ByLawyers News and Updates

Off the plan contracts – NSW

by

Significant changes to off the plan contracts commenced 1 December 2019.

The changes arise from the Conveyancing Legislation Amendment Act 2018 (NSW) and the Conveyancing (Sale of Land) Amendment Regulation 2019 (NSW). They place further disclosure obligations on vendors. They also create new remedies and stronger protections for purchasers when entering into residential off the plan contracts.

Changes to off the plan contracts – summary:

  • Certain prescribed documents must be attached to residential off the plan contracts. These include a prescribed Disclosure Statement, a draft plan prepared by a registered surveyor and other draft documents, as set out in clause 4A of the Conveyancing (Sale of Land) Regulation 2017.
  • A purchaser can rescind the contract within 14 days if the Disclosure Statement, draft plan or relevant prescribed documents are not attached to off the plan contracts exchanged on or after 1 December 2019.
  • There is an ongoing obligation on the vendor to notify purchasers of changes to material particulars using the prescribed Notice of Changes form. Purchasers may be able to rescind or claim compensation if there is a change to a material particular.
  • The cooling-off period for residential off the plan contracts is extended to 10 business days.
  • The final registered plan must be provided to the purchaser at least 21 days before settlement.
  • Deposits must be retained by the stakeholder in a trust or controlled monies account.

An off the plan contract is defined in the amending act to mean a contract for the sale of a residential lot that does not exist at the time the contract is entered into.

The following are not caught by the amendments:

  • The sale of a commercial property off the plan.
  • The sale of a residential lot off the plan if it is sold at the point when the title is registered but an occupation certificate has not been issued.
  • Contracts arising out of the exercise of an option that was entered into before 1 December 2019.

Updates to By Lawyers publications

  • The By Lawyers Conveyancing Publication, including Sale and Purchase Guides and 1001 Conveyancing Answers, all contain dedicated commentary regarding off the plan contracts. These commentaries now cover the new requirements in detail.
  • The By Lawyers Contract for Sale of Land has been amended as follows:
    • Statutory cooling off notice – 10 business days;
    • Statutory attachments table includes Disclosure Statement;
    • Price and deposit clause addresses the requirement for deposit and instalment payments to be held as trust or controlled money;
    • New clause 16(d) ‘Residential off the plan contracts’; and
    • Off the plan settlement changed to 21 days after notice of registration of plan.
  • All precedents making reference to cooling off periods have been updated to accord with the new period.
  • Disclosure Statement and Notice of Changes forms are available on the Sale matter plan.
  • New notices for rescission and compensation claims have been added to the ‘Claims, disputes and notices’ folder. Precedent letters serving these notices on the relevant parties have also been added.

By Lawyers are proud to assist subscribers to understand and comply with these amendments. Like all By Lawyers publications, our Conveyancing Guides provide all the necessary commentary and precedents in one place. Enjoy practice more!

 

 

Measurements

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Contracts for the sale of land often present a discrepancy between the title dimensions and the physical dimension on the ground. This problem has traditionally been dealt with by an IDENTITY condition in the contract.

Wollert Epping Developments P/L v Batten [2019] VSC 618 (Wollert) is the first case on the topic for some years and the first to consider the current standard identity clause, being General Condition 3 of the LIV/REIV contract in use between 2008 and 2019 and General Condition 7 of the LIV/REIV contract that was adopted in August 2019. As was said in Wollert, quoting from a previous judgment by Brooking J, identity clauses:

“had long been common in Victoria in contracts of sale of land under the TLA… since at least the middle of the century”.

The function of the identity clause is to chart a course between the rights of the vendor who is able to deliver title to the land and the rights of a purchaser who complains that the title does not comply with the dimensions of the land as represented by the physical boundaries, typically the fences.

The common law took a strict view in relation to dimensions and any small discrepancy entitled the purchaser to avoid the contract. Equity sought to ameliorate this harsh outcome and introduced the alternative remedy of compensation for deficiency. The standard identity clause prior to 2008 adopted this compromise by denying the right to avoid but allowing the possibility of compensation. Since 2008 the standard identity clause has denied the right to avoid and also denied a right to compensation. As explained in Wollert, by reference to an article by myself, this was justified by the fact that modern conveyancing is conducted under the auspices of s.32 Sale of Land Act and a purchaser has full details of the vendor’s title before entering into the contract and consequently has the ability to undertake a comparison of the occupational boundaries as against the title dimensions before committing to the purchase.

