Legal

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GUEST OBSERVER
The Retail Leases Amendment (Review) Bill 2016 was introduced into NSW Parliament on 8 November 2016 and when enacted, this legislation may make substantial amendments to many of the provisions of the current legislation, the Retail Leases Act 1994 (NSW) (RLA), governing most retail shop leases in New South Wales.
Some of the changes proposed by the Bill have been outlined below but first we must mention that some of the Bill is intended to have retrospective application:
Retrospective operation of amendments
Clause 38 of the Bill gives retrospective operation to the provisions of the Bill and extends the operation of the Bill to any leases and disclosure statements given, before the commencement of the amendments except as otherwise provided by the Bill.
Major Reform - Repealing the minimum five year term
The Bill removes the current minimum five year term for retail shop leases; the original intent of the introduction of a minimum five year term was to afford greater protection to the goodwill built up by a tenant and to protect the investment a tenant has made in fit out.
The result of getting rid of the five year minimum lease may be that more leases are being structured with shorter terms. Before the RLA, many retail leases were only 3 years but the new norm is now 5 years. The proposal gives greater flexibility to tenants to ask for longer or shorter terms however the potential for shorter terms may result in a greater turnover of tenancies. This may in turn have a detrimental impact on other tenants who are left behind when a key tenant does not elect for a longer term.
However the removal of this provision may save time and costs for both parties. The minimum five year term was not a benefit to tenants who sought a lease for less than five years as they would need to pay legal fees to obtain a s16(3) certificate from a lawyer to do so.
Exclusion of non-retail uses from RLA’s operation
The Bill excludes premises used wholly for certain non-retail purposes from the operation of the RLA. The excluded purposes are outlined in a new Schedule 1A and include the following (among other things):
<ul>
<li>ATMs;</li>
<li>Car parking;</li>
<li>Vending machines;</li>
<li>Public telephones;</li>
<li>Children’s ride machines;</li>
<li>Signage displays;</li>
<li>Internet booths;</li>
<li>Private post boxes;</li>
<li>Certain storage uses.</li>
</ul>
The Bill also removes an exclusion from the RLA for any premises in an office tower that forms part of a retail shopping centre. This means that the removal of the provision is not to include office towers; the reasoning is because the original exception was unnecessary as an office tower does not form part of a retail shopping centre simply because it is part of the same building. However the removal of this exception retrospectively may create practical issues where premises that have initially been deemed to be excluded under this provision now may no longer be excluded based on their factual circumstance. By functioning retrospectively the amendments would greatly burden those parties.
Additionally, the Bill asserts that the provisions will not apply to a retail shop that is a stall in a market unless the market is a permanent retail market.
Better Tenant Protection
Other changes proposed by the Bill include:
Disclosure Statements
<ul>
<li>
Landlords will be liable to pay compensation to tenants who terminate a lease in the first six months because they were not provided with a disclosure statement, or the disclosure statement was incomplete or false or misleading.
<ul>
<li>The compensation payable is the costs reasonably incurred by the tenant in entering into the lease, including expenditure in connection with the fit-out of the premises.</li>
</ul>
</li>
<li>A tenant is not required to pay outgoings unless that liability was disclosed in the landlord’s disclosure statement.</li>
</ul>
Disclosure of tenant’s financial obligation
<ul>
<li>If the landlord’s disclosure statement provides an estimate for an outgoing and the actual amount of the outgoing is more than the estimate, then if there was no reasonable basis for the estimate when the disclosure statement was provided, the tenant’s liability will be limited to the estimated amount, and all subsequent increases in outgoing will be limited by reference to the estimated amount.</li>
</ul>
Bank guarantees
<ul>
<li>
The landlord is required to return a bank guarantee to the tenant within 2 months after the tenant completes performance of obligations under the lease that are secured by the bank guarantee.
<ul>
<li>This allows the tenant to have certainty about the return of the bank guarantee, but also affords the landlord sufficient time to confirm compliance by a tenant with post-termination obligations.</li>
</ul>
</li>
</ul>
Online Transactions
<ul>
<li>Turnover rent must exclude revenue accrued from online transactions, except where goods or services are delivered or provided from the retail shop or where the transaction takes place while the customer is at the retail shop.</li>
<li>The tenant is not required to provide the lessor with information about online transactions except for transactions where goods or services are delivered or provided from the retail shop or where the transaction takes place while the customer is at the retail shop.</li>
</ul>
Mortgagee consent expenses
<ul>
<li>The tenant is no longer required to pay lease preparation expenses (including expenses incurred in obtaining mortgage consent to a lease) in connection with the granting, renewal or extension of a lease.</li>
</ul>
Employment Restrictions
<ul>
<li>The employment restrictions the landlord has over the lease is extended to impose on a tenant requirements for police and security checks for tenant’s employees or contractors carrying out works in the premises. However, this is only if the Registrar of Retail Tenancy Disputes has approved of their inclusion in the particular case.</li>
</ul>
Amendments that may benefit Landlords
Disclosure statement
<ul>
<li>The revised definition of outgoings extends the definition to fees charged by a landlord for services provided by the landlord ‘in connection with the management, operation, maintenance or repair of the retail shop building or land’.</li>
<li>A landlord’s disclosure statement may be amended if both parties agree in writing.</li>
</ul>
Other general amendments
Demolition
<ul>
<li>The protections afforded to a tenant when the lease is terminated on the grounds of a proposal to demolish the building are extended to termination on the grounds of proposed demolition of any part of the building. Proposed changes also clarify that termination on the proposed demolition is only permissible if the proposed demolition cannot be carried out practicably without vacant possession of the shop.</li>
</ul>
Assignment of lease
<ul>
<li>There is clarification on the procedure for obtaining the landlord’s consent to the assignment of a retail shop lease, however the provision still includes a deemed consent by the landlord if the landlord has not responded within 28 days from when the request for consent was made by the tenant or from when the tenant has complied with the requirements under the RLA.</li>
<li>Where a retail shop lease has been awarded by public tender, the landlord can refuse consent to assignment of the lease if the proposed assignee fails to meet any criteria of the tender.</li>
</ul>
Jurisdiction of the Tribunal
<ul>
<li>There is an expansion of existing power of the jurisdiction of the Civil and Administrative Tribunal and an increase to the monetary limit for claims arising under the RLA from $400,000 to $750,000.</li>
</ul>
Lease execution and registration 
<ul>
<li>The time period for which the landlord is required to provide the tenant with a signed copy of the lease has increased from 1 month to 3 months.</li>
<li>Leases for a term of more than 3 years will be required to be registered, and must be lodged for registration within 3 months after the executed lease is returned to the landlord.</li>
</ul>
Conclusion
Currently there is no guarantee that this Bill will be passed, and the Bill will likely undergo further discussion and amendments before it is enacted. Parties involved in retail leases as tenants or landlords however should be aware of the potential changes to the Bill as they will be expected to comply with the new requirements when the Bill is passed as the legislation will not only apply to future retail leases but also leases entered into before the enactment of the legislation.
Gary Newton is partner TressCox Lawyers and Henry Yuan is paralegal. Both can be contacted <a href="https://www.tresscox.com.au/page/our-expertise/property/" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Proposed amendments to the NSW Retail Leases Act may affect retail landlords, tenants 

