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An overview of the Victorian Relationships Act 2008

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By Roz Curnow, Nolch and Associates

The purpose of the Victorian Relationships Act is to establish a Victorian relationships register for domestic relationships, provide for relationship agreements, provide for adjustment of property interests between domestic partners (repealing part IX Property Law Act 1958), and to provide for rights of domestic partners to maintenance.

The latest default implementation date is 1 December 2008; or in respect to items 25 (re Freedom of Information Act 1982) or 69 (re Consumer Credit (Victoria) Act 1995) of Schedule 1, 1 July 2009. Regulations pertaining to fees, forms, penalties, and anything necessary for the purposes of the Act, may be made by the Governor in Council. See s 71; and ss 72-75 for transitional provisions and interim fees.

There are a number of main ‘arms’ to the Act, and note that there are different definitions of ‘domestic partner’ and ‘domestic relationship’ contained in the Act, depending upon the chapter – for example, s 35 contra s 39.

Registration of domestic relationships

A ‘registrable relationship’ is a relationship (other than a registered relationship) between two adults ‘who are not married to each other but are a couple where one or each of them provides personal or financial commitment and support of a domestic nature for the material benefit of the other, irrespective of their genders and whether or not they are living under the same roof, but does not include a relationship in which a person provides domestic support and personal care … for fee or reward; or on behalf of another person or organisation …’ See s 5.

There are various preconditions to registering a registrable relationship, such as not being in another inconsistent relationship/marriage, being domiciled or ordinarily resident in Victoria, and providing the prescribed documentation/information: see sections 6-8. If the application is not withdrawn, then within the prescribed periods the Registrar of Births, Deaths and Marriages must either register or refuse to register the relationship on the relationships register: see ss 9-10.

Note: there appears to be no required length of time for the parties to have been in a relationship before being able to register, compared with the two-year requirement in relation to property and maintenance orders pertaining to an ‘unregistered’ relationship.

Searches of the register appear to be similar to other searches at births, deaths & marriages – the privacy of the persons concerned is protected, and a proper reason needs to be given for the search: see ss 20-24.

A registered relationship will be revoked by the death of either party, or the marriage of either party (to each other or someone else); and it can also be revoked upon application by either party – see ss 11-13 – which application can be withdrawn: see s 14. The Registrar must revoke the registration after the expiry of 90 days after the revocation application has been lodged, unless it is withdrawn or a court or tribunal directs otherwise; and a court can order revocation on application by an interested person or on its own motion: see ss 15-16.

A person whose interests are affected by a decision of the Registrar can apply to the Victorian Civil and Administrative Tribunal (VCAT) for a review. See s 28; also see s 33 re extension to Evidence Act 2008 re the Registrar taking statutory declarations required for the above purposes.

Relationship agreements

First, there are a number of definitions to be taken into account – see s 35 (chapter 3, part 3.2), contra s 39 (chapter 3, part 3.3):

  • A ‘domestic partner’ is a person with whom the (first) person is or has been in a domestic relationship, or with whom they are contemplating entering into a domestic relationship.
  • A ‘domestic relationship’ is:
  1. A registered relationship, or
  2. A relationship between two persons not married to each other but living together as a couple on a genuine domestic basis, regardless of gender, or
  3. The relationship between two adults ‘who are not married to each other but are a couple where one or each of them provides personal or financial commitment and support of a domestic nature for the material benefit of the other, irrespective of their genders and whether or not they are living under the same roof, but does not include a relationship in which a person provides domestic support and personal care … for fee or reward; or on behalf of another person or organisation …’

And a number of listed factors are to be taken into account in determining the current or past existence of a domestic relationship:

  • ‘Financial matters’ relate to one or more of the following: the maintenance, income or property, or financial resources of one or both of the domestic partners. See further definitions in s 35 of ‘financial resources’ (very broad, including prospective claims or entitlements, pensions, and ‘valuable benefit’) and ‘property’ (again very broad, including real and personal, estates, interests, causes of action, et cetera).
  • A ‘relationship agreement’ is an agreement, whether or not there are other parties to it, made before, on or after commencement of the Act in contemplation of entering or during a domestic relationship, or in contemplation of terminating or after termination of a domestic relationship, which provides for financial matters, whether or not other matters are included.

These agreements are subject to and enforceable pursuant to contract law, and may be varied or set aside, wholly or in part, by a court in certain circumstances – for example, in instances of fraud or duress. See ss 36 and 37.

If a relationship agreement requires one of the domestic partners to pay periodic maintenance, then on the death of the first partner the requirement to pay maintenance is unenforceable against that person’s estate unless the agreement provides otherwise; and on the death of the second partner is unenforceable by their estate, with a saving for arrears then due at the death of either partner. However, unless provided otherwise in the agreement, terms relating to property and lump sum payments are enforceable by the surviving partner against the estate of the deceased partner.

Property and maintenance

Again, some definitions – see s 39, noting some other definitions revert back to s 35:

  • A ‘child’ is one born as a consequence of sexual relations between the partners, or a child of one of them of whom the other is presumed to be the father (per part II of the Status of Children Act 1974), or a child adopted by the partners.
  • A ‘domestic partner’ is ‘a person with whom the person is or has been in a domestic relationship’.
  • A ‘domestic relationship’ is:
  1. a registered relationship; or
  2. a relationship between two persons who are not married to each other but who are living together as a couple on a genuine domestic basis (irrespective of gender) …

A court has the power to make a declaration in respect to property, as broadly defined – see s 35(1) – including orders for possession, orders for adjustment of interests and/or granting of maintenance. Sections 45 and 46 concern the numerous factors to be taken into account, and also adjournments if there is a likelihood of a significant alteration in circumstances (including future entitlement to property under s 48) or contra Family Court proceedings; and ss 51 and 52 concern orders for maintenance). There are certain additional requirements in respect to unregistered relationships such as domicile, and that the parties have lived together in the relationship for at least two years or there is a child of the domestic partners or accepted by the domestic partners as a family member or serious injustice would result in not making an order: see ss 40 – 42, and s 42 in respect to unregistered relationships.

