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Property Conveyancing

Feb 24
Agents Survival Series – Vol 2B/2016

Agents Survival Series – Vol 2B/2016

By Article, Property Conveyancing

Don’t let the Pool Safety Inspection Date sink your deal

We’re seeing loads of contracts with either the wrong date or no date at all. Here’s a quick refresher on when it’s necessary, and what can happen if dates are missing, or wrong

When do you need to complete it?

When:

  • there’s a pool;  and
  • there’s no current pool safety certificate.

When you don’t need to worry about  it?

When the vendor’s already got a current pool safety certificate, or … when  there’s no pool …

What date do you insert in the Reference Schedule?

In the Pool Safety Inspection Date, insert the date by which the buyer’s inspector should have checked the pool before settlement.

The Pool Safety Inspection Date, is the date you insert in the contract, if you forget to insert it, it’s the earlier of:

  • the date of any pest / building report; or
  • if there is no building and pest condition,  2 working days before settlement.

What date don’t you insert?

The one we see most (and it’s wrong) is the date on the vendor’s pool safety certificate.

What’s the buyer allowed to do if the date applies?

Get the inspection done before the Pool Safety Inspection Date to see what has to be done to have a pool safety Certificate issue.

What happens after the inspection?

If no pool safety certificate issues by the Pool Safety Inspection Date the buyer can either:

  • terminate and get his deposit back, or
  • waive his rights and move on to settlement.

(we encourage parties to negotiate a fix on a without prejudice basis before settlement).

Common Error 1

The wrong date is inserted (eg the date of the existing Pool Safety Certificate is inserted as the inspection date)

The  fall out

  • If the certificate hasn’t expired, then beyond it being plain wrong (you can’t have an inspection date before the contract was signed), you’ve probably dodged a bullet.
  • If the certificate has expired – potential problem because the buyer can now engage a pool safety inspector to inspect prior to the Pool Safety Inspection Date, which is now no later than 2 working days before settlement.

Picture this:

Your seller and you sweat through:

  • the cooling off – check
  • the finance date, and a couple of other curly special conditions – check

The seller’s happier (finally), and starts packing up, goes ahead and signs up on the deal of a lifetime in Sydney. Buyer gets cold feet, and her exceedingly clever lawyers (PD Law) suggest she does a pool safety inspection in the week leading up to settlement. The fence doesn’t comply, she walks, takes her deposit back and buys a house down the road, using another agent!

The Seller is holding on line 3 for you. Wants to talk…

Common Error 2

No date is inserted at all

The  fall out

  • If the Pool is compliant, probably benign again. Maybe a sleepless night or two, but short of a tyrannical safety inspector the pool will comply.
  • If the pool isn’t compliant, same scenario as above, and the buyer has another potential out.

So, to avoid a case of the sweats, when this clause applies just think of the date like finance, pest and building inspection dates, not a past date.

Cheers, until next time, from the team at PD Law

Feb 17
Agent Survival Series – Vol 2A/2016

Agent Survival Series – Vol 2A/2016

By Article, Property Conveyancing

But it’s in the letting pool. I can’t give vacant possession

Avoiding the 11th hour panic call from your seller

The problem
It’s pretty common in unit sale contracts to see holiday letting appointments inserted in the tenancy details information in a sale contract, and a copy of the letting appointment attached (and no special conditions referring to it).

This won’t help buyer or seller for a stack of reasons, the primary one being that a holiday letting appointment with a letting manager is not a tenancy agreement, so vacant possession still applies. In these situations, the buyer typically insist on vacant possession, and to avoid a terminated contract the seller may have to bring their letting appointment to an abrupt end, leaving them liable to the letting manager for damages for loss of income.

As the agent you’ll be peppered with calls from both sides at the 11th hour looking for a solution or someone to blame.

The Solutions (Because we’re over achievers, we’ve got 3!)

1.  Longer settlement date
Instead of the usual 30 day settlement period, opt for a term longer than the minimum termination notice under the letting appointment (usually no less than 90 days). This gives the seller time to lawfully exit the letting appointment without penalty.

