ByLawyers News and Updates

Contract of Sale of Land – VIC

by

With the LIV contract not currently available through LEAP, the By Lawyers Contract of Sale of Land is available to all LEAP users until 1 March 2020. Beyond that date it will remain available to LEAP users who have By Lawyers as a companion product to their LEAP subscription. It can also be accessed by non-LEAP users through the By Lawyers website by subscribing to our Victorian Conveyancing Guide, which has many associated benefits such as full access to 1001 Conveyancing Answers.

Adapting to the use of the Russell Cocks authored By Lawyers contract should present few problems as Russell was the principal author of the LIV contracts, including the 2008 version which effectively overhauled the previous contract and established the current format, making the terms of the By Lawyers contract familiar and making numerous improvements.

The By Lawyers Contract of Sale of Land for Victoria was introduced on 1 March 2018 and its use has been increasing steadily among Victorian legal practitioners and conveyancers. The By Lawyers contract removes the need for special conditions other than those covering special circumstances. It has a number of other advances over the LIV contract which further simplify the conveyancing process.

The By Lawyers legal and editorial teams ensure that the contract is immediately brought up to date with any changes in law or practice.

Recent amendments to the By Lawyers Contract of Sale of Land – Parts 1 and 2.

  • The ‘Payments’ section in Part 1 of the By Lawyers Contract of Sale of Land (VIC) has been amended for clarity regarding payment of GST;
  • A new clause has been added to Special Condition 14(f) of Part 2 which attaches a Flight v Booth type test to the purchaser’s ability to end the contract for unsatisfactory pest or building report;
  • The time for settlement has been moved from 3 pm to 4 pm to reflect current practice.

For further information see our previous post Seven reasons to use the By Lawyers contract.

Retail lease outgoings

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Phillips v Abel is significant as it continues the march of the Retail Leases Act in terms of the application of the Act to premises that might not, in the past, have been thought to have been retail premises. The April 2017 column considered CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSC 23, which was subsequently confirmed on appeal, and since that case there has been a general understanding that the Act applies to many more premises than retail shops servicing the public. Phillips v Abel concluded that the Act applies to a quarry that supplied sand and other soil products in bulk. VCAT concluded that, as the buyers of the sand products basically used that sand “for their own purposes” as opposed to being “passed on by the purchaser in an unaltered state”, the buyers were the “ultimate consumer” of the goods and the Act applied.

Having satisfied the jurisdictional question, VCAT then moved on to consider the ability of the landlord to recover outgoings. This question is going to be of considerable significance in the current situation of many leases that may previously been thought not to be retail, now being held to be retail.

A landlord of a non-retail lease that has a right to recover outgoings may seek to exercise that right in a number of ways:

  1. by giving rate notices and other outgoings documents to the tenant for payment during the rating year;
  2. by paying the outgoings as they fall due and seeking reimbursement from the tenant;
  3. by calculating the anticipated outgoings and adding a fixed amount to the recurring rental figure; or
  4. by estimating the annual outgoings and seeking payment in advance from the tenant.

The method is not particularly significant, the important point is that the landlord has the freedom to adopt any of these, or other, methods of recovery of outgoings. However, the unexpected application of the Act means that recovery of outgoings is subject to a far more prescriptive statutory regime.

Section 46 requires a retail landlord to give particulars of outgoings to the tenant prior to entry into the lease, which will be by way of the Disclosure Statement, and again in respect of each of the landlord’s accounting periods during the lease, at least one month BEFORE the start of that period. Assuming that the landlord adopts the financial year as the relevant accounting period, the landlord must give an estimate of outgoings at least one month BEFORE the commencement of each financial year. Failure to provide the estimate means that the tenant is not obliged to contribute to outgoings.

An unexpected retail landlord will now find that a tenant may refuse to contribute to outgoings if, as will be the case, a Disclosure Statement has not been given. This refusal will be extended to each subsequent year unless the landlord has given the prescribed estimates prior to the commencement of the accounting year, which will not have been given as the landlord was of the view that the Act did not apply. Exacerbating the problem for the landlord is the decision in Phillips v Abel that subsequently giving details of prior outgoings does not satisfy the requirement to give estimates in advance. The tenant had not paid land tax or outgoings and the landlord could not recover either, because recovery of land tax is prohibited and the landlord had not complied with s 46 in relation to outgoings.

Australian Asset Consulting P/L v Staples Super P/L [2016] VCAT 1726 held that subsequent provision of a s 46 estimate DID enliven the tenant’s obligation to pay previous outgoings but this case was distinguished, perhaps tenuously, on the basis that the tenant had in fact mistakenly paid the outgoings and was seeking recovery.

Richmond Football Club Ltd v Verraty [2011] VCAT 2104 held that a retail tenant who mistakenly pays land tax is entitled to a refund as recovery of land tax is prohibited, but that a landlord who fails to comply with s.46 is not obliged to refund the outgoings, as the landlord had given good consideration for those payments.

Disputes relating to land tax and outgoings are likely to be a feature of the ever-widening retail leasing landscape.

Tip Box

•retail landlords must provide estimates of outgoings in advance

•if a timely estimate is not given the tenant is not obliged to pay

•a tenant who has paid is not entitled to a refund

Land tax – VIC

by

Land tax Victoria – Absentee owner surcharge

The land tax surcharge where applicable to Victorian property increases from 1.5% to 2% with effect from 1 January 2020.

The By Lawyers  Victorian Conveyancing publications, as well as the Trusts publication, have been updated accordingly.

By Lawyers wish everyone a happy holiday season.

Land tax – NSW

by

Land tax NSW – Increases to threshold values

Land tax thresholds are indexed to rise on 1 January each year.

The 2020 threshold combined land value will increase to $734,000 for all liable land. Special trusts and non-concessional companies are excepted.

A marginal tax rate of 1.6% of the aggregate taxable value above the tax-free threshold plus $100 applies.

If the aggregate taxable value exceeds the premium rate threshold of $4,488,000 then $60,164 is payable plus a marginal tax rate of 2% over that amount.

All relevant commentary and precedents in By Lawyers Conveyancing & Property Guides have been updated accordingly.

By Lawyers wish everyone a happy holiday season.

 

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

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.

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

Precedent update – Conveyancing – NSW

by

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

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

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

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

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

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

Conveyancing – supplier notification – All states

by

Supplier notification obligations for GST withholding

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

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

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

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

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

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

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

 

Nomination

by

By Russell Cocks, Solicitor

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

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

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

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

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

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

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

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

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

Tip Box

•The right to nominate is regulated by the contract

•The nominee does not become a party to the contract

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

Connect with us