There are time limits for making applications – essentially two years from the date on which the relationship ended – but with the court having power to grant leave for an extension: see s 43. The court is to make orders where possible to determine the financial relationship and avoid further proceedings: see s 44.

Property interests – If a party to property interest proceedings dies before an application for an order is determined, the application may be continued by or against the legal personal representative, and a court may make an order against the deceased’s party’s estate; and if a party dies after an order is made against them, the order may be enforced against their estate. See ss 49-50.

Maintenance – In respect to maintenance, the Act sets out an extensive number of factors to be taken into account, and provides that if either party dies before the application is determined then the application abates. See s 51. A court also has the power to make an order for interim maintenance. See s 52. If the domestic relationship ceases, then an application for maintenance cannot be made by a domestic partner who at the time of the application is in a domestic relationship with someone else or who has married or remarried. See s 53. A maintenance order ceases on the death of either party, on the marriage or remarriage or on the registration of a registrable relationship of the party having the benefit of the order, with various provisions for adjustment and interest, recovery of arrears and variation orders for periodic maintenance. See ss 54-57.

There are also some general provisions in respect to property adjustment and maintenance orders:

  • Courts with jurisdiction are the Supreme Court, County Court, and Magistrates’ Court, depending upon jurisdictional limits; with provisions for the transfer of proceedings, and a stay or dismissal of proceedings where proceedings have been instituted in more than one court in relation to the same person. See ss 65-69.
  • A court has numerous powers including ordering the sale or transfer of property, execution of documentation (and if the party fails to execute it, an officer of the court or other person can be directed to do so in lieu – see s 60), payments of periodic or lump sums, appointment or removal of trustees, granting injunctions, and making consent orders: see s 58. In exercising its powers, a court must not make an order or do anything inconsistent with the terms of a relationship agreement between the parties if the agreement is in writing and signed by the party against whom it is to be enforced, and each party was given a legal practitioner’s certificate (covering the stated matters – refer also to Legal Practitioners’ Liability Committee publications, particularly check issue no. 40, September 2008) at the time of signing the agreement and which accompanies that agreement. See s 59.

However if a court is not satisfied that all of these requirements have been met, the court can make an order as if there were no relationship agreement, although the court may have regard to its terms; and the court is not required to give effect to the terms of a relationship agreement if it is of the opinion that the parties have revoked or agreed to revocation of the agreement, or the agreement has otherwise ceased to have effect, or it is wholly or partly varied or set aside by the court under other provisions of the Act – that is, under s 37.

  • Ex parte applications may be made in cases of urgency. See s 61.
  • A court can vary or set aside a section 45 (adjustment of property interests) or s 51 (maintenance) order if the court is satisfied that there has been a miscarriage of justice because of fraud, duress or false evidence; that circumstances have arisen making the order or part of it impracticable; that parties have failed to carry out obligations under the order, and so on: see s 62.
  • Transactions to defeat claims can be set aside, and costs orders made, with regard being had to the interests of any bona fide purchaser or other interested person. See ss 63 and 64. A court may order that a person who may be affected by an order be given notice of the proceeding, or on application be made a party to it; and if a party against whom an order is sought is married, the applicant must give notice of the proceeding to that party’s spouse. See s 64.
  • A court can make orders requiring bonds, payment of penalties, handing up of documents, and so on, where the court is satisfied that a person knowingly and without reasonable cause contravened an order or injunction (other than an order for payment of money). See s 70.

Acts affected by this Act

In addition to the repeal of part IX of the Property Law Act 1958, there are presently sixty-nine affected Acts – subject to any further additions/amendments. These affected Acts cannot all be listed here. However, some Acts that may be frequently encountered by readers are:

Accident Compensation Act 1985

Administration and Probate Act 1958 – including amendment to section 51A of that Act Conveyancers Act 2006

Conveyancers Act 2006

Consumer Credit (Victoria) Act 1995

Crimes Act 1958

Duties Act 2000

Equal Opportunity Act 2010

Estate Agents Act 1980

Fair Trading Act 1999

First Home Owner Grant Act 2000

Freedom of Information Act 1982

Guardianship and Administration Act 1986

Land Acquisition and Compensation Act 1986

Land Act 1958

Land Tax Act 2005

Landlord and Tenant Act 1958

Legal Profession Act 2004

Partnership Act 1958

Payroll Tax Act 2007

Residential Tenancies Act 1997

Retirement Villages Act 1986

Sale of Land Act 1962

Superannuation (Portability) Act 1989

Trustee Companies Act 1984

Wills Act 1997

Wrongs Act 1958

A final note: as pointed out by Adrian Stone and Kathryn Downs in ‘Going separate ways’ (Law Institute Journal, September 2008, page 34), the operation of this Act may yet be affected by an Act resulting from the Federal Family Law Amendment (De Facto Financial Matters and Other Measures) Bill 2008.

Note: This article was first published in The Legal Executive November-December Volume 2008 Issue No. 6 (save for minor corrections), and is reproduced with the permission of the author and The Institute of Legal Executives (Victoria). Readers should note that further Federal legislation has since been implemented, affecting the operation of certain parts of the Act; and are also referred to a subsequent article, More about the Relationships Act 2008.

Tips

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

Vendor statement – Breach of section 32

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The Vendors Statement required by the seller of real estate pursuant to s 32 of the Sale of Land Act is a fundamental document in the conveyancing process. Designed as a consumer protection mechanism, the statement requires the vendor to disclose certain items of relevant information to a prospective purchaser.

Perhaps reflective of a ‘boom market’ in real estate in the new millennium, there have not been many recent cases that have considered this section. Purchasers in such a market are less likely to complain and more likely to take a long-term view that capital growth may remedy minor blemishes. Add to this the uncertainty of legal proceedings and enormous cost consequences of failure, and it is little wonder that contested cases are rare. Nicolacopoulos v Khoury [2010] VCC 1576. The writer’s firm acted for the purchaser plaintiff), therefore comes as a rare treat for the property connoisseur.