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GUEST OBSERVER
Having been a lawyer looking after farmers and graziers for almost 40 years, I have focused on the future of family farms all my professional life – indeed, my practice and those of the other lawyers in our Agribusiness team depends upon it.
The issues facing agriculture in Australia are well known – droughts, floods, fire, depressed prices, labour shortages, too much debt, government interference (tree clearing and live export bans to name but two), declining terms of trade, the high Australian dollar, the average age of our primary producers etc etc.
As a general observation, while undoubtedly the average age of our primary producers is high, the next generation are well placed to capitalise on the world's increasing need for protein and Asia's growing prosperity – they are technologically savvy and have access to resources, training etc (that their forebears could only look upon with envy) to ensure that the farms of the future will be sustainable both financially and environmentally.
I was asked a few years ago what I thought was the biggest issue facing primary producers and my considered response was "lack of communication". Farmers and graziers are, by their very nature, stoics – they have to be to cope with the myriad of challenges thrown at them. They know how to "tighten their belts" in bad times and battle through.
Producers though, in my experience, largely do not communicate about issues worrying them – droughts, debts, relationship issues, mental illness etc. These issues and the lack of communication particularly come to the forefront when we are addressing succession planning for family partnerships. My view, until recently, was that such partnerships have limited lives as the next generation takes up the "family farm".
My view though has changed and I was intrigued to read an article in Beef Central some time ago about two Mallee grain growers and their venture into "collaborative farming".
These two farmers started with a blank canvas and designed the ideal farm for their area. They worked with no preconceptions or restrictions and focused only on what mix of land, plant and labour would be required to create the most efficient and profitable farming business for their area.
They have combined their assets and skill base with a corporate focus that has enabled them to achieve a high level of scale, efficiency, profitability and flexibility that simply would not have been possible if they had remained as individual farming units.
Irrespective of what industry or profession you are in, it is an ever competitive and challenging business environment out there, and we all (lawyers included) have to look at ways to drive efficiencies, reduce costs and to ensure the business models are sustainable.
At Thynne + Macartney, for example, many of our lawyers now work remotely, reducing our need for high cost premises and allowing us to consolidate on a smaller floor plate. We also recognise the different strengths of our people and although we are still a legal partnership, we have moved to a corporate management model.
Having been raised in Mitchell on a property consisting of any number of 160 acre blocks carved up after World War 1 for soldier settlements, and in a wool growing era where adjoining properties all had their own woolsheds and supporting infrastructure, I can see opportunities for our farmers and graziers in "collaborative farming".
The basic idea is that you look to others in your or related industries and put yourselves into businesses where you add the most value and be more profitable. A breeder operation, for example, can form a business partnership with the operators of a backgrounding block (and in turn, the operators of a fattening block / feedlot) where resources (whether it be land, manpower, plant, livestock or whatever) can be applied to best advantage to make the combined operation more flexible and profitable than the individual operations could ever hope to be.
As has been said before, "it's not rocket science".
One of the Mallee farmers, John Gladigau, is said to have identified seven core principles for "collaborative farming":
Be strategic – Start off with a blank piece of paper and design your future.
Differentiate between agribusiness and real estate – Most farmers and graziers run two enterprises: a real estate business and an operations business – both have to get a return. Arguably some of our large operators in the beef industry are grappling with this issue.
Use resources efficiently (machinery, labour and infrastructure).
Create cells and replicate them, ie a scalable unit as the most efficient mix of land, machinery, infrastructure etc.
Create an environment of "win-win"– Win-win relationships need to be built between all of the stakeholders throughout the businesses.
Engage specialist services – The days of being a master of all trades (if they ever existed) are well and truly over. Recognise your limitations. There are areas where you need to bring in others because of their different skill set.
An independent voice is needed – Recognise that personalities, especially in a collaborative business where families are brought together, can destroy the business. The one essential element is to have an independent voice. Look at the corporate world where it is common to have an independent chair / directors on the board.
How then do we establish a "collaborative farm"? The key issue here is that "there is no model, there are no rules". You need to create a business that works for you and your partners. Having said that, the basic template is to set up a new company, put the various properties together, lease the properties and plant and sell your livestock to that new entity. There are legitimate steps that can be taken to minimise transactional costs, ie stamp duty, livestock transaction levies and income tax on any such restructure.
In summary, I am convinced more than ever that "the family farm has a future". The crucial issue here though is that the form of the family farm in future may well be more complex. It is of course a complex environment in which we all live and operate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Bill Loughnan is partner,  Thynne &amp; Macartney and can be contacted <a href="https://www.thymac.com.au/" target="_blank">here</a>.
 
