July 2019 in conjunction with Conveyancing Rules version 5 have now been published:

If eligible for a waiver, a Conveyancing Rules Exception form will need to be complete at the point of lodgement. This form is available in the sale and purchase matter plans.

An Alert has been added to the by Lawyers Conveyancing Sale and Purchase matter plans regarding the 1 July 2019 mandate.

Keep up to date with By Lawyers

By Lawyers keep you up to date with E-conveyancing. A brief explanation of the transition to E-conveyancing in the By Lawyers Conveyancing Sale and Purchase matter plans can provide further assistance.

Off the plan – sunset clauses – VIC

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Vendors face new restrictions when seeking to activate sunset clauses to end off the plan contracts in Victoria.

Amendments for off the plan contracts

The Sale of Land Amendment Act 2019 commenced on 4 June 2019. It amends the Sale of Land Act 1962. The amendments require vendors wishing to end residential off the plan contracts pursuant to a sunset clause to either obtain the purchaser’s consent, or an order from the Supreme Court.

New notice requirements created by section 13 of the amending Act for off-the-plan contracts for residential land including a sunset clause, have yet to commence.

The changes do not affect the existing statutory rights of purchasers to end a contract if the plan of subdivision is not approved by the sunset date.

Rescission

Section 10A of the Sale of Land Act 1962 provides that if a sunset clause in a contract allows the vendor to rescind the contract, then rescission must be in accordance with the Act. Section 10C overcomes any inconsistent contractual provision.

Purchaser’s consent

Section 10B of the Sale of Land Act prohibits a vendor from relying on a sunset clause unless the vendor obtains the purchaser’s written consent to any such rescission.

A vendor seeking to obtain the purchaser’s consent must give the purchaser 28 days notice setting out the reason that the vendor proposes to rescind, the reason for the delay in registration of the plan and that the purchaser is not obliged to consent to the proposed rescission.

A precedent ‘Notice of rescission of off the plan contract’ in accordance with s 10B(3) can be found on the By Lawyers matter plan.

Court order

Section 10D of the Sale of Land Act provides that the vendor may apply to the Supreme Court for an order permitting the vendor to rescind a contract pursuant to a sunset clause. The Court must consider a wide variety of matters relating to the contract and the property, including increase in value. If an order is made it may include compensation to the purchaser and the vendor will be liable for the purchaser’s costs.

Notice

Section 10F, created by section 13 of the Amendment Act, has yet to commence. This new section will require residential off-the-plan contracts that include a sunset clause to include a notice informing the purchaser that:

  • the vendor may give a notice proposing to rescind the contract;
  • the purchaser may consent to rescission, but is not obliged to consent;
  • the vendor may apply to the court for an order permitting rescission;
  • the court may make such an order.

A precedent notice in compliance with s 10F will be included in General Condition 9 of the By Lawyers contract on commencement of s 10F.

By Lawyers contract

The general conditions and particulars of sale in the By Lawyers Contract satisfy all of the statutory requirements when selling prior to registration, relying on the default sunset period of 18 months.

National Mortgage Form – All states

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New content added

New content on the National Mortgage Form has been added to the Mortgages Guides in each state.

The National Mortgage Form is an Australia-wide initiative. It standardises the content and presentation of mortgages lodged for registration via all lodgement channels with land registries in the various participating Australian states and territories.

Mortgagees and property practitioners across all participating jurisdictions must adopt the National Mortgage Form. The previous previous mortgage forms used in each Land Registry will no longer be accepted.

The National Mortgage Form allows for incorporation of any registered common provisions, or other registered dealings.

For further information, user guide and link to the current webform version of the National Mortgage Form, see the ARNECC website.

Compatibility with PEXA and Sympli

The Mortgage is created and registered within PEXA. For further information, see the PEXA Community user guides ‘How to create and register a mortgage in PEXA’ and ‘How to create and register a second mortgage in PEXA’. These are available on all By Lawyers Mortgages matter plans.

It is expected that the new Electronic Lodgement network Operator, Sympli, will have corresponding capability when it commences later this year. Details on Sympli will be added to by Lawyers guides as soon as Sympli becomes operational.

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