The vendor instructed a conveyancer to prepare a Vendors Statement, which formed part of a contract of sale. The property was a lot on a plan of subdivision and it was, as a matter of law, affected by an owners corporation. This was an agreed fact at the hearing but the conveyancer had incorrectly taken the view that the property was not affected by an owners corporation as there was no ‘common ground’. This was apparently a reference to the fact that the subdivision was a two-lot subdivision with both lots having separate road access, so there was no common property. Nevertheless, there was an owners corporation, even if in name alone – the euphemistic ‘inoperative owners corporation’.

In those circumstances s 32(3A) Sale of Land Act 1962 requires the vendor to include in the Vendors Statement an Owners Corporation Certificate issued pursuant to s.151 Owners Corporations Act 2006 and accompanying documents. Failure to do so entitles the purchaser to rescind the contract pursuant to s 32(5), subject to the limitation created by s 32(7). There was no contest that there was a breach of s 32(3A) and a consequent right to rescind pursuant to s 32(5), but the vendor argued that the vendor was saved by s 32(7). To come within the protection of ss (7) the vendor had to prove:

  1. that the vendor had acted “reasonably”; and
  2. that the purchaser was “substantially in as good a position as if all relevant provisions had been complied with”.

The first question raised the issue of the vendor’s liability for the statements in the Vendors Statement. This issue had been the subject of conflicting authority, with Payne v Morrison [1991] V ConvR 54-428 holding a vendor vicariously responsible for the unreasonable (negligent) conduct of an adviser and Paterson v Batrouney [2000] VSC 313 suggesting that vicarious liability was not appropriate and that only personal liability was relevant. Fifty- Eighth Highwire P/L v Cohen [1996] 2 VR 64 had also considered the issue, without needing to reach a decision on the point.

Ultimately Ginnane J. adopted a similar course to Fifty-Eighth Highwire P/L v Cohen and avoided deciding whether vicarious liability was sufficient as he was satisfied that the vendor had been personally negligent and therefore had not acted reasonably. Unlike Paterson v Batrouney, where there had been total reliance on the adviser, Ginnane J. held that the vendor should have been aware of the existence of the owners corporation and therefore bore personal responsibility for ensuring adequate disclosure.

The second issue concerned the consequences of the breach on the purchaser. The vendor made two arguments on this point:

  1. that the Vendors Statement had not mislead the purchaser.

The purchaser’s evidence was that she was particularly interested in the property because the sales brochure began with the words “Say good-bye to the body corporate”. She presently owned a property subject to a body corporate (owners corporation) and she was very concerned that a new property should not be affected by an owners corporation. The vendor argued that the purchaser purchased the property because of the brochure and that the absence of the Owners Corporation Certificate in the Vendors Statement had not influenced the purchaser’s decision.

Ginnane J. held that if the information required by ss (3A) had have been included in the Vendor Statement, then it was likely that the purchaser would have been made aware that the property was subject to an owners corporation and would not have purchased the property.

  1. that the owners corporation was dormant.

The vendor gave evidence that the owners corporation had never met and that no levies had been struck. For all intents and purposes, the owners corporation did not exist.

This argument was not accepted. The mere existence of the owners corporation and the possibility that it could be enlived was sufficient to establish a detriment.

Whilst the issue of detriment was to be determined objectively, the purchaser’s subjective characteristics were a relevant consideration. So too was the fact that Parliament had decreed that certain information was required and, it may be presumed, such consumer protection aspirations are not to be lightly ignored.

The matter came before the Court as a Vendor-Purchaser Summons based on s.49 Property Law Act. As such, the issue for determination was limited to the issue arising from s.32 Sale of Land Act and the question of the negligence of the conveyancer or misrepresentations of the agent were not matters before the Court. Nevertheless, the purchaser was able to establish that the agreed breach of ss (3A) was not saved by ss (7).

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Vendor statement – Aboriginal Heritage Act

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

A conveyancer’s perspective

An excellent summary of the operation of the Aboriginal Heritage Act 2006 (Vic) appears in the June 2008 Law Institute Journal at page 52. This column considers the operation of the Act from the point of view of conveyancing and seeks to identify how the Act might impact on conveyancing practice.

The Act imposes limitations on the use of land – something always of interest to a conveyancing practitioner, whether acting for a vendor, purchaser or lender. From the vendor’s point of view – do I have to disclose this limitation? From the purchaser/lender’s point of view – how will this limitation impact on my ability to enjoy/sell the land?

The fundamental purpose of the Act is to require an owner to prepare a Cultural Heritage Management Plan (CHMP) if the owner proposes to undertake any activity on the land that is prescribed by the Aboriginal Heritage Regulations 2007. From a vendor’s point of view, the only ‘activity’ the vendor is undertaking is selling the land. That is not a prescribed activity, so it would appear that there is no direct affect on a vendor. But what of disclosure? Section 32 Sale of Land Act requires a vendor to disclose various facts in relation to land, including zoning, restrictions and notices. The new Act is certainly in the nature of a planning Act. It does impose restrictions and might result in the service of notices.

However s 32 only requires disclosure of things that fit perfectly into the words used in the section. The requirements of the new Act do not impact on the zoning of the land (which arises from the Planning & Environment Act) and the possible restriction on enjoyment is not in the nature of the restriction referred to in s 32 (easement, covenant or other similar restriction). However a notice served under the new Act would most likely require disclosure, although the mere possibility of a notice would not. The potential for service of a notice is in the nature of a quality defect, akin to the possibility of service of a notice in respect to an illegal structure, and this possibility is usually covered by the principle of caveat emptor or ‘let the buyer beware’.

