New stamp duty surcharge-Applicable to foreign acquirers for property in QLD, NSW and VIC

From 1 October 2016, Queensland will apply a stamp duty surcharge of 3 per cent on direct and indirect acquisitions of residential land by foreign purchasers.

Similar surcharges are in place already in New South Wales and Victoria, having taken affect from 21 June 2016 and 1 July 2016 respectively.

Note however that the surcharge only applies to residential land.

Residential land is land upon which a building is (or will be) situated and approved by the local government for human habitation by a single family unit. It is extended to include land which is (or will be) subdivided into lots for the same purpose. The definition extends to vacant land where a person undertakes or will undertake development of a building or buildings which will fit the description above.

The Commissioner is serious about reaping the surcharge. The foreign purchaser, the vendor and any co-purchaser will all be jointly and severally liable for any unpaid Additional Foreign Acquirer Duty (“AFAD”), even if the vendor is not foreign. If any AFAD is unpaid the Commissioner of State Revenue will have a first-ranking statutory charge over the land and can even obtain a court order to sell the land. However there is some comfort in that subsequent purchasers of lots will not be jointly or severally liable for unpaid AFAD where the Commissioner has yet to register a charge.

Importantly, if the purchaser becomes foreign within 3 years of acquiring the land they will need to notify the Commissioner within 28 days. It is an offence to fail to notify the Commissioner within 28 days. This imposes quite an onerous obligation on trustees and corporate directors to monitor share and unit holdings.

New stamp duty surcharge-Applicable to foreign acquirers for property in QLD, NSW and VIC

From 1 October 2016, Queensland will apply a stamp duty surcharge of 3 per cent on direct and indirect acquisitions of residential land by foreign purchasers.

Similar surcharges are in place already in New South Wales and Victoria, having taken affect from 21 June 2016 and 1 July 2016 respectively.

Note however that the surcharge only applies to residential land.

Residential land is land upon which a building is (or will be) situated and approved by the local government for human habitation by a single family unit. It is extended to include land which is (or will be) subdivided into lots for the same purpose. The definition extends to vacant land where a person undertakes or will undertake development of a building or buildings which will fit the description above.

The Commissioner is serious about reaping the surcharge. The foreign purchaser, the vendor and any co-purchaser will all be jointly and severally liable for any unpaid Additional Foreign Acquirer Duty (“AFAD”), even if the vendor is not foreign. If any AFAD is unpaid the Commissioner of State Revenue will have a first-ranking statutory charge over the land and can even obtain a court order to sell the land. However there is some comfort in that subsequent purchasers of lots will not be jointly or severally liable for unpaid AFAD where the Commissioner has yet to register a charge.

Importantly, if the purchaser becomes foreign within 3 years of acquiring the land they will need to notify the Commissioner within 28 days. It is an offence to fail to notify the Commissioner within 28 days. This imposes quite an onerous obligation on trustees and corporate directors to monitor share and unit holdings.

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Solar rebates and residential tenancies

The solar rebate scheme entitled a person to 44 cents per kilowatt hour of electricity they fed back into the system via their solar panels. No new applications have been accepted since 2012; however those who signed up before the cut-off date will benefit from the scheme until 2028. To remain entitled, the name on the electricity account needs to stay the same. This can cause issues with leased properties where a tenant moves in and decides to change the account name to their own or switch electricity providers.

Who gets the rebate?

The tariff rebate is paid to the customer that holds the electricity account for the individual premises.

There is nothing preventing a rental property from receiving the feed-in tariff.

However, if the name on the electricity account at the property changes, for example due to a change in tenant, then eligibility for the scheme would cease.

What happens if the tenant gets their own electricity hooked up?

The name on the account changes from the landlord to the tenant, therefore the entitlement to the 44c/kWh rebate ceases.  If this happens on the agent’s watch, a landlord may be very unhappy.  In theory this should not be able to be done as a switch of electricity accounts should require authority from new and outgoing account holders.  We are aware however that this has actually happened without the consent or knowledge of the landlord.  Clarity and confirmation in writing will help protect an agent.

How does the landlord get a return on their investment?

The landlord could increase the rent and say to the tenant ‘you'll be getting free electricity’.

In the event a bloody-minded or ignorant tenant hooks up their own electricity despite the landlord's specific instruction not to, and the landlord subsequently loses their entitlement, provided there is appropriate documentation to create and prove the tenant had this obligation,  the landlord may be able to sue for the loss of the feed-in tariff from the date the tenant switched the account name to 1 July 2028, being the date the legislation is due to expire.  

Registered or unregistered leases. What’s the difference?

 

Registered or unregistered leases

What’s the difference?

Most people are surprised when they learn that commercial leases may not need to be registered. Nonetheless, it is quite common for even a savvy party to neglect or decide not to register a lease to minimise costs.

Whether a lease must be registered depends on the term of the lease.

