By Russell Cocks, Solicitor
First published in the Law Institute Journal
Regulation is the life-blood of lawyers, but it is also the bane of their life and that is particularly so when it impacts on common or garden transactions such as conveyancing and leasing. A recent example is the introduction of further Regulations relating to essential safety measures.
Essentially, these regulations require the owners of all properties (other than homes) to establish certain minimum standards in respect of safety at the premises and to also establish a maintenance program in respect of those safety measures, including an annual inspection and reporting regime. Exclusion of domestic dwellings from the requirements at least means that the Regulations are not relevant to common or garden conveyancing, but they are relevant to the sale of commercial buildings, such as shops & offices and also industrial buildings, such as factories.
Some safety requirements have been mandatory since 1994, notably the obligation to have adequate exit lighting and fire prevention equipment, but the obligations were ramped up by the 2006 Regulations and now include a wide array of safety matters set out in the Building Code of Australia. To ensure that the owner is aware of these requirements the occupancy permit issued in respect of any new property must include a list of all essential safety measures pertaining to the building. The Regulations also require an owner to prepare an annual essential safety measures report and have that report available for inspection at the premises.
Further, the Regulations now address premises that were built prior to 1994. Such premises will not have essential safety measures specified in the occupancy certificate however, from 13 June 2009 the owner of such premises is obliged to prepare an essential safety measures report in a form ‘approved by the Commission’.
Lawyers are not usually involved in the process that leads to the issuing of an occupancy permit. However consideration must be given to the question of whether a lawyer should take an interest in the occupancy permit and/or the mandatory essential safety measures report when the property is the subject of a transaction, either by way of sale or lease.
Sale
A vendor has statutory disclosure obligations and common law and statutory obligations in relation to misleading and deceptive conduct. Whilst there does not appear to be any authority to date supporting the proposition that an occupancy certificate (or an essential safety matters report) falls within any of the obligations created by s 32, an argument could be mounted on the basis of the obligation to disclose ‘restrictions’ or ‘notices’. Equally, no case has decided that a vendor acting in trade and commerce (as will be the case in relation to such properties) has an obligation to disclose an occupancy certificate (or an essential safety matters report) however an argument based on misrepresentation by silence at least appears to be open. It might therefore be concluded that it may be prudent to exhibit an occupancy certificate or report that set out the essential safety requirements when selling a commercial property, although it is by no means compulsory.
It might also be prudent when advising a purchaser of commercial properties to suggest that a copy of an occupancy certificate or report should be sought, particularly if advice is sought before contract.
The failure of a vendor to have an essential safety matters report would not appear to constitute a defect in title, but is rather a defect in quality, similar to the failure to have adequate smoke alarms or pool fencing. Whilst such a deficiency may expose the vendor to penalties, it does not create any rights for the purchaser and it is therefore unlikely that a purchaser can require the vendor to obtain such a report prior to settlement, even though the purchaser will ‘inherit’ the obligation to do so upon settlement.
Leased premises
These essential safety measures obligations fall on ‘the owner’. Section 251 of the Building Act prohibits the passing on of the compliance obligations to the tenant, including the obligation to obtain an annual report. It would therefore be prudent for a purchaser to inquire as to compliance with those obligations by either the vendor or the tenant but, in the absence of a specific term in the contract, the purchaser could not demand compliance with those obligations prior to settlement.
Tip Box
Whilst written for Victoria this article has interest and relevance for practitioners in all states.