So, what of a purchaser? From the above it will be seen that a purchaser cannot expect a vendor to disclose information pursuant to s 32 in relation to the new Act, unless a notice has been served. Caveat emptor will apply in most situations in relation to the potential for a notice, but if the vendor is engaged in trade and commerce it might be argued that the Trade Practice/Fair Trading Acts might impose an additional positive obligation on the vendor to disclose the possibility of a notice and that silence in this regard might constitute misleading and deceptive conduct. However such an argument would not apply in the sale of a domestic residence and would only be available if the vendor had knowledge of a real possibility of service of a notice and so it may be concluded that it would not apply to require a vendor to make any reference to the new Act in normal circumstances.

A purchaser is therefore left to its own devices in terms of discovery of the impact of the new Act. Essentially the purpose of the Act is to protect Aboriginal Cultural Heritage by requiring the preparation of a CHMP before certain activities are conducted on land. This is not likely to impact on residential purchasers, but may impact on purchasers of broadacres or any person proposing to change the use of land. The website vic.gov.au/aboriginalvictoria/heritage includes an Aboriginal heritage planning tool that includes maps of affected areas and a description of exempt activities (basically low level residential activities). This website also provides access to the Victorian Aboriginal Heritage Register which, whilst not available for on-line searching, may be searched by way of a written application and payment of a fee (presently $33.10). Whilst a purchaser exercising an abundance of caution might add this certificate to the plethora of other certificates available in relation to a purchase of land, it is suggested that most transactions will not require such an inquiry and that a visit to the website and application of the planning tool will generally reveal that the land is not affected.

Mortgagees have a habit of requiring certificates simply because a certificate is available. It is to be hoped that mortgagees will exercise some subjective judgment before requiring these certificates, certainly in relation to domestic transactions at least. In an environment where costs are perpetually under the microscope, it is to be hoped that another unnecessary cost is not imposed on the conveyancing process.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

More about the Victorian Relationships Act 2008

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By Roz Curnow, Nolch and Associates

Further to the article in the November/ December 2008 (The Legal Executive) Journal, please note the Relationships Amendment (Caring Relationships) Bill 2008 which will amend the Relationships Act 2008 (the ‘principal Act’), the latest default implementation date being 1 December 2009 if not proclaimed earlier. Readers should of course maintain a watching brief, as further amendments may be made.

This article focuses on the ‘caring relationship’ aspects of the bill.

The explanatory memorandum to the Bill states, in part, that the purpose of the amending Bill is to amend the Relationships Act in order to “… allow for the registration of caring relationships on the relationships register and for the recognition, where appropriate, of registered caring relationships … Like registered domestic relationships, registration of a caring relationship will provide conclusive proof of the relationship where caring relationships are recognised under Victorian law. Also like domestic relationships, the bill allows partners in registered caring relationships that have broken down to apply to a court for the adjustment of interests in the property of the relationship and for maintenance …” The bill itself states that its purpose is “… to provide for the registration of caring relationships in Victoria … the adjustment of property interests between caring partners who are in, or have been in, a registered caring relationship (see clause 19 which amends the definitions in Part 3.3 Property and maintenance of the principal Act)… the rights to maintenance of caring partners who are in, or have been in, a registered caring relationship… ”

The bill also makes consequential amendments to various acts in order to specify which acts, whilst they apply to partners in domestic relationships, do not apply to partners in caring relationships.

Some definitions should be particularly noted – the bill amends section 5 of the principal Act to insert the definition of a ‘registrable caring relationship’ which means “a relationship (other than a registered relationship) between two adult persons who are not a couple or married to each other and who may or may not otherwise be related … where one or each of the persons … provides personal or financial commitment and support of a domestic nature for the material benefit of the other, whether or not they are living under the same roof, but does not include a relationship in which a person provides domestic support and personal care to the other person for fee or reward or on behalf of another person or an organisation …”, and to insert the definition of ‘legal practitioner’s certificate’ – being a certificate given per s 7(ba)(and see also s 59).

Persons in a registrable caring relationship can apply for registration of the relationship. They must live in Victoria and cannot be married or in a relationship already registered in Victoria, or in another relationship which could be registered in Victoria. The existing registration requirements in section 7 of the principal Act will be amended by clause 10 of the bill (inserting sub-section 7(ba)) embedding a pre-registration requirement in relation to a registrable caring relationship that each party must first obtain independent legal advice in respect to the consequences of registration (i.e. which will of necessity be extensive). The Explanatory Memorandum notes that the remaining registration application requirements in section 7 apply to applicants “in registrable domestic relationships and registrable caring relationships in the same way”. It appears therefore that independent legal advice needs to be provided for registration of a caring relationship, but not for registration of a domestic relationship; however, in respect to registration of agreements, both types need independent legal advice (see proposed amendments to section 59 regarding the court’s powers, including where registration requirements have not been met).

Clause 16 inserts a new s 35A into the principal Act, defining relationship agreements. It separately defines an agreement made between domestic partners, and an agreement made between caring partners on or after the commencement of the amending act. The caring relationship agreement, providing for financial matters, whether or not it provides for other matters, can be made in contemplation of entering into a registered caring relationship, during it, in contemplation of it ending, or after it has ended.

The bill also amends s 42 of the principal Act “to clarify that the section applies to domestic relationships that have not been registered…” That section details residential and other prerequisites which apply to unregistered domestic partners vis-à-vis making an order for the adjustment of property interests or maintenance. “The section is not relevant to caring partners whose relationship must be or must have been registered.”

The bill amends s 41(1) of the principal Act to include caring partners, as defined in s 39(1), so that a caring partner can apply to a court for an order for either or both of an adjustment of property interests or maintenance; s 43 regarding applications by registered caring partners within two years of the ending of the relationship (or as extended by the court); s 51, empowering a court to make a maintenance order in favour of a caring partner unable to support him/herself because his/her earning capacity has been adversely affected by the registered caring relationship or other reason arising from the relationship, listing the matters to be considered (with the application for maintenance abating if either caring partner dies before determination); s 53, preventing an application for maintenance in respect to an earlier domestic relationship or registered caring relationship where the person has married or entered a new domestic relationship or registered a new caring relationship; s 54 regarding the circumstances in which a maintenance order ceases to have effect (including in relation to the death of a party); s 74A regarding transitional arrangements for relationships registered after 1 December 2008 but before commencement of the amending Act; and numerous other sections to include caring partners and make other amendments to the principal Act.