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Collaborative farming – the future for family farms?

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GUEST OBSERVATION
Looking to ensure a smooth property transaction? Congratulations, you’ve already taken the first step, which is to begin to learn about how property transactions usually work.
The more you know about the process, the easier it is on the blood pressure. Buyers, sellers and conveyancing solicitors all agree that the best surprise at settlement is no surprise at all.
Most property transactions go through six steps:
<ol>
<li>Financing 
</li>
<li>The execution of the contract of sale 
</li>
<li>Review of searches and removal of conditions 
</li>
<li>Preparation of settlement figures 
</li>
<li>Settlement 
</li>
<li>Post settlement matters</li>
</ol>
At each step there may be twists and turns, but these too are generally somewhat predictable. 
Step one – Obtain financing 
Finding the home of your dreams and only then going to look for money guarantees anxiety. 
Most buyers seek preapproval for a mortgage before they go house hunting. That way they know what they can afford.
First time home buyers should explore <a href="https://www.urban.com.au/expert-insights/buying/31603-the-national-guide-to-first-home-buyer-grants&amp;sa=U&amp;ei=DJXZU83vKcK9uATArIH4DA&amp;ved=0CBQQFjAH&amp;client=internal-uds-cse&amp;usg=AFQjCNGfui5XQzc36baPUutL_b3hq8bbmg" target="_blank">whether they are eligible for a First Home Owner Grant scheme</a> (FHOG scheme).  
Step two – Exchange of contracts
Supposing that buyer and seller have met and agreed upon a price, step two is the exchange of contracts. The seller’s real estate agent, conveyancer or solicitor generally prepares the contract, which will set out the description of the property, price, warranties, contingencies and other terms and conditions. 
The buyer’s solicitor will carefully review the contract and negotiate any changes before the parties sign and the buyer pays the deposit. This is known as the “exchange of contracts”.
During a <a href="https://www.urban.com.au/expert-insights/buying/33835-what-is-the-cooling-off-period-investment-terms-explained&amp;sa=U&amp;ei=8JTZU5ziMdO8uATSj4GIAg&amp;ved=0CAYQFjAA&amp;client=internal-uds-cse&amp;usg=AFQjCNG-vNxBrqkYL3new6GFnYGEQJOU3A" target="_blank">“cooling off” period</a>, of a few business days, the buyer may withdraw from the agreement, forfeiting the deposit but incurring no legal penalty. 
As an aside, we advocate retaining a conveyancing solicitor rather than a conveyancer because the solicitor has the legal background to evaluate any unanticipated legal issues that may arise in the course of the conveyance.
Step three – Searches and inspections 
The buyer’s obligation to buy the property is generally contingent on satisfactory results from things like pest inspections and property searches. The buyer’s solicitor will order and review the property searches.
In New South Wales, these include a title search, zoning search, strata plan search and a historical search. If there are termites or a problem with the title, for example, the parties may choose to re-negotiate or walk away.
Step four - Pre-settlement Process
This is where the number crunching begins. Smart clients ask for an itemised list of estimated costs before the work begins. In addition to fees for legal services, a buyer should anticipate charges for inspections, searches and building insurance. 
There may also be a category of fees associated with the mortgage, including mortgage insurance, establishment and registration of the mortgage and mortgage duty. Other miscellaneous costs may include photocopying, certificate fees charged by water, utility, roads and school authorities, adjustment for council and water rates, stamp duty and the goods and services tax.
Your job, as a client, is to make a complete pest of yourself at this point. Ask to be updated regularly on costs and ask for an explanation of what those costs are if they seem mysterious.
Step five – Settlement 
This is the exciting part – when the purchase of your property is finalised.
Your conveyancer or solicitor (known as your settlement agent) will meet with your lender and a seller's representative to sign and exchange documents and cheques. The documents will then be lodged with the Titles Office to register you as the new property owner.
Do not be alarmed if at the settlement the costs change to adjust for taxes, rental fees and fees for the release of an existing mortgage. In the spirit of being a nuisance, you should ask your solicitor to estimate these costs for you in advance.
Step six – Post settlement Matters
Remember that the job is not done until the paperwork is finished, so step six involves notifying relevant authorities of the change in ownership and lodging transfer documents with the Land Titles Office. This is often done by the buyer’s lending institution, but to be secure buyers should follow up to confirm with the lender.
Property transactions involve money, quite a lot of it. Where there is money, there can be complications. You can minimise these, however, by understanding the process and insisting that you be updated regularly on costs and progress.
Rolf Howard is managing partner of <a href="https://www.owenhodge.com.au/">Owen Hodge Lawyers</a>. 
Rolf concentrates on business planning and formation, directors’ duties, corporate governance, fund raising and business succession. His major interest is to assist business owners and their financial advisers plan and implement strategies to build and exit from successful businesses.<a href="https://www.owenhodge.com.au/" style="line-height: 1.3em;"> </a>
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rhoward-axCnf7VAF6