*2. Special condition  – subject to amicable early termination of letting agreement
Use this condition if the parties want to settle earlier than what we’re suggesting above. It provides that the contract is subject to the Seller reaching an agreement with the letting agent and provide vacant possession, failing which the Seller can terminate.
*3. Special condition – buyer agrees to enter into replacement letting agreement  
Use this condition when the buyer would like to continue to keep the property in the letting pool. There can be many other variations to these.  As always, give us a call if you would like any help before the parties are locked in.

 

Dec 02
1 December 2015 and still no pool safety certificate?

1 December 2015 and still no pool safety certificate? That’s fine but what will the buyer’s lawyers say?

By Article, Property Conveyancing

Perennial Battlelines

The agent works tirelessly getting the parties to the table, the lawyer gives advice about pool compliance risk (now in the shape of a $20,000 fine). Buyer gets concerned, tells lawyer to kill the deal and to pass on the bad news, agent curses lawyer …  the cycle of real estate life grinds on.

Swimming Pools as at 1 December

There are now 2 things to bear in mind when your seller client lists their property with a swimming pool:

1.    compliance with the pool safety laws; and

2.    pool safety certificates (or lack thereof).

 

The good news

Although the terms of the REIQ contract haven’t changed, the effect of the law will. From 1 December 2015 whoever owns a property with a swimming pool bears the responsibility of complying with current pool fencing legislation (and failure to comply can result in heavy fines). If the seller gives the buyer a form 36 notice of no pool safety certificate, the REIQ contract mechanism will operate as usual and assuming settlement proceeds the buyer will have a 90 day grace period after settlement within which to obtain pool safety certificate.

The bad news

What will change is the advice buyers receive from lawyers about their immediate risk of facing heavy fines (currently almost $20,000 for an individual) on and from the day of settlement. Although many buyers will make an informed decision and take a calculated risk, some may take the news badly and elect / find a way to terminate the contract.

From here

It would be worthwhile to qualify your vendors and set their expectations about the risk of termination outlined above, and get them to literally get their back yard in order before you burn too much time finding a buyer.

Nov 18
Apples with Apples…When price point kills service!

Apples with Apples…When price point kills service!

By Article, Property Conveyancing

$50? $100 maybe?  A light meal at a casual restaurant?  A few rounds with friends? A tank of fuel?

Now consider that number in the context of say a $500,000 house purchase. On anyone’s scale, it’s a tiny proportion. And yet that’s all it takes to cloud consumer judgment when it comes to choosing legal services.

In the conveyancing industry, consumers need to stress test their quotes, and what looks like a slightly cheaper alternative is unlikely to be the case. Some of the ‘fleas’ that come with a cheap quote can be add ons, hidden extras and limited service just to name a few.

So, even though at first glance we may not be as cut price as some of the larger Queensland wide, bulk turnover conveyancing shops, we offer a guarantee we know we can back up 100%: our service is always better – way better:

  • You get what you pay for – our fees are fixed and transparent – no hidden extras
  • Our people have been doing this stuff for a gazillion years, and we’re very good at what we do
  • Our product is excellent, well developed and professional
  • Our two-fold aim is to:
    •    win each client’s business for life, and
    •    ensure the agent referring us doesn’t ever suffer ‘blowback’ from a disgruntled consumer of our services.

 

We’re the alternative. Thanks in advance.

Jul 30
Email exchanges and other land mines – tread carefully

Email exchanges and other land mines  – tread carefully

By Article, Property Conveyancing

When are your vendor clients, (and you) locked in by email?

Some sellers and buyers don’t want to be locked in until the proverbial ink dries on the contract. You’ve probably seen or even typed emails during negotiations with phrases like  subject to the parties signing a formal contract..., which have traditionally made it clear to other side that there’s no deal until the contract is signed.

A recent Supreme Court decision has shone a light on this practice, with some adverse consequences for a seller and its agent.

Bear with us, we’ll be brief:

  • The seller engaged the agent to sell its commercial property and business. The agent found a buyer and started negotiating with the buyer’s representatives. The price was circa AUD$1.75m
  • The parties each adopted words similar to those above (subject to the parties signing a formal contract) in email exchanges
  • However they also used other phrases which ended up giving some mixed messages. Here’s a great example:
“This offer is of course subject to contract and due diligence as previously discussed. We are hopeful of effecting an exchange of contracts next Monday but need an acceptance of our offer immediately so we are in a position to instruct the appropriate consultants to carry out the necessary investigations.