Also of particular note is the section in the explanatory memorandum (and see clause 37 and schedule 1 in the bill) which refers to “schedule 1 – consequential amendments to other Acts”, which requires very careful scrutiny regarding reference to the definition in the listed Acts of a ‘registered relationship’; and the definition of ‘domestic partner’ in the Acts not amended by the bill.

Readers must check the specific wording of the amendments to the thirty acts which will be amended by the Schedule to the bill, assuming further acts are not added.

Of immediate concern to many readers will be:

Administration and Probate Act 1958

The explanatory memorandum states that “It is intended that the provisions (of the Administration and Probate Act) that apply to domestic partners apply equally to partners in registered caring relationships. The Act does not make provision for unregistered caring relationships.

The Relationships Act 2008 inserted into s 3(1) (of the Administration and Probate Act) a definition of a registered domestic partner of a person who dies. … the bill further amends s 3(1) … to insert a definition of a registered caring partner of a person who dies … (which) means a person who, at the time of the person’s death, was in a registered caring relationship with the person.

The Relationships Act 2008 also amended s 51A to make provision for a partner in a registered domestic relationship. … the bill further amend(s) s 51A to apply its provisions to registered caring partners…”

The explanatory memorandum continues “…if an intestate leaves a spouse or registered partner (either domestic or caring) and an unregistered domestic partner, then the estate will be divided between the one formalised relationship and the other relationship … a person cannot register a registrable caring relationship if he/she is already married or in a registered relationship”, i.e. an intestate cannot leave both a spouse and registered partner.

Wrongs Act 1958

In sub-ss 19(3)(a) and 19(4)(a) and (b) after the word ‘registered’ insert “domestic”.

Additionally, the Fair Trading and Other Acts Amendment Bill 2008 will repeal Item 69 in schedule 1 of the principal Act.

Insofar as property and maintenance matters are concerned, we noted in our previous Relationships Act article that the operation of that act could be affected by an act resulting from the Federal Family Law Amendment (De Facto Financial Matters and other Amendments) Bill 2008. This is now the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008; and in their article Two by Two: Victoria’s Relationships Register (Law Institute Journal Jan/Feb 2009 commencing at page 50), which includes commentary on the interrelationship between the Victorian and Commonwealth Acts, authors Adiva Sifris and Ronli Sifris comment “It is envisaged that, as Parliament has passed the Federal Act, the provisions in the Victorian legislation relating to property and spousal maintenance will become largely redundant.”

We will watch with interest the development of this area of law, and where enforcement action might ultimately be effected – noting County Court of Victoria Interim Practice Note PNCI 8-2008 re Relationships Act 2008 and Relationships Amendment (Caring Relationships) Bill 2008 – www.countycourt.vic.gov.au; and Family Court Rules 2009 – https://www.fcfcoa.gov.au/.

Further reading: Impact on Wills and TFM claims of the Relationships Act 2008 by Kathy Wilson, Aitken Walker & Strachan, presented at the LIV Legal Support Staff Conference 2009; and subsequent papers.

Roz Curnow

Nolch & Associates

Note: This article was first published in The Legal Executive March-April Volume 2009 Issue No. 2 (save for minor corrections), and is reproduced with the permission of the author and The Institute of Legal Executives (Victoria). Readers should note affecting Federal legislation. This is a brief, and non-exhaustive, overview contributed by Nolch & Associates Solicitors for educational purposes only, with thanks to those who provided input on the numerous initial drafts. This article does not constitute legal advice. Readers must of course read the full Principal Act, and maintain a watching brief on the amending Bill, for themselves. Sources: www.justice.vic.gov.au and www.austlii.edu.au. Emphasis has been added in some sections.

Tip Box

Whilst written for Victoria practitioners this article has interest and relevance for practitioners in all states.

GST – GST margin scheme

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Last month I wrote about owner-builders and suggested that the only issue that causes property lawyers greater concern is GST. Perfectly on cue, changes have been made to the operation of the margin scheme within the GST regime and these changes are bound to cause heartache and pain, particularly in the hip-pocket nerve.

The margin scheme is a legitimate method by which developers of land are able to minimise the impact of GST on their activities. The ATO accepts that GST is not meant to be a tax on land, but rather a tax on the proceeds of activities involving land. In its simplest form the margin scheme allows a developer (someone who is conducting a profit-making enterprise) to pay GST on the ‘profit’ or marginal increase in value of the real estate activity that the developer is conducting. Thus a developer who buys a property for $1m and sells it for $2m is able to pay GST on the ‘margin’ of $1m rather than the sale price of $2m. This applies whether the developer simply holds the land and resells it, which is an enterprise in itself, or the developer undertakes a more intensive enterprise, such as constructing homes on the land, and then selling.

Like all benefits, the margin scheme has qualifications. The rule that to rely on the margin scheme ‘the seller must have purchased on the margin scheme’ is widely known. In such circumstances the vendor will have remitted GST on its margin to the ATO and the purchaser does not receive a tax invoice and is not able to claim the GST back. The ATO has got and kept its pound of flesh and it is (momentarily) content. However this rule whilst an easily remembered mantra, is not strictly correct. In fact, the qualification is a little more generous than that and the margin scheme may be used if the purchase was on the margin scheme OR on a no-tax basis.

Thus a purchase from a vendor not liable for GST, or the purchase of a going concern or farm (both non-taxable) will entitle the purchaser to adopt the margin scheme when reselling. The ATO accepts that it is not entitled to a share of such sales, although it waits hungrily for a piece of the action from the next transaction.

The corollary of this rule is that the margin scheme is not available on re-sale if the purchase was on a full tax basis. In such cases the ATO will have received GST on the transaction but the purchaser will have received a tax invoice and claimed the GST back. Thus the ATO have gained no net benefit out of that taxable supply and eagerly awaits the next transaction to recover its entitlement. The margin scheme is available for successive transactions (with successive owners paying tax on their margin) but once someone hops off the merry-go-round and sells on a full tax basis, the music stops and the margin scheme is no longer available.