The six steps to ensure a smooth property transaction

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GUEST OBSERVATION
Buying a property is one of the most important financial decisions you will ever make.
It's easy to get swept up in emotions when you think you've found "the one", especially when you're a first home buyer or you've been searching for ages. But it's very important to carefully consider the legal and financial implications before you sign a contract. Thorough research could save you a fortune and ensure you avoid a serious mistake.
From the hundreds of real estate contracts I've read during my career, below are my top five legal tips to keep in mind when you're considering a purchase:
<ol start="1">
<li>
Carefully inspect the property and check the condition of everything before you sign the contract. A standard clause in the contract makes the vendor (or seller) only responsible for delivering the property to you at settlement in the condition it was on the day of sale, fair wear and tear excepted. So if the central heating wasn't working on the day you signed the contract, bad luck. Turning on all appliances and checking all light fittings beforehand will give you an accurate picture of the state of the property; you may be able to negotiate on price if something like an oven or garage door isn't working. 
</li>
<li>
Understand the zoning of the land and how it may affect your use of the property. Beware of flood paths or special building overlays, especially if there is a basement car park involved. It is prudent not to purchase a lower basement level car park in a flood zone (keep in mind that some apartments are sold with particular car parks allocated). The zoning of the land can prevent commercial or business activities being conducted. If you'd like to run a business from home, whether it's a professional service, childcare, wholesaling or anything else, always check if the planning scheme will allow it. You may require a permit or your proposed use may even be prohibited. Check with the local council if you're in any doubt. 
</li>
<li>
Beware of water easements. It is illegal to build on top of water drains and sewerage pipes without the permission of the water company. Look carefully at the water easement plan in the contract. You will not be allowed to build anything, even a deck, on top of a water easement and even if permission is granted, the water company can destroy any structure if they need access - and you are solely responsible for the cost. Look out for garages, carports and decks on the property: could they be built over water easements? If so, has permission been given? If not, the Council and water company could come knocking in the future and you'll be responsible, not the previous owner, unless you negotiate the wording of the contract. 
</li>
<li>
Don't be seduced by display units and rent guarantees. Spacious and well-lit display units are not a representation of your finished off-the-plan apartment. The fine print of the contract will make it very clear that you cannot rely on what you see in a display unit. Rather, carefully check the plans for your chosen apartment that are included in the contract. Use a tape measure to actually measure out the size of the apartment. How does it compare to your current home? What is the orientation of the apartment? Will it have enough natural light? North-facing properties are always preferable. And as for rent guarantees: these often aren't worth the paper they're written on. These guarantees are often provided by companies that are financially worthless or are wound up and closed by the time any purchaser may want to enforce a guarantee. Instead, do your homework about the rental market in the area. What rent could you achieve if all or most of the apartments in the building were all released onto the rental market at the same time? Always budget for conservative rent receipts. 
</li>
<li>
Don't rush, get advice and read the fine print. Resist any pressure from the real estate agent to quickly sign the contract. Never sign on the spot without getting advice – if possible, legal advice but at the very least advice from someone experienced in the property market. Remember that real estate agents are looking out for the vendor's best interests, not yours. If it's a private sale, take the contract home and 'sleep on it'. If there's an upcoming auction, request the contract at least a week in advance, to give you enough time to properly consider everything. Speak to your accountant and lender: can you afford it? Are there tax implications? Read the fine print and never assume that it's straight-forward. One hour of your life spent checking or consulting with a lawyer may save you an enormous amount of grief and money. Remember, buying a property is a life-changing decision.</li>
</ol>
Note: the above is general information and should not be considered as legal advice.
Kate Ashmor is president of <a href="https://www.australianwomenlawyers.com.au/" target="_blank">Australian Women Lawyers</a> (AWL) and a commercial lawyer for the Victorian government.
This article originally appeared on <a href="https://www.womensagenda.com.au/personal-freedom/investment/top-five-legal-tips-for-buying-property/201407234364#.U9GUM-OSy0d">Women’s Agenda</a>. 
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kashmor-ge4wELXMKp

Top five legal tips for buying property

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Is e-Conveyancing going to be a way of ensuring that foreign nationals comply with Australian foreign investment rules?
The Real Estate Institute of Australia suggests that this might be exactly the case.
As part of the House of Representatives Standing Committee on Economics’ public hearings into the Inquiry into Foreign Investment in Australian real estate, REIA board member First National's Ray Ellis is to address the inquiry and detail the possibility of using e-Conveyancing to improve compliance.
This would ensure greater inter-departmental and agency communication, including with the Department of Immigration, with REIA CEO Amanda Lynch noting that later in the year the first national e-Conveyancing platform will be rolled out.
“While it is important to stress that the new online platform is heavily regulated with keen focus on protecting privacy of individuals, it will be capturing a rich set of data including identification where the transaction involves foreign nationals,” said Lynch.
“Lawyers and conveyancers will have to verify the identity of the clients they represent and reflect the client’s foreign residency status while filling the form in an online workspace,” she said.
They will reflect the paper versions of transfer in each state and territory, with the same data fields, however will store data electronic – something that matches the expectation for 85% of all property transactions over the next two years to be electronic, explained Lynch.
Monitoring could more easily be undertaken under this system.
“The transition towards e-Conveyancing provides the opportunity for easier detection of irregular activity,” said Lynch.
“The last thing that the sector wants to see is unnecessary red tape around foreign investment in Australia and here is an ideal platform that is available for all property purchases, not just those involving foreign investment,” she said, noting the REIA supports both foreign investment in Australia, and the current guidelines.
Ellis noted that the issue isn't that foreign investment happens, but that it is inadequately monitored and regulated.
"Australia has long depended upon migration and foreign investment. It’s vital to a thriving economy in a country with a comparatively small population," he said.   "However, there appears to be evidence that some wealthy foreign investors have been purchasing existing homes and leaving them vacant to avoid detection by the Foreign Investment Review Board (FIRB)."
He noted that there is currently an $85,000 fine for breaching this law.
"Foreign developer investment, when compliant with our laws, creates jobs and benefits the construction industry. However, if foreign residential property investors believe they can buy existing properties and leave them vacant, to avoid detection, this is clearly against the rules and objectives of the FIRB scheme and measures should be put in place to address this cavalier attitude," he said.
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jduke-EHk3XBmHkn