I look forward to receiving your clients confirmation that our offer is accepted as clearly both parties are now going to start incurring significant expenses.”

  • The response to this was equally confusing:

“We accept the below offer which we understand will be subject to execution of the contract provided…”

  • The seller found another buyer willing to pay more.

“We suspect that, at about this time, all hell broke loose and people became concerned about their employment!”

  • The Court confirmed that a contract can exist even though:
    • the “subject to execution of the contract” correspondence was used;
    • negotiations were between buyers’ employees and seller’s agents;
    • some conditions were still yet to be agreed on; and
    • no contract was ever signed.

Lessons to be learned

The lessons to be learned are:

  • be crystal clear in your choice of words when negotiating deals
  • signatures and contracts are not always necessary to evidence an agreement.

As always, if in doubt about your turn of phrase, or that of the other side, just call us. Fallout can be minimised by some early, simple, clarifying correspondence.

Cheers, from the team at PD Law

Jan 29

‘Give me certainty please’ – Fixed Fee legal pricing and why it works

By Article, Property Conveyancing

Just before Christmas, PD law CEO Mel Cox took a call from a prospective home buyer client wanting a price for a conveyance. With expected apprehension of any buyer of legal services, our soon to be client asked the obligatory barrage of questions, making sure she knew we knew what we were talking about. Yet, she still had some nagging doubts about engaging us to look after her transaction. To Mel, it felt like the client was hesitating to ask a burning question…..

Then it happened…

‘So, what about if I have to ask more questions or call in? What else do I have to pay? What if I need any more help, basically?’

Mel’s response was simple – ‘That’s all you pay. Our fees are fixed. Call us, drop in, email us, use the portal whenever you want and as much as you want. Our fees don’t change based on how much you talk to us.’

The client sounded surprised – clearly she thought that lawyers billed for every 6 minutes, every phone call and every photocopy. That might have been true in the past!  So the client engaged us, and her matter progressed on time, and as quoted.

No-one wants uncertainty. If you take your car to the mechanic to be serviced, or repaired, you need to know what it’ll cost. If you need surgery, you need to know what it’ll cost. So why, on earth, engage a lawyer without knowing the cost?

Word of warning – many lawyers are dead against it. Typically the discussion ends up with the tired old line – ‘Well, how long is a piece of string?’, palms upturned, wry grin. Difficult conversation averted.

We think the days of hourly rates are all but over, and for very good reason. Here are some of the benefits associated with fixed fee pricing legal services:

Keeping in touch

After engaging a lawyer, clients can be so concerned about the potential cost, they try to limit their communication for fear of a massive legal bill. They’re concerned that, every time they make contact, they’ll get charged.

As much as I can see their point (if I was getting charged by the minute I wouldn’t call me either), it’s so counterproductive. Everyone loses – the lawyer is in the dark, the client is anxious and irritated, and the job is a mess.

On the other hand, if you knew up front how much it was going to cost to get from point A to point B, and then from point B to point C, it follows that your working relationship with your lawyer would be far more effective and valuable.

Value pricing not crunching out the hours

Knowing exactly what it’ll cost, means you can ascribe some subjective value to the service your lawyer offers, rather than feeling like you’re not in control, and out of your depth. Instead of focussing on how long it will take to complete a project, and panicking about time and fees, you can make an informed decision on cost and focus on working together and chasing down your objective.

Precision on scope of work

With fixed fee work, you get the peace of mind of knowing just what is included and what is not included. It’s then your choice to decide whether to increase or decrease the scope of work to suit your needs.

Detailed upfront analysis

With fixed fee pricing it’s crucial that lawyers know what it is they have to do, how long it will take, what sort of value they are adding, and what your outcomes and objectives are. This can only be done by a comprehensive up front analysis, and the law firm’s collective experience. This in turn often draws out issues which might otherwise not be considered until after a matter has begun. We’ve found another benefit with this collaborative approach is that all key personnel in our firm are involved in the analysis – we draw on everyone’s experience to ascertain what we need to do to get the job done and add value.