Under the Land Title Act a lease for a term of 3 years or less (granted after 24 April 1994) need not be registered, as the rights of a lessee under such an unregistered lease will be protected by the Land Title Act.[1]

A lease for an initial term of 3 years or less doesn’t need to be registered to create a valid lease. However, the option period (if exercised) will not bind anyone else with a registered interest in the property such as a new owner, a bank with a mortgage over the property, or a new lessee.

A lease for a term of more than 3 years must be registered on the title, although it will remain valid without registration.[2] If the lease is not registered, it will be defeated by the interest of a subsequent registered proprietor.  That is, if the building is sold and the lease is not registered, the new registered owner doesn’t have to honour any option to extend the tenancy.

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[1] Land Title Act s 185(1)(b)

[2] Land Title Act s 71

A Mortgagee’s Liability for Body Corporate Debt

A Mortgagee’s Liability for Body Corporate Debt

The Queensland Court of Appeal has recently considered the question of whether the definition of “body corporate debt” encompasses ‘recovery costs’. The Court of Appeal’s answer was essentially “yes”.

This conclusion has significant consequences for the mortgagee of a body corporate or strata title lot, where the owners are not only liable for outstanding body corporate contributions but also the body corporate’s significant recovery costs. Recovery costs usually includes solicitor’s costs of pursuing the debt.

“Body corporate debt” means—

(a)  a contribution or instalment of a contribution;

(b)  a penalty for not paying a contribution or instalment of a contribution by the date for payment;

“Owner” means:

• (a)  the person who is, or is entitled to be, the registered owner of the lot, and includes—

o    (i)  a mortgagee in possession of the lot

A purchaser from the mortgagee is liable for the costs incurred by the body corporate in seeking to recover outstanding contributions from the existing lot owner regardless of whether those costs have been incurred by the body corporate before the financier becomes mortgagee in possession

Action to take for a solution

From the perspective of the prospective buyer from the mortgagee, before purchasing a property it is prudent to;

•         search the body corporate records to check not only the amount of any body corporate contributions owing by the mortgagor, but also what steps, if any, have been taken by the body corporate to recover such contributions and the costs incurred in taking such steps.
•        the buyer should also include a term that the mortgagee is responsible for discharging any “body corporate debt” (including recovery costs incurred by the body corporate).

Liability to pay a body corporate debt is enforceable jointly and severally against the person who is the owner of the lot and a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid. If there are two or more co-owners of a lot, the co-owners are jointly and severally liable to pay a body corporate debt in relation to the lot.

Holding Deposit Money

Disputes about trust money for sales of lots and proposed lots

What happens where a deposit is held in a trust account and, before the amount is paid a dispute arises between the parties to the contract?

A “person having an interest” in the amount does not include th

e agent or solicitor acting for one of the parties in relation to the sale or purchase of the lot.

Where a dispute has arisen or is likely to arise, the stakeholder may give all persons with an interest in the amount a written notice, which explains:

ü  The practice considers that a person is entitled to the amount, and

ü  The stakeholder is authorised to pay the amount to the stated person, and

ü  This will occur on or after a specified date (at least 60 days after notice is given) unless;

û  A proceeding is started by another who disputes the stated person’s entitlement, or

û  Everyone who has an interest in the amount authorise payment of the amount to the stated person before the stated date.

A stakeholder can pay the amount to the stated person if, after the stated date, they are still unaware of the start of a proceeding in relation to the amount.

Importantly, the stakeholder will not be breaching the trust money protection legislation by disbursing the amount in this way.

If the stated person was not actually entitled the amount, the stakeholder is not liable.

The above is merely a process which a firm or agency may choose to follow. A stakeholder is also able to hold on to the amount until;

1. a)    The Court directs whom to pay the money to, or
2. b)    All persons having an interest in the amount authorise payment.

New South Wales takes aim at underquoting real estate agents

Reforms targeting at reducing under quoting commenced earlier this year

So what’s changed?

For a start, you won’t see “Offers over $1,000,000” or “$500,000 plus” anymore. The floor price has been removed. It is hoped that this will reduce vague price guides being given to prospective buyers. Selling agents are now required to give an evidence-based estimated selling price, and may potentially need to show how they arrived at that figure. The selling agent cannot then use a price less than their evidence-based estimate.

An agent cannot quote a price less than their lowest estimate. If the agent does provide a price guide or range then the upper limit must be within 10% of the estimate. For example if the agent estimates the lowest price would be $500,000 then the agent may quote $500,000 - $550,000.

If an agent receives market feedback indicating that their estimate is out of date and needs to be amended, then the agent must amend it immediately.

Whenever an agent discusses price with a prospective buyer or their seller, that conversation must be recorded in writing.

Finally, agents now face harsher penalties for underquoting. An agent can lose their commission as well as receiving a $22,000 fine.

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Details tenants are required to provide to a landlord & Agent's Liability

Details tenants are required to provide to a landlord

When requested by a lessor (landlord), a tenant must provide their name and place of employment. A lessee (tenant) who gives false information can receive a penalty of $2200.