However, as often happens, some ‘smarties’ have apparently been rorting the system and so the rules have changed for everyone. One ‘rort’ was to insert a GST-free transaction (such as going concern) between a full-tax supply and a margin scheme supply, thereby ‘reopening’ the margin scheme that had been closed by the full-tax supply. A sells to B on a full tax basis (no net GST to the ATO) then B ‘converts’ the asset to a going concern and sells to C (no GST to the ATO). When C re-sells the development (now no longer a going concern as it is complete) instead of C paying GST on the sale price, the ATO only receives GST on C’s margin as C had purchased a going concern and is therefore entitled to apply the margin scheme. The value that B added to the development escapes GST. The new rules require C to ‘look back’ to the transaction through which B acquired the property (from A) and only entitles C to apply the margin scheme if A was also entitled to do so.

A second rort relates to calculation of the margin itself. Again, the modus operandi is to insert a GST-free transaction, such as a going concern, between two margin scheme transactions. The first transaction from A to B is conducted on the margin scheme and B then ‘converts’ the asset to a going concern before selling (GST free) to C. C (under the old rules) was entitled to apply the margin scheme to the subsequent sale of the completed development. The value that B added to the project escaped GST. Again the amendments adopt the ‘looking back’ obligation and require C to ‘look back’ to the first transaction (A to B) and to adopt A’s sale price in determining C’s margin. In that way the value that B added is taxed.

These amendments came into effect on 8 December 2008 and no doubt the ‘smarties’ will have already moved on to find other loopholes in the Act. Fortunately the amendments only apply to “new supplies”, being a supply (on the margin scheme) of a property that was itself acquired after 8 December 2008. However such transactions will begin to take place much quicker than anyone expects and an appropriate inquiry process must be established.

Inevitably the unprepared will unintentionally allow their clients to enter transactions that come back to bite them at tax time and the Legal Practitioners Liability Committee will no doubt have to walk along behind the elephant swinging its shovel.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Deposit release – A solution?

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Conveyancing has traditionally been haunted by three systemic inefficiencies:

  1. requisitions and the answers thereto;
  2. deposit release; and
  3. bank settlement procedures.

Bank settlement procedures, involving inordinate telephone waiting times and lack of accountability, are beyond the scope of this article; and requisitions have been solved by replacing requisitions with contractual warranties, a simple but effective solution.

Deposit release remains a significant inefficiency, particularly for the purchaser’s representative. At common law a vendor was entitled to the benefit of the deposit immediately upon payment, whilst remaining responsible to account to the purchaser for the deposit if the contract did not proceed. As part of the consumer protection push of the 1980s, section 25 of the Sale of Land Act was introduced to require deposits to be held in stakeholding, meaning that the deposit was to be held on trust for the vendor and purchaser and did not become available to the vendor until settlement. Acknowledging that vendors might, on occasion, have a need for the deposit prior to settlement, s 27 provides a release mechanism that the vendor may implement to gain access to the deposit prior to settlement.

Much has been written about this release mechanism. This article considers not so much the mechanism itself, but rather who should be responsible for the cost of implementing that mechanism. Essentially the protection is designed to ensure that a vendor will be in a position to discharge mortgages affecting the property at settlement and therefore a vendor may seek release of the deposit by satisfying the purchaser as to the amount owing pursuant to such mortgages. To do so the vendor would ordinarily obtain evidence in writing from the mortgagee as to the amount outstanding and provide that evidence to the purchaser with a request to release the deposit. Undoubtedly, the work associated with this part of the exercise falls to be performed by the vendor’s representative and the cost of that work will be borne by the vendor. Whether this charge is part of the representative’s overall fee or a separate charge will depend entirely on the contract between the vendor and the representative and will be influenced by market forces.

Next in the process is the consideration of the information provided and the response thereto. This falls upon the purchaser’s representative and has to date been regarded as within the ambit of the purchaser’s representative’s retainer and therefore a cost to be borne by the purchaser. But deposit release is of absolutely no benefit to the purchaser and may, in unusual circumstances such as the property being destroyed prior to settlement, be an actual detriment. It may well be asked: why would a purchaser ever consent to deposit release?

Recently a practitioner has been responding to requests for deposit release by advising the vendor’s representative that the practitioner’s retainer does not extend to advising the purchaser in relation to deposit release and that the practitioner is prepared to submit the information provided to support deposit release to the purchaser and obtain instructions in relation thereto provided that the vendor is prepared to pay the purchaser’s representative’s costs to do so. This suggestion has been met with shock and horror but, on careful reflection, it appears to be perfectly reasonable.

The terms of a retainer between purchaser and representative are negotiable. When costs were dictated by scale there may have been a standard level of performance, but scales have been dispatched to the dustbin of history. A purchaser’s representative is entitled to limit the retainer to matters that are necessary to diligently perform the work necessary to ensure that the purchaser becomes the registered proprietor. Performance of any additional work is not necessary and if a third party, such as the vendor, asks the purchaser’s representative to perform additional work then it is perfectly appropriate that the party making that request bear the costs associated with performing that work.

By submitting a request for release of the deposit the vendor is requesting the purchaser’s representative to consider the legitimacy of the information and the adequacy of the disclosure, and to advise the purchaser as to the virtue of consenting to release. Given that there is no benefit in the purchaser consenting to release, the vendor is asking the purchaser’s representative to assume a substantial burden and it is reasonable that the vendor bear the cost of that. The vendor is not obliged to pay for this service but if the vendor wants the deposit released then the costs associated with complying with the legislative requirements should fall on the party who will receive the benefit – the vendor.

