ByLawyers News and Updates

Conveyancing NSW – Option to purchase

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The ‘Option to purchase’ precedent in the By Lawyers Conveyancing – Sale Guide for NSW has been updated so that the s 66ZH Notice in relation to cooling off rights is now incorporated in the document rather than needing to be separately provided.

The wording adopted complies with Form 2, Schedule 5 of the Conveyancing (Sale of Land) Regulations 2017.

We are grateful to one of our user firms who suggested this practical amendment. At By Lawyers we love getting feedback from our users! You can always email us at askus@bylawyers.com.au.

Conveyancing – Conveyancers’ Costs Disclosure precedents

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By Lawyers are pleased to announce the addition of Conveyancers’ Costs Disclosure precedents for NSW, VIC, NT, SA and TAS.

These precedents comply with the relevant legislation governing the costs and dispute resolution disclosure requirements for licensed conveyancers.

The Conveyancers Costs Disclosure precedents are now included in the following By Lawyers Guides:

  • Sale of real property
  • Purchase of real property
  • Mortgages
  • Leases

These are important precedents for all licensed conveyancers – if the necessary disclosure is not given before or at the time of the retainer, a client is not required to pay the conveyancer’s costs!

GST withholding – how does it work?

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The new GST withholding obligations are discussed in detail in the By Lawyers Purchase commentaries for each state, under the heading ‘Withholding payment of GST on purchase of certain real property’.

By way of summary, from 1 July 2018 purchasers of new residential premises or potential residential land are required to withhold an amount of the contract price and pay this directly to the ATO as part of the settlement process.

This does not affect the sales of existing residential properties, or the sales of new or existing commercial properties. However, for all residential premises or potential residential land, if the the vendor is registered, or required to be registered, for GST then they must notify the purchaser as to whether or not GST withholding applies – even if it does not apply.

Where withholding applies, purchasers need to:

  • split the amount of GST from the total purchase price;
  • pay the GST component directly to the ATO as a disbursement at settlement;
  • pay the GST exclusive purchase price to the vendor.

The liability for the GST remains with the vendor and there are no changes to how vendors lodge their business activity statements.

ACT Conveyancing – Payment of stamp duty – Barrier Free Model amendments

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Registration of transfer and payment of stamp duty

Under the Barrier Free model, stamp duty is only required to be paid to the ACT Revenue Office after registration of title at Access Canberra.

The transfer must be lodged for registration, and stamp duty paid, within 14 days after the settlement date. Penalty tax may be applied if the transfer is lodged late.

The relevant precedents in the By Lawyers ACT Purchase Guide have been updated accordingly, including:

  • All initial letters to buyer;
  • To do list; and
  • Finalisation letter to buyer.

Conveyancing – 1 July fee increases and legislative updates

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1 July always sees legislative changes, including increases to many government charges related to conveyancing and property transactions. Happy New (financial) Year!

The following are some of the more important changes commencing 1 July 2018. By Lawyers publications in each state have been updated as appropriate.

CONVEYANCING

All states 

GST withholding provisions of the Taxation Administration Act commence.

Fee increases apply to all land registry services.

NSW

Mandatory electronic lodgement of all standalone transfers and caveats applies.

QLD

Additional Foreign Acquirer duty rate increased to 7%.

TAS

First Home Owner Grant scheme extended (to 30 June 2019).

SA

Stamp duty no longer charged on transfer of non-residential or non-primary production land: “Qualifying Land”.

 

Subdivision – Off the plan sales – Sunset conditions

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Off-the-plan sales are a common feature of Victorian conveyancing. The fact that the contract cannot be settled until the plan of subdivision is registered at Land Victoria means that the settlement date is uncertain. Sunset conditions in off-the-plan contracts are meant to bring some certainty to the settlement date.

Section 9AE(2) Sale of Land Act allows a purchaser to end an off-the-plan contract if the plan of subdivision is not registered within 18 months of the date of the contract. This is consumer protection legislation designed to allow a purchaser to end a contract which may have, objectively, gone too long. A purchaser may not, 18 months after signing a contract, still wish to proceed with the purchase. However, it is important to recognise that this is a right, not an obligation so the purchaser may choose to continue with the contract, and that the statutory right is limited to the purchaser and does not extend to the vendor.