Efficiency

Fixed fee legal services promote efficiency. The client is happy to keep in touch as needed, and there’s no incentive for the law firm to keep racking up hours. There’s no benefit in unnecessarily dragging a matter out, but rather much to be gained in efficient practices.

What happens at PD Law

At PD Law we:

  • meet with you, listen, gain an understanding of what you might need, and what your objectives are, listen some more;
  • confirm we have it clear what your objectives are;
  • give you an obligation free fee proposal, telling you our scope of work, what’s included, what’s not included;
  • believe that you want our experience, expertise and our intellectual capital, not hourly rates.

But sometimes the goal posts change…

And sometimes additional work that was outside the scope of the original fee quote is required. For example, negotiating changes to the contract can be required. But you’ll be the first to know. We will always provide you our best estimate of what the additional work may cost, and we won’t do any additional work without your approval. It’s not always possible to foresee the future, but you’ll at least be able to make an informed financial decision before incurring any additional costs.

So, even though buying legal services is often seen as a grudge purchase, it doesn’t have to be. If you need a lawyer, make sure you know what you’re getting, make sure your opportunity to communicate is unlimited, and make sure you ascertain the value that your lawyer is adding, based on their expertise, experience, and fee structure. You’ll soon know whether it is worth it.  At PD Law we do this, and you shouldn’t settle for less.

Dec 04
Agents – Too Busy to read the New Contract?

Agents – Too Busy to read the New Contract?

By Article, Property Conveyancing

Here’s the PDL Bullet point list

There’s a new look and feel about it, a fresh new layout and some key changes that we’ve been hoping would be included.

Some of the key features include:

  • Title Encumbrances – must be specifically listed, especially statutory easements and covenants. It’s not sufficient any more to simple say ‘refer to title’ or searches will reveal. If you do, there is a risk that a buyer may be able to terminate, and your seller client won’t be happy.
  • The “Warning Statement” is now included on the signing page, though it’s not as glaringly obvious as we were anticipating. (See below pic)
  • The definition of business day has been amended to exclude working days between Christmas/New Year.
  • Keys – there is a new (clearly stated) right given to the buyer to request to have the keys handed over at settlement, provided that request is made 2 clear business days before settlement.
  • The Contract for Residential Lots in a Community Titles Scheme has also had a makeover, and similar provisions as outlined above have also been included.

As always, call us if you have any questions – better to ask to clarify what needs to be done before going to contract rather than trying to fix a potential nightmare later.

If you need any more information please contact our solicitors.

Nov 24
Buying on Hamilton Island?

Buying on Hamilton Island? Download our comprehensive guide!

By Article, Property Conveyancing

Island life – taking the plunge! Diving in – what’s different?

While many are familiar with buying and owning freehold title property like vacant land, houses or units, the concept of leasehold title is different. In practice though, for property holders on Hamilton Island, the difference is not significant.

Title to all property on Hamilton Island (units and land) is leasehold, stemming from a Perpetual Crown Lease from the State of Queensland (the Crown) in favour of Hamilton Island Enterprises Ltd (HIE). This is known as the Head Lease, and perpetual means just that – the lease has no end date, as long as HIE continues to comply with its conditions, such as using Hamilton Island for the right purpose of a tourist destination and paying  Crown rent.

Read more by selecting the Hamilton Island Guide booklet below.

“This guide covers the basics of buying and owning leasehold property, on one of Australia’s most iconic island destinations –  Hamilton Island”.

Property & Development Law, December 2014.

 

Sep 11
Sales Team Alert – On Tuesday

Sales Team Alert – On Tuesday, the QLD Parliament passed the Land Sales and Other Legislation Amendment Bill 2014

By Article, Property Conveyancing

Here’s a brief summary of its effect on your business as real estate agents, and what you and your developer clients should consider. We’ll provide a more comprehensive summary once the legislation comes into force:

  • The Big Ticket items
    • it relocates and slightly amends pieces of legislation from the Land Sales Act across to the Body Corporate and Community Management Act
    • it increases the maximum deposit developers can call for under ‘off the plan’ contracts to 20%
    • it varies disclosure requirements for ‘off the plan’ standard format lot sales particularly regarding retaining walls
  •  When will it take effect
    • this will commence on the same date of commencement of the Property Occupations Act (later this year, hopefully!)
  • What should you do now ?
    • If you have any developers issuing OTP contracts and selling down land at the moment, you should advise them to update their disclosure statements and their contracts now.