Wollert concerned the sale of valuable development land on the outskirts of Melbourne. The vendors were long-time farmers and the purchaser was a subdivisional developer. After signing the contract, the purchaser discovered an encroachment on one boundary. The title dimensions showed the land to be 58.1 ha. and the encroachment was approximately 500sm. or 0.92% of the area. The purchaser argued that this constituted a breach of the warranties in General Condition 2.3(c)&(e) concerning possession of the land and passing unencumbered title at settlement, and General Condition 10(1)(b) requiring delivery of vacant possession. The vendor argued that GC.3 prevailed over those warranties and that the discrepancy did not give rise to a right to avoid or claim damages.

The first point to be considered was whether the property was sold by title or sold by description. The contract referred to both the title description and the land description and if the sale was by description (rather than title) there was no misdescription as the property at the address in the contract was capable of being delivered. Wollert settled this argument by deciding that the sale was by title, not description. The second question therefore was how did the warranty conditions interact with the identity condition.

After a consideration of the law relating to identity clauses generally, Derham AsJ. concluded that the identity clause (GC.3) prevailed over the warranty conditions in circumstances where the “difference in the measurements of the land as shown in the Certificate of Title compared with the land as occupied by the Vendors is not of such consequence that it may be reasonably supposed that but for the error or misdescription the purchaser would not have entered into the Contract.” His Honour had previously referred to “the common law principle – the so-called rule in Flight v Booth, to the effect that a significant discrepancy will justify avoidance of the contract by the purchaser, and the associated ‘rule of thumb’ that a 5% or greater diminution in area is likely to be considered significant.”

It is fair to say that this judgment has settled a long-standing uncertainty in relation to measurement disputes in Victoria and has come down on the side of the identity condition adopted by the standard contract of sale. Notwithstanding the rise of consumer protection and the demand for vendor disclosure, the purchaser still bears a due diligence obligation in relation to the basic compliance between title dimensions and occupational boundaries. Only a ‘significant’ discrepancy will entitle a purchaser to avoid the contract.

Tip Box

  • Identity conditions are common in contracts for the sale of land
  • A discrepancy between title and occupation will not invalidate the sale unless significant
  • As a rule of thumb a 5% discrepancy will be significant

Revocation of Power of Attorney – NSW

by

Revocation of Power of Attorney

Unlike a will, a power of attorney does not revoke a previous appointment of an attorney by the principal. Powers of attorney which are not intended to continue must be revoked.

The By Lawyers Powers of Attorney, Appointment of Enduring Guardian and Advance Care Planning Guide for NSW includes commentary on revoking a power of attorney, as well as a Revocation of Power of Attorney precedent.

Following some helpful feedback from our subscribers, the Revocation of Power of Attorney precedent has been amended for enhanced functioning.

Amended precedent

The following amendments have been made:

  • Guidance notes have been added to the precedent;
  • For LEAP users, the precedent has been coded for matters with multiple clients so that an ‘ASK’ will run when the precedent is opened asking which client is revoking and the address of all attorneys now populates.

This precedent can be found in the Revocation of Powers of Attorney sub-folder under Folder B. Powers of Attorney in the By Lawyers Powers of Attorney, Appointment of Enduring Guardian and Advance Care Planning Guide.

 

Interpreters – NSW

by

The rules concerning the engagement or appointment of interpreters for civil litigation in NSW courts have been amended.

The Uniform Civil Procedure (Amendment No 92) Rule 2019 provides for new rules. These are based on the Model Rules in Recommended National Standards for Working with Interpreters in Courts and Tribunals prepared by the Judicial Council on Cultural Diversity.

The amendments that commenced on 8 November add Division 3 of Part 31 and Schedule 7A to the Uniform Civil Procedure Rules 2005 (NSW). The new division sets out rules which cover:

  • When an interpreter may be engaged;
  • Who may act as an interpreter; and
  • Functions of interpreters.

Importantly, an interpreter must now adhere to the Court Interpreters’ Code of Conduct, which is set out in Schedule 7A of the UCPR. A copy needs to be given to the interpreter as soon as possible after they have been engaged or appointed.