The Act recognises that the 18-month sunset period is a statutory default period and allows the parties to agree to a different period, however it has been held that the vendor cannot unilaterally alter that sunset period (Solid Investments Aust. P/L v. Clifford [2010] VSCA 59). Contracts often provide a longer sunset period, sometimes up to 60 months, and regularly give to the vendor the contractual right to end the contract, in addition to the purchaser’s statutory right, which cannot be removed.

The purchaser has very little control over the plan approval process and must adopt a largely passive role, awaiting the happy news (hopefully) from the vendor that the plan has been approved and that settlement is due 7,10, 14 or 21 days after approval, depending upon the formula adopted in the contract. On the other hand, responsibility for obtaining approval of the plan falls almost entirely upon the vendor and this, by default, means that the vendor is able to influence the timing of registration and hence the time for settlement. If only the purchaser had the right to terminate if the plan is not registered within the sunset period, then the conduct of the vendor would be less likely to be particularly significant, but the practice of granting the vendor the contractual right to terminate if the sunset date passes opens up the possibility that the vendor can affect the outcome of the contract by action, or more particularly, inaction.

By definition, there will be a delay between contract and settlement, sometimes a considerable delay. As a consequence, market forces may have had an effect on the value of the property and in a rising market, as we have enjoyed for two decades or more, this means that the property is likely to be worth more, sometimes remarkedly more, when the sunset period expires. The temptation for the vendor to allow the sunset date to pass and then terminate the contract may in such circumstances be strong as the vendor will then remain the owner of a property which is much more valuable than the contract price. The flip side is that the purchaser misses out on a property that they have long waited for.

New South Wales has recently responded to a number of examples of vendors ending contracts in these circumstances by requiring the vendor to seek consent, either from the purchaser or the Court, before ending such a contract. Victoria, on the other hand, has relied on a firmly recognised obligation of “best endeavours” on the part of the vendor to ensure that vendors are not able to unscrupulously take advantage of the unexpected delay in obtaining approval of the plan of subdivision beyond the sunset date. This obligation was firmly established in Etna v. Arif [1999] VSCA 99 where, upon it being proven that the vendor had effectively stopped trying to get the plan approved during the sunset period, the Court order specific performance of the contract notwithstanding that the sunset period had expired when the vendor finally did obtain approval.

This view was confirmed in Jessup v. Fremder [2001] VSC 100 where a purchaser was able to obtain an order for specific performance even where no particular sunset date was referred to in the contract, the Court finding that a ‘reasonable period’ was to be implied. Joseph Street P/L v. Tan [2012] VSCA 113 held that a vendor might even be required to enter into a s.173 Agreement to secure registration of the plan so that the sunset period could be satisfied, notwithstanding that construction (if applicable) had not been completed. In an unreported interlocutory judgment in April 2018 the Supreme Court imposed an injunction on a vendor who sought to terminate upon the expiration of the sunset period where the purchaser alleged that the vendor had failed to use best endeavours to obtain approval of the plan.

These decisions do not mean that a vendor will never be able to rely on the expiration of the sunset period to terminate, but they do indicate that the vendor bears a heavy burden to prove to the Court that the vendor has used best endeavours and that the sunset period has expired notwithstanding those best endeavours.

Tip Box

•purchasers have a statutory right to avoid if the sunset period expires

•vendors may have a contractual right to avoid, but must use best endeavours to achieve registration

Conveyancing Victoria – Seven reasons to use the By Lawyers Contract of Sale of Land

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The By Lawyers Contract of Sale of Land for Victoria is gaining more fans among Victorian lawyers and conveyancers all the time, as it simplifies the conveyancing process.