If you or any of your developer clients require any further information please feel free to call us when convenient.

Click here to contact Stuart Bell or Kylie Drysdale for further details.

Jan 05
Purchasing Property in Paradise

Purchasing Property in Paradise

By Article, Property Conveyancing

A guide to buying real estate in the Whitsundays

The Whitsundays has more than most to offer. Encompassing four unique townships, the region offers an ideal mix of stunning natural surroundings, a relaxed lifestyle and economic growth through development, tourism, agriculture and resources.

Airlie Beach, the hub of tourism in the Whitsundays, is home to an industry that last year contributed over $253 million to the regional and Queensland economy. In the past few months, several of the more prominent islands – including Hamilton Island, Lindeman Island and Long Island – have announced multi-million dollar refurbishments, fuelling rumours of a tourism boom. Collinsville, the mining town at the tip of the Bowen Basin, already has two major coal mines, with three new mines – Drake, Jax and Sarum – at varying stages of development. Holding up the final pillar of the Queensland government’s plan for economic growth, is the cane farming town of Proserpine, just 25 minutes from the coast, and the rich agricultural land surrounding Bowen, renowned for its fresh fruit and vegetables.

In a region that has it all, it’s no wonder the population is predicted to swell approximately 64 per cent by 2031, from 35,500 people to 55,500. Despite population growth forecasts, recent figures have shown a steady decline in house and land values across the Whitsundays. As a result, property experts are predicting a strong return to growth as buyers and investors take advantage of the current levels of affordable housing. From June 2007 to 2012, median house prices decreased from $400,000 to $320,000, with the value of land also sliding by a median of $60,000 over the five year period.

With little that can go wrong in choosing to buy or invest in the region’s real estate, it’s important to ensure the legal process of purchasing runs as smoothly as possible. For instance, if you assume something is ‘automatically included’ in a contract, and it is not there at settlement, you may be left with few options. To make sure you’ve got all your bases covered, we’ve developed a simple guide to buying real estate in the Whitsundays.

To download your copy, simply click here: BUYING REAL ESTATE IN THE WHITSUNDAYS.

 

Dec 10
Mortgagee sales – what’s in store for buyers

Mortgagee sales – what’s in store for buyers

By Article, Property Conveyancing

How they work

We’ve all heard about these. Sometimes called ‘mortgagee in possession’ sales, or ‘mortgagee auction’ sales, even ‘foreclosures’, the result is the same: a property owner defaults under the mortgage, and the bank sells the property up. The image conjures up phrases like ‘rock bottom price’, ‘take it or leave it’ and ‘as is where is’, some of which are pretty accurate, others not so much. What you can be sure of is that the sale conditions are different.

Sales under the hammer

Although you can buy the property outside of the auction environment, the most common method of mortgagee sale is at auction, so it’s important to understand your legal position before you bid.

TIP: note if a property has already been passed in after auction, you can negotiate a deal with the mortgagee through the agent. That is, the deal does not have to be concluded only at auction.

What a steal!

None of us want to pay more than we have to, but it’s not quite true that mortgagees will sell at just any price, or at a price sufficient to clear just what they’re owed. The law requires that they sell at market value (best established via auction), and account to the defaulting borrower for any proceeds above what is owed under the mortgage. Also, banks don’t want to engage in fire sales: fire sales lose money, adversely affect banks’ balance sheets, share prices, and investor confidence!

So your offer needs to be reasonable. The upside is that you’re certainly unlikely to be paying premium, and a key reason for this is that the mortgagee will have changed a number of the standard conditions, discussed below.

The conditions: as is where is:

Use

  • Buyers need to satisfy themselves that the use to which they want to put the property is lawful. They’re also expected to have satisfied themselves with the condition of the property, quality, fitness for purpose, existence and lawfulness of access, issues regarding resumptions by any authority (eg resumptions by Main Roads dep’t), existence of any approvals or licences, and environmental protection related notices.
  • Common sense will frequently answer a lot of these questions when it comes to buying residential land, but if buyers are considering a commercial application, it may pay to speak with us, or a planning consultant, or Council (or all of the above) first.