The By Lawyers Litigation publications for Local, District and Supreme Courts have been updated accordingly. A link to the Code of Conduct is included.

Transfer by direction – SA

by

Requirements for a transfer by direction have been relaxed in SA.

A recent Revenue Ruling SDA009[V2] states that, unless additional consideration is being paid by the transferee, a Deed of Assignment or Nomination is no longer necessary for any purchaser to direct the vendor to transfer the property to any other person or entity – whether related or not.

The Ruling states that Revenue SA:

  • acknowledges that a purchaser named in a contract has a common law right to direct the vendor to transfer the land to any party the purchaser chooses. This common law right to a transfer by direction exists whether or not the purchaser executes the contract with “and/or nominee”; and
  • no longer requires a letter of agency/nomination, nor any formal assignment, where a purchaser named in a contract and the person named in the transfer pursuant to that contract are not the same.

However, stamp duty will still be payable where an assignment document is prepared and executed, or when Section 68 of the Stamp Duties Act 1923 applies.

The ruling contains an example direction to the vendor.

The Sale and Purchase commentaries in the by Lawyers SA Conveyancing publication have been updated accordingly.

Immigration – FED

by

Two important changes to Australian immigration law commence on 16 November 2019.

  • The Skilled Employer Sponsored Regional (Provisional) visa 494 is replacing the Regional Sponsored Migration Scheme visa 187.
  • The Skilled Work Regional (Provisional) visa 491 is replacing the Skilled Regional (Provisional) visa 489.

The new visas allow skilled workers to work in regional Australia. They can be a pathway to permanent residency, via the Permanent Residence (Skilled Regional) visa 191, which commences in November 2022.

Applicants for the Skilled Employer Sponsored (Regional) visa 494 must be under the age of 45 at the time of application, have competent English and at least three years full-time relevant work experience in the nominated occupation, or a related field, at the same level of skill. The visa is for a five-year period.

Applicants for the Skilled Work Regional (Provisional) visa 491 must be under the age of 45 at the time of application, complete a positive skills assessment, be nominated by an Australian state or territory government agency, or be sponsored by an eligible family member residing in the regional area and be invited to apply for the visa after the submission of an expression of interest through SkillSelect. The visa is also for a five-year period.

The By Lawyers Immigration publication will be updated accordingly.

Avoiding off the plan contracts – A sequel

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Avoiding off the plan contracts is a common topic for this column. March 2019 and July 2018 considered sunset clauses, October 2015 looked at avoiding for quality defects and May 2015 considered the various statutory avoidance rights.

Harris v K7&@Surry Hills P/L [2019] VSC 551 is a decision of the Supreme Court that considers the purchaser’s right to terminate an off the plan contract for the sale of a residential unit and two car parking spaces. The contract was preceded by lengthy negotiations between the purchaser, the agent and the vendor as the purchaser wished to combine two of the proposed lots into one occupancy, although the contract related to 2 lots (lots 306 & 307). These lots each had a car space and a full length (as opposed to an ‘over the bonnet’) storage cage as part of each lot on the proposed plan. The contract, having identified the property sold as lots 306 & 307, included a provision that the proposed plan would be revised so as to incorporate the combined lots as one lot on the final plan.

As is often the case when purchasers seek to ‘fiddle’ with off the plan contracts, the contract ended up containing conflicting terms, some that were standard terms for the sale of lots on the plan generally and which give the vendor wide powers to amend the plan, and some that were specific to this contract that were designed to protect the changes that the purchaser had negotiated. One such specific term added to the contract as Special Condition 38 required the vendor to provide “two (2) car parks that are adjacent”.

The vendor undertook the task of revising the plan to accommodate the purchaser’s wishes, but disputes arose. In particular the revised plan only included one ‘over the bonnet’ storage cage (instead of the two full length storage cages the purchaser believed it was entitled to) and one car space on title and the right to share a car stacker for a second space. The purchaser sought assurances that the plan would be amended to provide the purchaser with 2 full length storage cages and 2 adjacent car spaces and the vendor declined to do so stating that “allocation of car spaces and storage spaces are only finalised at the time of construction completion”. It is fair to say that this is a common approach amongst developers who seek to rely on Special Conditions giving them wide ranging powers to adjust the plan of subdivision to accommodate construction needs. This case is important as it indicates that developers need to take account of specific needs of purchasers and that purchasers need to be specific in specifying those needs in the contract.