For those still wondering what all the fuss is about, you can read below Seven reasons to use the By Lawyers contract – or you can listen to this lively and informative podcast:

 

Seven reason to use the By Lawyers Contract of Sale of Land:

  1. The contract and the vendor’s statement are combined into ONE document, with the vendor’s statement, logically, coming FIRST. The vendor’s statement is formatted to deal with the obligatory disclosures first, then to group the optional fields in a way that makes removal of those fields simple if they are not required. Part 2 general conditions in PDF form removes the need for ‘standard’ special conditions. Any genuinely special conditions can be added.
  2. Clear new approach – all pertinent details are set out in Part 1 to enable anyone to quickly understand the deal by referring to this Part.
  3. Particulars of sale include a “sunset date” for off the plan approvals. No more searching through mountains of special conditions to work out this crucial date.
  4. Non-derogation warranty. The general conditions can be amended by any special conditions BUT not so as to reduce the rights created by the general conditions. No more contracts that say one thing on page 1 and reverse that on page 15! This contract is fair to both parties.
  5. General Condition 12 – deposit release – establishes a clear protocol for early release, by requiring timely objection to title. Title objections actually have very limited relevance to the Torrens system, as title is part of the disclosure in the contract. General Condition 12 allows 28 days to object to title. This offers protection to purchasers, while allowing the vendor to have use of the deposit. Again, this process is fair to both parties.
  6. General Condition 14 – loan condition – extends the time for approval to 21 days and allows for extension, subject to vendor’s ability to end the extension by notice.
  7. General Condition 25 – losses – removes any disputes relating to default losses from the settlement process and allows the parties to resolve these issues after settlement. Unless there is a legitimate objection to title, the matter is settle and disputes relating to quality and inclusions etc, follow after settlement. This removes unnecessary settlement delays.

The By Lawyers Contract of sale of Land is available to LEAP users and By Lawyers subscribers via the Conveyancing & Property – Sale matter plans, or for purchase on the By Lawyers website.

A brief explanation of the move to e-conveyancing – PEXA settlements

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Electronic conveyancing is coming

The conduct of a sale and purchase up to and including exchange can and will remain unchanged for some time as practitioners adapt to conducting matters electronically using emails and software that is currently being introduced into the market.

It is in fact possible today to prepare, submit, negotiate, sign and exchange contracts without the use of paper. Those practitioners interested in joining this move away from paper will find the means to do so within the By Lawyers conveyancing guides.

Electronic settlement has already arrived

However, the focus of this explanatory paper is the electronic settlement process – currently available via PEXA, but soon also via SYMPLI, a joint venture of Infotrack and the ASX.

So, how does PEXA work?

The PEXA process that follows exchange requires all participants in the transaction to have been identified, be registered and have a PEXA digital certification that entitles them to transact electronically in what is known as a ‘workspace’.

A workspace in the electronic conveyancing platform is opened by the vendor, or failing the vendor any other party, for each transaction and a date and time for settlement is entered. When the workspace is created the vendor ‘invites’ all other parties to the workspace via PEXA.

The workspace is where the transaction occurs. As the transaction progresses, each party can add, remove or amend their information in the workspace.

Whilst such matters as requisitions and settlement adjustments are completed outside the workspace, they can be uploaded to the workspace and made visible to a party of choice. For instance, a discharge authority might be made visible to the vendor’s discharging mortgagee only.

The vendor and purchaser sign a paper Client Authorisation allowing their practitioner to sign for them, as it is the practitioner who has the authority through their Digital Certificate to sign for clients. Therefore, the Client Authorisation is a critical document and must be retained for 7 years as they may be audited.

Outgoing and incoming mortgagees make their arrangements for settlement without input from practitioners. Payment directions are communicated by entry into a Financial Settlement Schedule which contains tabs for Source Funds and Disbursements.

Each party to the transaction completes their tasks prior to the nominated settlement time and for settlement to take place as planned, the Settlement Schedule must balance, the source funds must be available, and all documents must be signed.

How does settlement occur?

The workspace is locked automatically once everything is ready. This triggers title verification and movement of the source funds into a holding account. A final search is not required as the workspace will not lock if there are title impediments to registration.

Settlement occurs exactly as scheduled and title documents are lodged and registered, and the settlement funds disbursed in accordance with the Financial Settlement Schedule. The settlement process is automatic and completed in about 15 minutes which sees cleared funds transferred and title registered.

Note settlement can be cancelled at any time prior to the locking of the workspace.

The way of the future

 

The electronic settlement process is remarkably efficient and easy once you get used to it. As it seems inevitable that electronic settlements – and ultimately electronic conveyancing – will become standard practice, it is well worth becoming familiar with it and its really not so hard to do. By Lawyers conveyancing guides can assist you.