Adjustments

  • Some mortgagees require settlement to be effected even if there is outstanding land tax payable, which is often the case.
  • Although the mortgagee may still be required to pay, you might not be able to demand it be paid at settlement.

GST

  • Usually the sale price in a contract is expressed as GST inclusive.
  • Sometimes (especially if a mortgagee is selling development stock), the price may exclude GST, and you could be required to pay this on top.

Assignment of warranties

  • If a building is new or relatively new, a mortgagee might exclude the assignment of any builder’s warranties that might otherwise be assigned.
  • Similarly, any warranties under a tenancy agreement (and the agreement itself) will not be available for assignment or delivery at settlement.

Boundaries

  • You can’t terminate or claim compensation if lot boundaries are inaccurate.
  • Also, if you establish (for example) an encroachment on to or from the property during the contract, you’ll not be able to terminate or claim any compensation.
  • If the mortgagee owns adjoining lots (eg balance developer stock), it’s likely that they’ve removed their obligation to contribute to fencing costs (under dividing fences legislation).

Removal of reserved items

  • If the property consists of improvements, the mortgagee may remove any obligation on it to clear away all items not included in the sale (such as abandoned goods), leaving these items for you to deal with post settlement.

Extensions

  • The usual process in a conveyance is for a seller to ask a buyer to agree to extend and the parties then negotiate. In a mortgagee transaction, the mortgagee can often extend settlement unilaterally, for a several months.
  • This may impact on your financing, timing, moving out of other properties etc.

No warranties

    • The mortgagee will warrant nothing, and exclude warranties written into the standard terms, such as being able to settle on time, or at all, that there will be no unsatisfied judgments or writs attaching to the title at settlement, or existing issues under environmental protection legislation.
    • It will often exclude any obligation to deal with any notices from any authority (eg a council notice to clear an overgrown allotment or remove illegal structures
Where does this leave the buyer?

These amendments don’t mean you’ll have to settle without clear title, as that remains assured. Rather, it just means you’re not allowed to carry out as many checks as you otherwise could. Remember also that some mortgagees are negotiable, so don’t be afraid to ask. Common sense usually prevails and mortgagees may bend a little on some issues they have control over.
As indicated, this is general information, and not legal advice. Every contract is different and requires contract specific advice, which we’re happy to give.

If you’d like more information on any of the matters raised here, or if you’d like us to look at your mortgagee sale conditions just give us a call.

Nov 25

Buying off the plan – the detail

By Article, Property Conveyancing

Off The Plan

The term ‘off the plan’ is not so much a legal term but rather an industry one, referring to all types of units and land being sold (but not settled) before legal title actually exists. Below are some of the essential elements of off-the-plan contracts, along with some things to consider before signing up.

The Developer

Like any popular tourist destination, the Whitsundays has seen its fair share of developers, some successful and some otherwise. A little bit of research on your part via an agent to establish who it is that is building your product, and their track record to date might help in making an informed decision.

Conditions Precedent

Off-the-plan sales are often conditional upon the developer:

generating enough pre-sales to make the project viable so they can secure construction funding; and
obtaining satisfactory development approvals from the relevant authorities.
Usually, the developer cannot satisfy these conditions by certain date deadlines then it (not you) may elect to cancel the contract. Although you don’t usually have termination rights at this stage, you still you’ll still be refunded your deposit. In our experience, this is rare as developers generally have a reasonable idea as to the market and costing issues, before going to the market to sell their product.

Schedules of Finishes and Furniture Packages (units only)

Off-the-plan Unit contracts go into some detail about ‘quality fittings, tiles, tapware etc.’ to be included in the finished product. Similarly, if the unit is to be placed into a letting pool (where the unit is being let out to holidaymakers for example), then a furniture package will also typically form part of the purchase. These schedules and lists often refer to finishes and appliances in very general terms, allowing developers a bit of latitude in settling on the type and price of the finished product.