How e-Conveyancing can help ensure foreign investors comply with rules: REIA

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Home owners won't lose protections and rights when new home building reforms come in, NSW Fair Trading Minister Matthew Mason-Cox has claimed.
His reassurance comes after a recent court decision in favour of Brookfield Multiplex in a case regarding commercial property. The High Court's ruled that Brookfield Mutliplex was not liable for alleged building defects in a commercial development was a complex and technical decision,
According to Mason-Cox, the owners corporation deemed not vulnerable in legal terms, with no duty of care from Brookfield Multiplex to a commercial property owners corporation.
"I have obtained legal advice from the Crown Solicitor's Office that confirms the decision does not affect the consumer protections offered by the state's home building legislation,'' Mason-Cox said.
"This case refers to the law of negligence and involved a commercial development.
"The case does not affect the separate NSW statutory scheme of a residential development.
"Consumers continue to enjoy all the protections afforded to them by home building laws, including the statutory warranty scheme. Any suggestions to the contrary are simply false.''
A number of reforms relating to home owner rights have been passed in the Home Building Amendment Act 2014.
Some claim the reforms will <a href="/expert-insights/investing/37974-nsw-home-owners-dodgy-construction-claims-curbed-by-government" target="_blank">degrade consumers' rights</a> when their building is found to be defective, with a government-granted six-year warranty for "structural defects" now applicable only for "major defects".
However, Mason-Cox says the amendments "provide significant protection for consumers and offer clarity about rights and responsibilities of builder's liabilities, particularly in relation to defects".
"The Home Building Amendment Act 2014 was passed by Parliament in May and is expected to start in mid-January," said Mason-Cox.
"Under the new Act, if a strata scheme discovers a major defect up to six years after the building has been built, then they can pursue their builder under the statutory warranties in the Act to rectify that defect.
"In particular, our reforms ensure that all home owners continue to have the benefit of a six year warranty for major defects and two years for minor defects."
Fire safety and waterproofing will be considered "major elements" of a building under the changes.
"By clarifying the nature of major defects, this key reform will save owners, and owners corporations, tens of thousands of dollars in legal costs incurred in protracted litigation," claimed Mason-Cox.
"We are also introducing changes to the licensing system, making it harder for unscrupulous builders to illegally 'phoenix', which is where a failed company starts up under a new or similar name to avoid scrutiny by consumers or NSW Fair Trading."
Individuals who were once involved in companies closed by their directors to avoid their obligations will now risk having their licence applications denied or their licenses revoked.
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jrichardson-uRX5hFdKfN