Electronic conveyancing – Are you ready?

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As the timeline towards mandatory electronic conveyancing marches on, By Lawyers continues to make changes to our matter plans and precedents to make sure that you are ready and that completing your matters electronically is as easy as possible.

Our matter plans have been split after ‘Mid transaction’ into ‘Paper transaction – Through to settlement’ and ‘Electronic transaction – Through to settlement’.

Precedent letters have been updated and where necessary new precedents included to cover electronic transactions.

By Lawyers helps you make a seamless transition to the new regime.

Planning certificates – Accuracy

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Can this be right?

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Can lawyers rely on certificates provided by authorities?

Property lawyers rely on certificates from authorities, such as local councils, all the time. Acting for a vendor, our clients have an obligation to disclose, prior to contract, certain information to prospective purchasers about the property to be sold and often rely upon certificates to reveal that information. Indeed, s.32J Sale of Land Act envisages that such certificates may be attached to the Vendor Statement. When acting for a purchaser, it is common practice to rely on certificates attached to the Vendor Statement as proof of the information contained therein.

This is particularly relevant to the town planning status of the property, a consideration that can have a huge impact on the value of the property. It is fair to say that the average lawyer would unconditionally accept that if a planning certificate was annexed to a Vendor Statement, the zoning of the property would comply with that certificate and that the purchaser can rely on that information. It is therefore likely to come as somewhat of a shock that the Court of Appeal in Queensland appears to have thrown doubt on this expectation and, if that decision were to be followed in Victoria, lawyers would become liable to their purchaser clients if the information in the certificate proved to be incorrect.

Central Highlands Regional Council v Geju P/L [2018] QCA 38 was an appeal by the Council against the decision in Geju P/L v Central Highlands Regional Council [2016] QSC 279. At first instance McMeekin J held the Council responsible for an incorrect town planning certificate that described land as zoned ‘industrial’ when it was in fact zoned ‘rural’ and found in favour of a purchaser who, relying on the certificate, had paid too much for the land. The purchaser’s claim had been based on the negligence of Council in providing the incorrect certificate to the vendor, who in turn provided it to the purchaser, and the Court was satisfied that the Council owed a duty of care to the purchaser, had breached that duty and the purchaser had suffered loss as a result. Most lawyers would agree with that decision and take comfort in the knowledge that an authority is responsible not only to the party who obtains the certificate, but third parties who might be expected to rely on the certificate.

But that decision was overturned on appeal. The Court of Appeal followed a similar line of analysis to McMeekin J but diverted, dramatically, at the question of duty of care. McMeekin J was satisfied that the Council owed a general duty of care in respect of the provision of certificates and described the purchaser as being a member of a class of people who might reasonably be expected to rely on the certificate – a potential purchaser of the property. However, the Court of Appeal rejected this view and concluded that “there was no rational way to define a class of which (the purchaser) was a member other than in very broad terms” and went on to suggest that tenants, lenders or investors might also be interested in the information contained in the certificate and that the Council’s liability should not extend to such a wide class of people. Thus, the Council owed no duty of care to the prospective purchaser.

Can this be right?

Since Mid Density Developments P/L v Rockdale Municipal Council [1993] FCA 408 there has been a widely held belief that municipal Councils are responsible for the accuracy of certificates provided to applicants for certificates AND third parties who deal with the applicant and might be reasonably expected to rely on such certificates. Prospective purchasers certainly fall within such a class, particularly when the certificate is relied upon by the applicant vendor to satisfy the vendor’s statutory disclosure obligation to prospective purchasers. That other classes of people might also interact with the applicant for the certificate hardly seems a valid reason to exclude that smaller class of people who interact as prospective purchasers.

The law relating to negligence causing pure economic loss is arcane. The High Court has had cause to consider the issue on a number of occasions and Central Highlands might provide the opportunity for it to do so again. In the meantime it is hoped that the previously understood liability imposed on council charged with the responsibility of administering planning schemes to provide correct certificates in respect of those schemes will continue, in Victoria at least.

Tip Box

•authorities provide certificates relating to properties

•the applicant for the certificate can rely on it

•there is now some doubt as to whether a third party can rely

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