A reasonable charge for the work involved might be $200 plus GST, which might be paid by way of authorised deduction at settlement.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Trade practices – Fair trading in property transactions

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Property law is an inherently conservative branch of the law. The contest between strict legal principles and the application of equity seems to have occupied an inordinate portion of the last two centuries, with the common law principle of caveat emptor still being the starting point of any analysis of purchaser’s rights. When added to the equally dominant preference in favour of certainty of contract, it can be seen that a purchaser alleging a breach of contract by the vendor generally starts behind the eight ball. A defect in title might justify complaint, but these are rare. The more common defect in quality rarely justifies avoidance of the contract and claims based on implied terms founder on the rocks of certainty.

But the consumer (of encyclopedias or real estate) has found an ally in the last 25 years as Parliament has responded to the common law’s intransigence by creating rights and remedies that seek to equalize the imbalance of power between vendor and purchaser. The Trade Practices Act has been the saviour of the downtrodden consumer but, due to the Commonwealth’s limited power, this weapon was confined to disputes with corporate foe. The corresponding Fair Trading Acts in the various state jurisdictions were generally viewed as the poor cousin of the Trade Practices Act, but a recent High Court decision may have changed the landscape forever.

Houghton v Arms [2006] HCA 59 involved a commercial dispute between a consumer and a corporation based on the Trade Practices Act, but the corporation had gone into liquidation, so the claimant faced a pyrrhic victory. The claimant therefore sought to claim against two individuals who had negotiated the contract on behalf of the corporation. These individuals were not directors of the corporation but mere employees, albeit in senior positions in a relatively small organisation. This claim could not be based on the Trade Practices Act, as these defendants were individuals, and so the claim was made pursuant to the Fair Trading Act. The High Court held that the Fair Trading Act effectively mirrored the Trade Practices Act and, provided that the individual defendants had been acting in ‘trade and commerce’, that they would be equally liable (with the corporation) for the misrepresentations. The claim had been lost at first instance on the basis that mere employees were not engaged in ‘trade and commerce’ (merely engaged in their contract of employment) but the High Court took the view that the employees were indeed engaged in trade and commerce in the fulfilment of their employment duties. The extraordinary aspect of the case was that the Chief Justice delivered a unanimous judgment on behalf of all five judges (neither Kirby J. nor Callinan J. sat) and the whole judgment occupies just 9 pages and 48 paragraphs. It is a case study in judicial brevity.

The recent willingness of courts (Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405) to lift the corporate veil has been a worrying trend for directors who have sought refuge behind this (now flimsy) artifice. Houghton v Arms means that mere employees may now ‘carry the can’ for corporations, although this liability is a personal one based on the Fair Trading Act, rather than a vicarious liability transmitted from the corporation.

In the context of common or garden variety conveyancing, not only will corporate vendors be held accountable for misleading or deceptive conduct, so too will their employees. This may be particularly significant for individual estate agents (who are undoubtedly acting in trade and commerce) and the employees of development companies who sell land and/or apartments to the public. It may have a particular significant in terms of what such participants in the conveyancing process don’t say, as much as what they do say. Misrepresentation by silence is unknown to the common law, but a usual suspect in a trade practices environment. Now, not only corporate vendors and agents will be liable for their failure to disclose, so too will their employees.

Is it too much to expect that this may lead to the mythical world of ‘truth in advertising’?

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Deposit release – 2010

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Deposit release is one of the most misunderstood aspects of the conveyancing process. Like most attempts to explain any particular topic, it is best to return to basics to understand what it is that is trying to be achieved.

The common law has a rule against penalties. This rule prohibits the imposition on a contracting party of a penalty for contractual breach. Thus forfeiture of a deposit for breach of contract by the purchaser would normally be liable to be struck down by this rule against penalties. However, the common law was prepared to accept that a 10% deposit was a show of good faith by a purchaser (an ‘earnest’) and a reasonable pre-estimate of the vendor’s likely losses for non-performance by the purchaser. Accordingly, forfeiture of a 10% deposit for breach of contract is an exception to the rule against penalties, although forfeiture of a greater deposit might offend the rule. In these circumstances the common law regarded the deposit as being the vendor’s property immediately upon payment. Statutory protection against forfeiture of the deposit and contractual notice requirements merely ameliorated the vendor’s fundamental right to have the deposit immediately upon payment.

This (typically) pro-vendor approach of the common law did not sit well with the raging consumer protectionism of the 1980s, which saw a raft of purchaser protection mechanisms introduced in the Sale of Land Act. Indeed, there had been (limited) examples of purchasers suffering as a result of this pro-vendor approach. Changing financial circumstances (and a few rogue vendors) had resulted in purchasers being faced with an obligation to pay a balance of 90% under the contract, but an absent vendor who had decamped with the 10% deposit and a secured mortgagee requiring payment of more than 90% (indeed, in some cases, more than 100%). The purchaser was caught between a rock and a hard place, with the choice of either walking away from the contract and abandoning the 10%, or finding more than 90% to complete.

The potential for vendor failure is most prevalent in an ‘off the plan’ environment. In such circumstances the purchaser’s 10% deposit was indeed exposed to dissipation in the hands of a vendor who had contracted to sell something that did not even exist at the date of the contract and so s 9AA Sale of Land Act requires that such deposits be held on trust for the purchaser until registration of the plan.

For all other transactions a deposit-release procedure was introduced. This requires the deposit to be held ‘in stakeholding’ (a legal concept akin to ‘in limbo’) until certain conditions are satisfied. Essentially this process is designed to allow the purchaser to be satisfied that the vendor will be in a position to complete the contract by acceptance of the 90% balance. Regrettably, due to some poor legislative drafting, the process is much more complicated than it needs to be and often leads to considerable inefficiency.

A vendor may seek release of the deposit from stakeholding prior to settlement by satisfying the requirements of s 27. This requires the vendor to give the purchaser ‘a notice in writing’ setting out particulars of any mortgage or caveat affecting the land and envisages the purchaser then giving the vendor an ‘authorization in writing’ to release the deposit from stakeholding. The section anticipates the possibility that the purchaser will not bother responding to the vendor’s request for release of the deposit by providing that ‘authorization’ will be deemed to have been given if the purchaser fails to respond within 28 days of delivery of the particulars.