Home owner rights still strong, despite building reforms: NSW Fair Trading

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GUEST OBSERVATION
Back in 2010 we received an enquiry about the real estate auction method in NSW and the sharp, deceptive practices that are sometimes used to enforce a contract.
A consumer buyer, whom we spoke to, believed they were induced to enter into a contract at auction by misleading and deceptive conduct and was considering a civil action against the agent and vendor involved. After listening to their concerns we decided to invest some time into completing a legal study of the real estate auction method, while obtaining some powerful legal advice along the way to substantiate the findings.
This is what we found.
The Statute of Frauds, is an Act passed in England in 1677. What has this got to do with modern-day Australia? Well, back in the 17th century, the law of contract was beginning to take shape. In particular it was becoming possible to enforce executory (future) promises.
The law of evidence, however, was still back in the dark ages. It did not allow anyone to give evidence to support their own case. It was possible to prove a case by simply getting 12 of your mates to come along and swear, for example, that so and so made a promise to pay some money.
This laid the way open to make fraudulent claims by simply getting others to commit perjury on your behalf. The answer was provided by the Statute of Frauds which stipulated that certain contracts had to be evidenced in writing. Not all contracts – only a limited class of contracts.
To this day, the same statutory provision, re-enacted (or even still applying in their own right in NT and WA) in the states and ACT, governs at least contracts involving interests in land and one or two other contracts. Still, to this day, the legislation is referred to generally as the Statute of Frauds.
The Statute of Frauds has, it must be said, got a bad smell about it. It can be used as a technical defence to a contract claim. That is, it enables someone who has committed himself or herself to a contract to simply wriggle out of it on the basis that there is not a sufficient writing to satisfy the legislation.
There is no merit, no plausible or understandable excuse for not performing; only a fortuitous, technical defence which would only be apparent to the person after they have talked to their lawyer.
The Statute of Frauds is invoked by a defendant in a breach of contract action. If the defendant can establish that the contract he has failed to perform is legally unenforceable because it has not satisfied the requirement of the statute, then the defendant cannot be liable for its breach.
For example, suppose that a plaintiff claims that a defendant agreed to pay her a commission for selling his building. If the defendant can demonstrate that no commission contract was signed, the statute of frauds will prevent the plaintiff from recovering the commission.
The legal advice we received, would be of interest to many auctioneers’ in NSW and other states in Australia. But firstly we need to establish that a bid is, in effect, an offer of a price for the property being sold, and the fall of the auctioneer’s hammer the acceptance.
Once the auctioneer’s hammer has fallen, the auctioneer has by implication the authority of the highest bidder to sign any memorandum on the bidder’s behalf embodying the conditions of the sale, such memorandum being sufficient to satisfy the requirements of the Statute of Frauds and the Sales of Good Act.
However, if a successful bidder for certain land at an auction sale refused to sign a written sale agreement, it would be difficult to enforce specific performance of an agreement to purchase the property under the Statute of Frauds. This is due to there being no expressed authority under auction laws in NSW and on the bidder’s register, which permits the auctioneer at the fall of the hammer to sign any memorandum or contract of sale on the bidder’s behalf.  
Although, in the old case of Phillips vs. Butler [1945], where a successful bidder declined to sign a contract for the sale of land at the conclusion of an auction, a judge ruled there was an irrevocable authority to sign the contract, due to evidence proving that both parties had finalised a contract and specific performance of the contract in this case was required.
However, this ruling to some may seem straightforward on its face, but not quite.
The auctioneer’s authority to sign on the purchaser’s and, if necessary, the vendor’s behalf is only an irrevocable authority once the contract is final and both parties have agreed to be legally bound.
Further to this, under contract law, for an agreement to be regarded as a contract, it must contain four essential ingredients: if any one of them is absent the agreement will not be legally binding.
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One of the essential ingredients of a contract is the ‘Intention of legal consequences’. The parties to the agreement must understand that the agreement can be enforced by law. For a contract to be binding, it does not have to expressly state that you understand and intend legal consequences to follow.
For commercial contracts your intentions are presumed, for example, to be legally bound. The parties to a contract can decide not to be legally bound by the agreement – this must be clearly stated and is then an agreement that is not legally enforceable.
In NSW under the standard contract for sale of land the following warning statement is located on page 3 of the contract:
“IMPORTANT NOTICE TO VENDORS AND PURCHASERS
“Before signing this contract, you should ensure that you understand your rights and obligations, some of which are not written in this contract but implied by law.”
This provision of the contract gives each party more freedom to further negotiate the terms of the contract before deciding to be legally bound. The negotiation stage of a contract would likely challenge and override the irrevocable authority to sign after the fall of the hammer.
Furthermore, the principles of contract law require that consideration be given for the contract to be valid. Consideration means that something of value for example a deposit was given to the vendor by the purchaser.
Under auction conditions in NSW, it doesn’t state that all bids must be unconditional and at the fall of the hammer is forming of the contract. Surprisingly, there is such a thing called conditional bidding and this is permissible at auctions in NSW and in the other states as well. It is advised that such information be disclosed to bidders prior to commencement of the auction; this not only will prevent allegations of mismanagement and fraud, but should also come as a timely reminder, that a successful bidder is not always a true unconditional bidder.
All estate agents should be aware, that all financial institutions have never operated in line with real estate auction conditions, therefore, any winning bidder who is still subject to a loan doc approval with the bank, should be given the courtesy and respect of their offer being made subject to finance.
In other words, if the winning bidder was restrained from signing the contract under auction conditions, due to unavoidable circumstances relating to finance approval, the contract of sale, should therefore be entered into under private treaty conditions and not under the traditional auction conditions. The contract would need to include also, a seller’s warning statement and remain on the market until such time the contract is unconditional.
National Unfair Contract Terms Laws (part of the Australian Consumer Law)
One of the most significant reforms for New South Wales businesses and consumers are the provisions addressing the use of unfair contract terms in standard form consumer contracts, contained in Part 2-3 of the Australian Consumer Law (commenced on 1 July 2010 at the Commonwealth level.