The purchaser terminated the contract on three bases:

  1. that the vendor had repudiated the contract;
  2. that there was a ‘material change’ to the plan invoking s.9AC(2) Sale of Land Act; and
  3. that the vendor had engaged in misleading and deceptive conduct contrary to s.18 Australian Consumer Law.

Repudiation – the Court accepted the purchaser’s argument that by submitting an amended plan that did not include “two carparks that are adjacent” in accordance with Special Condition 38 the vendor repudiated an essential term of the contract and that the purchaser was entitled to end the contract. The vendor argued that the amended plan might not necessarily be the final plan, but the Court held that a purchaser in such circumstances is entitled to assume that an amended plan is intended to constitute a final plan.

Material change – the Court also accepted that by submitting the amended plan that did not included a full length storage cage the vendor gave the purchaser the right to terminate the contract pursuant to s.9AC(2) as that plan contained a ‘material change’.

ACL – the Purchaser’s argument based on the ACL alleged that the vendor’s agent had, immediately before contracts were exchanged and as an incentive for the purchaser to sign, represented that the purchaser would receive 2 full length storage cages and that in breach of that representation the amended plan did not include those storage cages. The plan in the contract in fact did not include 2 full length storage cages but the Court accepted that the representations had been made and rejected the argument that Special Conditions allowing the vendor wide discretion to amend the plan could be used to overcome those representations.

Developers tend to ride rough-shod over complaints made by purchasers of off the plan apartments but this case confirms that if a purchaser is prepared to see it through, the law will often provide a remedy, or three.

Tip Box

  • Specific amendments to off the plan contracts will prevail over standard conditions
  • The application of s.9AC will be judged on plans submitted from time to time
  • The ACL will provide a remedy for misrepresentation

Testamentary capacity – NSW

by

A recent Court of Appeal decision on testamentary capacity has been added to the By Lawyers publication 101 Succession Answers (NSW).

In Drivas v Jakopovic [2019] NSWCA 218 the Court of Appeal upheld a first instance decision which had given substantial weight to the evidence of the attending solicitor over the retrospective evidence of medical experts based on the deceased’s medical records.

The case is notable because the solicitor had no specific recollection, nor any notes, of the interaction with the client. However the will was time-stamped to show it had been prepared over the course of 1.5 hours spent with the client. The solicitor was very experienced in preparing wills and dealing with elderly clients, including assessing their testamentary capacity. The solicitor gave evidence as to his usual practice when taking instructions, including his understanding of the legal tests for capacity laid down in Banks v Goodfellow (1870) LR 5 QB 549.

The Court of Appeal agreed with the fist instance judge that the evidence of the solicitor – which suggested there was no issue with the will maker’s capacity – was preferable to the evidence of doctors who had considered the deceased’s medical records and made a retrospective assessment that she lacked capacity.

This case highlights the importance of the role of the attending solicitor in assessing testamentary capacity. However it is specific to its facts and reliance upon ‘usual practice’ as evidence of capacity is not ideal. The prudent course, as noted both under Capacity in 101 Succession Answers and in the commentary in the By Lawyers Wills guide, is for the attending lawyer to ensure that comprehensive notes are taken. The notes should include specific reference to the legal tests in Banks v Goodfellow. Where capacity may be in issue, a statement from the testator’s GP or treating doctor as to their capacity, addressing the tests in Banks v Goodfellow, is also likely to be valuable evidence to protect against any later challenge to the will maker’s capacity.

101 Succession Answers (NSW) is available in the reference materials folder in the NSW Wills, Estates, Powers of Attorney, Appointment of Enduring Guardian and Family Provision guides.

Off the plan amendments – NSW

by

Off the plan amendments

Off the plan amendments for residential properties are being introduced by the Conveyancing Legislation (Amendment) Act 2018 and the Conveyancing (Sale of Land) Amendment Regulation 2019. The bulk of the amendments will commence on 1 December 2019, however, the provisions affecting statutory cooling off commenced on 25 October 2019, introducing a transition period until 30 November 2019.