Thus explained, the process sounds simple. Indeed, where there is no mortgage or caveat relating to the land, the vendor is not obliged to do anything other than to wait 28 days from contract before releasing the deposit, as the section only requires a ‘notice in writing’ if there is a mortgage or caveat. Arranging transfer of the deposit from an agent to the vendor’s solicitor pursuant to s 24(c) during this time will allow for speedy release upon the expiration of the 28 days.

Where the property is subject to a mortgage; the particulars must be in the form of Schedule 1. This form was designed to provide particulars to purchasers who were buying in the relatively rare situation where the purchaser was taking over the vendor’s mortgages and the decision to use this form is the first example of poor drafting. The information that a purchaser who is assuming continuing responsibility for a mortgage after settlement would want is far more extensive than a purchaser who knows that the mortgage will be discharged at settlement. Some purchasers insist on a letter from the lender, although there is no legislative requirement for that, and others take the view that no matter how much information is provided, they will never be satisfied. The 2008 contract seeks to provide guidance as to what may be acceptable by nominating a mortgage debt of not more than 80% of the contract price as a reasonable figure below which the purchaser should consent to deposit release, but this guidance cannot overcome the provisions of the Act.

The second example of poor legislative drafting is the proviso that ‘the contract is not subject to any condition enuring for the benefit of the purchaser’. This was meant to prohibit release if a condition such as a finance condition, or building inspection condition, or sale of the purchaser’s own property condition had not been satisfied and when viewed in that context, is entirely acceptable. However it refers to ‘any’ condition and all contracts are subject to many conditions, some of which (for instance the obligation to deliver the property at settlement in the condition it was when sold) enure for the benefit of the purchaser until settlement. Interpreted this way, the deposit could never be released until settlement.

Purchasers who seek to rely on this provision to avoid release of the deposit are not acting within the spirit of the legislation, but the effort involved to seek release in such circumstances usually far outweighs the small benefit to the vendor that release achieves. The process should be overhauled.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Defects – Occupancy and insurance certificates

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The law requires us all to do, and not do, a lot of things. Specifically in relation to ownership of real estate, various statutory requirements impose duties on home owners and those engaged in the business of building homes. Indeed, failure to comply with those statutory obligations can result in the imposition of penalties for non-compliance. But the existence of those legal obligations and sanctions for breach do not normally impact on the relationship between vendor and purchaser, which is essentially governed by the fundamental legal principle of privity of contract.

That a vendor has not complied with a statutory obligation or has in fact breached such an obligation remains a matter between the vendor and the statutory authority and does not give a purchaser any right to insist upon the vendor fulfilling that statutory duty. A vendor might be obliged to put only recyclable material in the green bin but regularly uses that bin for non-recyclable rubbish. This may make the vendor a social pariah at the local kindergarten and expose the vendor to a penalty, but it does not impact on the relationship between the vendor and purchaser should a contract of sale be entered into. Likewise, the failure by the vendor to comply with statutory duties relating to pool fencing or installation of smoke alarms is a matter exposing the vendor to sanction, but does not give the purchaser the right to insist upon the vendor complying with those obligations during the course of the contract and prior to settlement.

The purchaser would only have such a right in one of two situations:

  • if a statute provides that failure by the vendor to comply with the statutory duty entitles the purchaser to avoid – as is the case with s 11 Sale of Land Act 1962 in respect of failure to have adequate body corporate insurance; or
  • if a notice has been served in relation to the breach requiring the vendor to remedy the breach. Condition 15 of Table A gives the purchaser the right to insist that the vendor comply with such notices prior to settlement. However this right only applies in relation to notices served pre-contract, and any notice served post-contract burdens the purchaser.

The obligation for a home owner to have an occupancy certificate or certificate of final inspection in relation to building works performed on the property arises from ss 38 and 39 Building Act 1993. The objective is to ensure that works on properties achieve a certain standard of completion and safety and the failure to obtain a certificate upon completion of works may result in a statutory penalty and, for participants in the building industry, may lead to loss of registration. But the absence of a certificate does not undermine the vendor’s ability to sell the property or give a purchaser any right to insist that a vendor obtain a certificate prior to settlement.

The one exception is in the case of a new home or apartment purchased off-the-plan. In such circumstances it is possible to argue that, on the basis of the contractual obligation to deliver vacant possession, a purchaser is entitled to expect that the purchaser will have the legal right to occupy the premises and that the vendor is thereby obliged to obtain a certificate to that effect. This argument respects the fundamental principle of privity of contract: see McDonald v Balaam P/L (1996) ANZ ConvR 447.

Similar arguments apply in relation to builder warranty insurance certificates. Registered domestic builders are obliged to have warranty insurance and a vendor selling a property with the benefit of such insurance might use that fact as a positive marketing attribute. But no law requires a vendor to provide the certificate of insurance, either prior to contract, in response to an inquiry during the contract, or at settlement. Some vendors choose to do so, but a purchaser does not have a right to insist upon the vendor providing those certificates. The purchaser does have a right to request a certificate from the insurer (whoever that might be) but only after the purchaser becomes the owner: see ministerial order 2003 S98.

Owner-builders who sell might have an obligation to obtain insurance and disclose particulars of that insurance in the vendor statement, but that is as a result of a specific obligation in s 32(1A) of the Sale of Land Act 1962, and failure to do so gives the purchaser a statutory right to avoid. This obligation only applies to owner-builders and has no application where the warranty insurance was issued to a registered builder.

Failure to have adequate pool fencing, working smoke alarms, certificates relating to occupancy, certificates relating to warranty insurance and indeed the fact that properties might have fill, be liable to flooding or contain asbestos, are merely defects in quality. In the absence of specific statutory intervention, such defects fall within the principle of caveat emptor (buyer beware) and are the purchaser’s problem. To purchasers who complain about such matters I say, ‘Would you like the vendor to repaint the bathroom too?’

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Defects – ­Essential safety measures – Part 1

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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.

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