This law has the potential to create a basis for a significant amount of litigation. The definition of ‘unfair’ adopted in Part 2-3 may cause uncertainty over the enforceability of contract terms which favour one party over another, providing all consumers additional grounds upon which to challenge and potentially avoid their contractual obligations.
While there have not yet been any instances of enforcement of the national unfair contract terms law, publications released by the ACCC give some indication as to what will be considered to be an ‘unfair term’ under these provisions.
A term of a consumer contract will be void if:
<ul>
<li>The term is unfair; and</li>
<li>It is a standard form contract.</li>
</ul>
A consumer contract is defined as a contract for the supply of goods or services or a sale or grant of an interest in land to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.
For example, a buyer acquiring an off the plan apartment for investment purposes will not be a ‘consumer’ because of their reasons for buying. However, if it is for their own occupation the buyer will be a ‘consumer’.
The test for unfairness, under Sch 2, s. 24(1) of the Act and s. 12BG of the ASIC Act, states that a term of a consumer contract is unfair if it:
<ul>
<li>Would cause a significant imbalance in the parties’ rights and obligations arising under the contract and</li>
<li>Is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term and</li>
<li>Would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.</li>
</ul>
All three limbs of the unfairness test must be proven, on the balance of probabilities, to exist for a court to decide that a term is unfair.
In light of the unfair contract law, businesses should prepare themselves and adjust the way in which they deal with individual consumers in the following ways:
<ol>
<li>Be aware and take note of whether a consumer is purchasing for investment purposes or for their own personal use;</li>
<li>Be willing to negotiate the terms of the contract with the consumer and keep detailed records of any negotiations;</li>
<li>Obtain an acknowledgement from the consumer that they are aware of and understand any terms  in the contract which may be seen to favour one party over another; and</li>
<li>Have your standard form consumer contracts reviewed to ensure that their terms are not at risk of being voided for being ‘unfair’.</li>
</ol>
Finally, the law in NSW requires that an agent must also; act honestly, fairly and professionally with all parties in a transaction. An agent must not mislead or deceive any parties in negotiations or a transaction.
Silent Auction – The Alternative Method
<a href="https://www.wikihow.com/Run-a-Silent-Auction" target="_blank">Silent auctions</a> are auctions held without an auctioneer. People place their bids on sheets of paper instead. They're often used by charities to raise money, but actually can be a useful method in real estate.
When there are multiple buyers under Private Treaty - converting to either a “Sale by Tender method (where buyers get one opportunity to put forward their most competitive offer and once the vendor makes their final decision on a specified time and date, the decision is announced) or “Silent Auction Method” makes perfect sense to avoid engaging in misleading and deceptive conduct.
As previously mentioned, the auction is "silent" in that there is no auctioneer selling the property and bids are written on a sheet of paper. After each pre-determined round, the agent announces the highest bidder. Bids continue to escalate in subsequent rounds. At the end of the final round, the highest registered bidder is the purchaser.
There are variations to silent auctions which may include sealed bids. The highest bidder pays the price he or she submitted. However, the capability of inducing bidders into error or refusing to disclose any competing bid relevant to the decision of the other party, would likely lead to an allegation of misleading and deceptive conduct. All agents must engage in full disclosure, but set pre-determine bidding increments at the start, to avoid non - genuine bidding on the day.
It is important to point out under the standard sales agency agreement, that services detailed in the agreement can be varied providing it is in writing and signed by both parties. Furthermore, the definition of an "auction" under the Property Stock and Business Agents Act 2002 refers to the person who claims the property submitted for sale at a certain price is named by the person acting as auctioneer. As with silent auctions there is no auctioneer. This gives real estate agency businesses the flexibility to draft terms and conditions that are not based on the unnecessary and unproductive rules of public auctions – only laws applicable to contract law and consumer law.
In closing the purpose of this article is to alert all agents, with intention of preventing any future allegations and claims of fraudulent misrepresentation in tort, when facilitating the sale of a property at auction.
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A RECENT COURT RULING:
Auctions — Did residential property bidder engage in misleading and deceptive conduct? (Carter &amp; Anor v Delgrove Holdings Pty Ltd &amp; Anor[2 September 2013] FCCA 783.)
This is an interesting decision from the Federal Circuit Court of Australia for its consideration of when the provisions of the Australian Consumer Law will apply to the sale of residential property.
Facts
The respondents were engaged in the business of property acquisitions for the purposes of deriving rental income. The first respondent was a company which was the trustee of a family trust and the second respondent was a director of the first respondent and a beneficiary of the family trust.
The second respondent attended the auction of the vendor applicants’ home in Western Australia. During the course of the auction, he placed a bid for $3.6 million. He was the only genuine bidder at the auction.
As the reserve price had not been met, the auctioneer suspended the auction to consult with the vendor. After gaining approval to sell at $3.6 million, the auctioneer recommenced the auction, inviting further bids. There were no further bids. The property was then knocked down to the second respondent. However, after the other potential bidders had left the property, he refused to sign the contract or pay the requested deposit asserting that he no longer wanted to buy the property.
When the respondents refused attempts at settlement, the property was placed upon the market again. Additional costs were incurred in respect of the marketing of the property. The property did not sell.
The vendor brought an application against the respondents for (inter alia) damages for misleading or deceptive conduct under s 18 of the Australian Consumer Law (ACL).
Section 18 of the ACL provides that “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
The respondents countered that the matter involved the sale of a private house without any business character and was not conduct in trade or commerce for the purposes of the ACL.
Decision
The court held that the s 18 misleading and deceptive conduct provision did apply even though the matter involved the sale of a private house without any business character.
It sufficed that the respondents were engaged in commercial activity (acquiring properties to rent out). However, despite the finding that s 18 applied, no damages were awarded because the vendor could not demonstrate that the loss incurred resulted from the respondents’ conduct.
George Rousos is director and training Consultant with <a href="https://www.itc.nsw.edu.au/" target="_blank">Industry Training Consultants</a>.
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GeorgeRousos-zguir4Lyg6