The cooling off period for off-the-plan contracts has been extended from 5 to 10 business days. The cooling off warning notice form, prescribed by Schedule 5 of the Conveyancing (Sale of Land) Regulation 2017, has also been amended to reflect this change. A contract for the sale of residential property entered into during the transitional period may include the new cooling off warning notice form or the old form in force immediately before the amendment. There is no obligation for a contract to include the new form of notice until 1 December 2019. 

A summary of the amendments that will commence 1 December 2019 include:

  • Increased vendor disclosure requirements including a Disclosure Statement and draft documents to be attached to the contract. Purchasers can rescind the contract within 14 days of exchange if the Disclosure Statement or relevant prescribed documents are not attached to an off-the-plan contract before it is signed. These new requirements are additional to the existing disclosure regime imposed by Part 2 of the Conveyancing (Sale of Land) Regulation 2017. There is no need to attach more than one copy of the same document to the contract and the Disclosure Statement;
  • Vendors to notify changes to ‘material particulars’. Purchasers can rescind or claim compensation for some changes to material particulars. Notification of changes must be made on an approved form which will be available on the By Lawyers Sale matter plan soon;
  • 10-Business-Day cooling-off period. All contracts for sale of land may use either the old form or new form of warning notice until 30 November 2019. Contracts for established properties may use the old form or new form of warning notice for 6 months after commencement. From 2 June 2020, all contracts for sale, whether for off-the-plan or established properties, will need to use the new form of cooling off warning notice;
  • Purchasers to be given registered plans 21 days before settlement;
  • Deposit to be held in trust. Any money paid by the purchaser by way of deposit or installment under the contract must be retained by the stakeholder in a trust or controlled money account during the contract period. This money cannot be released to the vendor before settlement. This measure will ensure deposit and instalment monies are protected in the event of the developer’s insolvency;
  • Stronger sunset clause protections. The amendments extend the definition of a sunset clause to capture other events which trigger termination of the contract, like the issue of an occupation certificate. Changes also confirm that the Court can award damages if the vendor is permitted to end the contract under a sunset clause. These changes are contained in new Section 66ZS introduced by the Conveyancing Legislation (Amendment) Act 2018. New sunset clause provisions will apply to all off-the-plan contracts, irrespective of whether they were signed before or after commencement.

The By Lawyers Conveyancing (NSW) Publication will be updated accordingly. This will include new provisions in the By Lawyers Contract for the sale of land 2019, precedents and commentary.

Companies – FED

by

Following an extensive author review, the By Lawyers Companies guide has been substantially enhanced. Users will find new commentary and a number of helpful new precedents.

The commentary now includes sections on Running a company and Company disputes.

With trademark By Lawyers practicality, the new sections of commentary assist practitioners to advise clients about most of the common issues which arise in the operation of small private companies, from managing company business, conducting meetings, issuing new shares and dealing with various types of company disputes, to negotiating share sales, handling insolvency events and participating in voluntarily winding up. Some aspects of the existing commentary on Setting up a company have also been enhanced and new precedents added.

Users will find the following new precedents have been added to the By Lawyers Companies Guide:

  • Retainer instructions – Company disputes;
  • Initial letter to company which has received a statutory demand;
  • Letter to the client  to make an appointment to sign documentation required for incorporation;
  • Letter to the client advising that the company has been incorporated;
  • Letter to the client with draft shareholder’s agreement;
  • New letters gathering information relevant to company disputes:
    • Letter to client requesting relevant documents;
    • Letter to director requesting inspection of company minutes;
    • Letter to director requesting company records; and
    • Letter to director advising of intention to seek a s 247A order to inspect company records;
  • New option precedents:
    • Notice of exercise of call option;
    • Notice of exercise of option to purchase
    • Notice of exercise of put option;
    • Notice of appointment of nominee;
    • Letter to seller’s solicitor exercising option; and
    • Letter to buyer’s solicitor exercising option;
  • Company resolution; and
  • Minutes of meeting – Directors.

These substantial enhancements to this already popular publication are part of By Lawyers commitment to constantly add value for our users and keep our content updated.

We invite you to peruse the new commentary and precedents in the Companies Guide, located in the Companies, Trusts, Partnerships and Superannuation publication. Also available in the Reference materials folder on each of these matter plans is the helpful reference manual Business structures and comparative table, which compares and contrasts the different types of business structures and considers their advantages and disadvantages, including from a taxation point of view.

 

 

 

Connect with us