If you have any particular preferences regarding your finishes, or you thought the items were a particular model of a particular brand, then make sure this has been made clear. Otherwise, the general conditions of contract may let the developer supply and install whatever it can source at the time at the best price, though as long as it’s the same or similar quality.
Although that sounds reasonable, there’s little that can practically be done at settlement if you’re disappointed with the quality of your finishes. You’re generally not allowed to terminate, withhold money or delay settlement at all. In fact, you usually have to settle first and then prove that the alternative finishes you have been given are substandard. To prove this will mean at the very least some form of mediation or arbitration (after settlement), or worst case, court. Given the very cost prohibitive nature of court proceedings, this leaves buyers in a tough position.

Defects Liability Periods (units only)

Most off-the-plan contracts provide for a defects liability period of up to 90 days, and require a buyer to provide a list of defects to the developer within a specified period of time, failing which the buyer loses their right to have any defects rectified. This type of condition often goes on to provide that defects due to poor workmanship or poor materials will be rectified at the developer’s expense. All the documents

Statutory warnings, cooling off periods, disclosure statements … the list seems to be growing each year. in the interests of consumer protection, the law has evolved to a point where very stringent processes must be followed to ensure that a contract is valid and binding. Incorrect document preparation has led to many developers’ projects stall and fail as buyers’ lawyers continue to test legislation for loopholes.

Settlement

Off the plan contracts provide that Settlement is due 14 days after title to your lot issues. Title is issued by the titles office when the survey plan, signed by the local council, is lodged and registered. The local council generally won’t seal the plan until the developer has carried out all of the work to complete the development.

The developer has a statutory time frame within which to complete the development and settle on each contract with off-the-plan buyers. This is often referred to as the sunset date in the contract. If by this date title has not issued, contracts become automatically void and buyers have their deposits returned. This is subject to any rights the developer might have with respect to extending the Sunset Date.

Staged developments

Some off-the-plan purchases may form part of a development being completed in parts or stages. This is not unusual and generally does not affect you unless, for instance, you are buying a unit and proposing to enter it into a letting pool and construction works are continuing, which may result in low occupancy rates.

It can be problematic when purchasing a unit off-the-plan on the assumption that the unit being bought it will form part of a larger resort or development with all the amenities and benefits that follow. Almost always, developers’ contracts state that they are not obliged to continue with subsequent stages. If the developer fails to proceed with subsequent stages, a buyer of a stage 1 unit may be left without any subsequent stage amenities, benefits, increased value, or recourse to a developer for any losses sustained.

Coming Up With The Money

One major attraction for buying off-the-plan is that you do not need to come up with any major outlay beyond the initial deposit. Transfer duty, legal costs and the balance purchase price are all deferred until the unit is complete. As attractive as this sounds, it is unwise to enter into an off-the-plan contract unless you are certain you’ll have the money to complete.

Resales

A resale is when a buyer agrees to on-sell the unit or land they contracted to buy before they have actually settled. Typically both settlements occur simultaneously. Whether this is allowed depends on the contract terms. Some prohibit this, usually because developers do not want to be competing with buyers whilst trying to clear their original development stock. If you are not contractually prohibited and you decide to resell during the course of the construction of the development, you need to bear in mind that the resale price needs to be considerably higher than your original contract price before the transaction makes the risk of buying the property in the first place worthwhile (if indeed that is why you are buying it). You should take into account the following:

Tax – take advice from your accountant before you agree to re-sell. Remember that, under the current capital gains tax regime, you will be required to pay tax on the capital gain you make when you re-sell the property, at your marginal rate;

  • Agent’s commission – if an agent brokered the resale deal for you, then you will be liable to pay agent’s commission on the resale as well as the date for completion;
  • Stamp duty buying in – although it doesn’t seem that you actually own the property for any period of time, the law considers that you will, requiring you to pay stamp duty;
  • Additional legal fees – it is not a simple exercise for any lawyer to re-produce an off-the-plan contract. Additional costs are inevitable;
  • Net effect – the net effect of these deductions can result in a very marginal capital gain;
  • You remain bound – additionally, even though you have a buyer, if that buyer does not complete his contract with you, you are still bound to settle with the developer.
Nov 24
Distressed sales – has the price been cleared?

Distressed sales – has the price been cleared?

By Article, Property Conveyancing
Motivation to sell

More than ever, agents will need to be very attuned to clients’ reasons for selling. Rarely will a seller be inclined to candidly speak of their personal financial position, and understandably so. The irresistable conclusion is however that you must establish whether a seller’s motivation to sell is not so much their own, but rather brought upon them by their bank.