How the auction system is being derailed by contract and consumer laws

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The ‘cooling off period’ is a right that the buyer has when they sign the contract for sale of a residential property. It provides them a number of days to back out of the contract.
If you don’t know what a cooling off period is, you can <a href="/expert-insights/buying/33835-what-is-the-cooling-off-period-investment-terms-explained" target="_blank">read more about it in our quick explainer here</a>.
The terms of the contract vary from state to state, though there are many similarities.
Consumer Affairs Victoria details six occasions where a buyer, usually, cannot cool off. They also note that a clause in a contract cannot be used to remove the right to cool off where it is allowed.
<ol>
<li>On commercial or industrial properties. 
</li>
<li>On rural properties larger than 20 hectares. 
</li>
<li>On a property sold at public auction, or within three clear business days before or after an auction. 
</li>
<li>If they are an estate agent or an agent's representative. 
</li>
<li>If they are a company. 
</li>
<li>If they have previously entered into a contract of sale with the seller for the same property with substantially the same terms.</li>
</ol>
Ensure you obtain legal advice around the nature of your cooling off period.
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Six times the “cooling off period” does not apply: Consumer Affairs Victoria

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The latest NSW 2014 edition of the Contract for Sale and Purchase of Land features a number of changes to the 2005 edition, including new clauses on electronic conveyancing.
The new 2014 edition of the Contract for Sale and Purchase of Land was issued by the Joint Copyright Holders, Law Society of New South Wales and the Real Estate Institute of New South Wales, last month.
While the 2005 edition of the contract was issued in both paper and electronic formats, the new contract has been released in an electronic format only, <a href="https://www.cbp.com.au/People/Gary-Newton?utm_source=Mondaq&amp;utm_medium=syndication&amp;utm_campaign=author-bio-link">CBP Lawyers</a> has advised.
Although the contract is largely the same as the 2005 edition, it contains a few changes:
<ul>
<li>The contract has been renamed, from "Contract for Sale of Land" to "Contract for Sale and Purchase of Land". </li>
<li>The front page of the contract has a few changes, including the addition of buyer's agent as well as storage spaces as an improvement and solar panels as a possible inclusion. </li>
<li>There are a few new boxes to tick, including the vendor agreeing to accept a deposit bond and the parties electing to use the new electronic conveyancing for completing the purchase. </li>
<li>One change that was badly needed was the removal of references to "vendor's duty". Although it was still relevant at the time the 2005 edition was being prepared, shortly after release the vendor's duty was scrapped. </li>
<li>A new clause on "breach by the vendor" has been added. This new clause 8.2 is important because in the previous drafts of the contract there had been extensive clauses in relation to termination for default by the purchaser, but there was no corresponding clause in relation to default by the vendor. This lack of mutual breach clauses could be seen as being an unfair contract term. The new clause restores the balance. </li>
<li>There is a new clause 30 on electronic conveyancing. Given the rollout of electronic conveyancing over the last year and the fact that it is expected that the first settlements of transfers in NSW will occur using the new electronic system at the time of publication of this article, the joint copyright holders thought it would be a good idea to put in an extensive clause that dealt with all of the key steps and processes required in order to complete a matter using the new electronic conveyancing.</li>
</ul>
Gary Newton, a partner at CBP Lawyers<a href="https://www.cbp.com.au/People/Gary-Newton?utm_source=Mondaq&amp;utm_medium=syndication&amp;utm_campaign=author-bio-link"></a>, says the new clause 30 on electronic conveyancing sets out a mechanism for the party's representatives to confirm if it is proposed that the matter will proceed using electronic conveyancing and a mechanism for a party's representative to notify the other party that the matter will need to default to the paper environment, as well as the payment of fees and costs associated with that change.
The electronic conveyancing clause sets out:
<ul>
<li>How to go about creating the work space </li>
<li>How to populate the work space with data </li>
<li>How to send certain invitations to join the work space </li>
<li>Subsequent communications between the parties as they prepare for settlement </li>
<li>Time frames for the supply of adjustment figures, completion of a financial settlement schedule and digital signings of all things necessary for each settlement</li>
</ul>
Newton, who is the author of the new book Real Property Law (4th edition, 2014) and is the co-author and co-editor of a new book titled Annotated Conveyancing of Real Property Legislation in NSW, noted the new clause 30 on electronic conveyancing provides a default mechanism for the provision of settlement documents outside the work space if not otherwise agreed by the parties and sets out the consequences of the computer systems of the land registry, the Reserve Bank of Australia or the electronic platform being inoperative at the completion time.
"Finally, the electronic conveyancing clause provides for amendment of other clauses of the contract as necessary, for example clause 16 is amended such that the place for settlement becomes the work space," he advised.
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Contract changes that buyers and sellers of land in NSW should know about

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GUEST OBSERVATION
Brisbane tenants and unit owners need to brush up on body corporate rules in the wake of recent storms to avoid being stung with insurance nightmares.
With experts predicting an increase in severe storms this summer, I’m urging all Brisbane unit owners to prepare now. Residents in units and apartments in particular have unique considerations to bear in mind around storm preparedness and insurance claims.
Residents need to think about how the storm’s effect on the body corporate will impact their property, and vice versa for how their actions can affect the body corporate. For example, the placement of a drain in a common area could potentially be a flood hazard to ground floor properties if there is an excessive amount of rain.
Owners should be aware of this type of issue and have an action plan in place to mitigate potential flood damage which could include having a barrier ready to roll out and a plan to move any valuables.
On the flip side, unit owners and tenants need to prepare their property not only to ensure their own safety but also the safety of the building as a whole.
This includes securing balcony furniture and ensuring the property complies with the building’s by-laws. If a unit does not comply it can create unnecessary dangers for the property and the building as a whole.
Navigating the insurance process can be tricky for those in units and apartments. It depends on your scheme’s insurance but most policies will cover the structure of the building including internal fixed cupboards, but will normally exclude cover for carpets and of course your personal belongings.
Some policies may also exclude flood cover unless the body corporate chooses to include it, so be sure to check the policy document of your scheme’s insurance to know what’s covered and what’s not.
Here are some tips for you to consider:
<ul>
<li>Prepare your property – secure items on your balcony and ensure your unit complies with the building’s by-laws. If you’re unsure, contact your body corporate. 
</li>
<li>Prepare common areas – clear away any rubbish and ensure all loose items are secured. This includes outdoor furniture, pot plants and plastic pool furniture which can be placed in the pool to avoid it blowing away. 
</li>
<li>Check your insurance policy – be aware that the building’s strata insurance does not cover your belongings in your unit so you will need to have up-to-date contents insurance. 
</li>
<li>Familiarise yourself with your building’s evacuation plan just in case you need to evacuate and ensure you consider pets if necessary. </li>
<li>Communicate with your body corporate about your property’s damage and any damage you notice on common property as soon as possible.</li>
</ul>
Grant Mifsud has more than 12 years’ experience in the strata industry and has been a senior body corporate manager at<a href="https://www.abcm.com.au" target="_blank"> Archers Body Corporate Management</a> since 2007. 
Currently Grant manages a portfolio of clients in the Brisbane region with a focus on providing financial and strata legislation advice. Grant is a practitioner member of Strata Community Australia (SCA).
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