 

Pitfalls

These types of sales are, regrettably, on the increase, as are potential pitfalls not usually present in a regular conveyance.

Mortgage insurers and mortgagees are hard to budge once a deal is done. Sometimes, due to poor communication between mortgagees and defaulting sellers, some mortgagees expect to receive the full proceeds of sale. If the mortgagee has not taken into account commission to be deducted, it may refuse to release its mortgage. This can result in a seller being in default in an otherwise unconditional contract, the mortgagee refusing to move, and the sale falling over.

To limit this risk we suggest:

    • Confirm with the seller that they have sought clearance from the mortgagee on the ‘net’ amount available, after deduction of commission;
    • Ask them to get a confirmation email from their bank that they’ll settle for $X;
    • Ensure you’ve got enough deposit in trust to cover commission as it will be difficult to call for a cheque at settlement;

 

If the above can’t be sorted, call us for a special condition we can tailor for the deal to ensure that the seller is not in default on settlement day, and enable us both to work together to try to negotiate an acceptable result for the seller.

Nov 22
PAMDA out – POA in – soon!

PAMDA out – POA in – soon!

By Article, Property Conveyancing

Sales Team Alert – 22 November 2013

PAMDA out – POA in – soon!

On Wednesday the Property Occupations Bill was introduced to Parliament. It will, once it commences, replace PAMDA … thankfully…

 

What do you need to know

Transitional provisions – for any contracts signed while PAMDA is in force, they’ll continue to be subject to PAMDA

When will it start –  This is yet to be determined, but we expect it to be within the next month or so. We’ll keep you posted.

Key Changes –  pesky forms gone

  • written direction – thankfully, removal of the need to direct buyers to the PAMDA warning statement, the Body Corporate And Community Management Act (BCCM) information sheet and the proposed relevant contract;
  • Form 30c  – the warning statement (Form 30C) is gone. Now the following words need to appear above where buyers sign their contracts:

 

The contract may be subject to a 5 business day statutory cooling off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling off rights before signing

 

  • What if the above words are not there, or in the wrong place?

Sensibly, if there’s a failure to include these new words or they’re in the wrong spot, there’s no right to terminate the contract. Instead, the seller or their agent commits an offence and is liable to a penalty of up to $22,000. So you’ve still got to pay attention, but more for your own purposes than for the sake of the contract!

  • Counter offers – again sensibly, inclusion of the above words isn’t necessary for counter offers by a seller unless the particular property or buyer changes; 
  • Form 14 information sheet –  the requirement to give a BCCM information sheet to the buyer in any sale of a lot or proposed lot in a community titles scheme has been abolished;

 

The Cooling off period – no change :

  • still five business days after the buyer receives a copy of the contract of sale, but that copy must be ‘signed by both parties’ (so entering into contracts by exchange is not available – this is common practice in other states).
  • It can still be waived and shortened, and at this stage there is no reference for a lawyer’s certificate any more, which is sensible.
  • It’ll apply only to options and not the contract arising from it (assuming the parties are the same).
  • It won’t apply to contracts now signed up within two business days after auction, as long as the ultimate buyer was a registered bidder at the auction – TIP: get your bidder registrations!

Refining other dumb definitions –

  • Residential Property – Under PAMDA “Residential Property” was a messy definition.  Should I use the residential contract? Or the commercial contract etc? The new one is nice and clear:

 

Residential property is real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.

Residential Purposes – it’s not defined, but all this means is that it would be given its ordinary meaning! The new definition will overcome the need to look at planning schemes to decide whether property could be used for residential purposes etc.

What about how it affects you as an agent?

There are a number of changes but these are the most topical for obvious reasons are:

  • Statutory Commission abolished –   commission will be deregulated  – the sky’s the limit on residential property sales
  • S 149 Notice abolished – these notices for non-residential vacant land (under s 149 PAMDA) are pretty rare in any case, but now they’re even more so!

From here:

Just as soon as we know when the Act has been passed, and comes into force, we’ll be in touch. In the meantime, call us if you’d like any more information.

PD Law
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