When handing over possession of the premises, the tenant must tell the landlord the tenant's new residential address, unless they have a reasonable excuse for not telling the landlord the new address. The landlord must ask the tenant for the new address in writing.

Details landlords are required to provide to a tenant

On or before the day the tenant starts occupying the premises, the landlord or their agent must give a written notice to the tenant stating—

·        the landlord’s name and address for service (see below); or

·        if the landlord has an agent who is authorised to stand in their place, the agent's name and address for service.

A landlord who fails to provide this information can be fined $2200. They can also be fined if their details change but they do not provide notice of this change to the tenant within 14 days.

What is an address for service?

Address for service means—

(a) for an individual—the individual's place of residence or place of business; or

(b) for a body corporate—the body corporate's registered office or place of business.

The agent’s liability

If the agent’s details are given to the tenant instead of the landlord’s details, the agent can have proceedings brought against them as if they were the landlord. Further, a tribunal can make an order against the agent and settlement may be made with the agent as if they were the landlord themselves.

House Rules

House Rules

House rules are rules about the use, enjoyment, control or management of rental premises. The house rules in force for rental premises are the prescribed rules that apply to the rental premises and any other house rules made by the landlord.

Rules made by the Landlord

A landlord may only make house rules for rental premises about any of the following matters—

•         using shared facilities;
•         parking motor vehicles;
•         drinking alcohol or illegally consuming other drugs;
•         smoking;
•         making noise;
•         keeping pets;
•         guests;
•         another matter prescribed under a regulation.

A provider must not make a rule about a matter not provided for above. The maximum penalty for breach is $2200.

The rule is only effective if it is consistent with;

·        the prescribed rules under legislation,

·        the landlord’s obligations and the resident’s rights,

·        7 days notice is given of the change or new rule before it commences.

If 10 residents or half the total number of residents object to the change (whichever is the lesser) the change lapses.

Publication of house rules

A proposed resident must be given a copy of house rules prior to entering into a rooming accommodation agreement. It is the landlord or landlord’s agent’s responsibility to ensure the proposed resident is given a copy of the house rules for the premises. The maximum penalty for non-compliance is $1100.

Display of house rules

At all times, the house rules must be displayed in the premises in a place where it is likely to be seen by the residents. Failing to do so may cost a landlord or their agent $1100.

Goods left on premises

When a tenancy comes to an end and goods (not including money or personal documents) are left on the premises, the person who was the landlord or property manager may sell the goods or dispose of them as long as they believe on reasonable grounds that;

· The market value of the goods is less than $1500, or

· The storage of the goods would be unhealthy, unsafe, or cause the value of those goods to significantly depreciate, or

· The cost of removing, storing and selling the goods would be more than the proceeds of the sale of the goods.


If none of the above applies, the former landlord is required to store the goods safely for 1 month. A caravan and its contents must be stored for 3 months. If the goods are still not reclaimed then the landlord can sell the goods by auction.



Selling unreclaimed goods via auction


Requirements:

1. Give notice of the auction by publishing the notice in a newspaper circulating generally in the area where the goods were abandoned,

2. The notice must describe the goods and state the day, time and place the auction will be held,

3. Give the notice 7 days in advance.


The penalty for not complying with these requirements is $4400.


If the owner of the goods claims possession of them in writing (before they are disposed of or sold), the former landlord must let the owner take back the goods. The landlord can require the owner to pay storage and/or removal costs, assuming they are reasonable.


If the landlord does sell the goods, they may keep out of the proceeds of sale the reasonable costs of removing, storing and selling the goods, but the rest of the money must go to the public trustee within 10 days of the sale.



The tenant still owes the landlord moneyIf money is still owed to the landlord under the tenancy agreement, they can make an application to a tribunal to have the money paid out from the public trustee. The landlord will receive either the amount owed or the balance which was paid to the public trustee from the sale of the goods, whichever is smaller.


What if the owner tries to sue the landlord for touching their belongings?
A former lessor or their agent is not liable for removing, selling or disposing of the goods unless they fail to take reasonable care.


Can the owner pursue a person who buys the goods from the landlord?The buyer of the goods acquires the right to them, and the interest of anyone else in the goods ends, unless the person acquiring the goods did not act honestly.

Condition Reports

At the beginning of a tenancy

Obligations of the lessor or their agent (including property managers);

A property manager is required to produce a condition report on or before the day the tenant is to occupy the premises[1]. The condition report must;

• Be signed by the lessor or their agent,
•  Be given to the tenant,
• Be in the approved form, and
•  Detail the condition of any inclusions

Obligations of the tenant;

Within 3 days of the tenant occupying the premises, the tenant must;

•         Sign the copy of the condition report provided to them,
•         If the tenant disagrees with the report – show which parts of the report they disagree with by marking the copy, then
•         Return the copy to the lessor or agent.

The agent must then make a copy of the report and return it to the tenant within 14 days[2].

A lessor or agent must keep the copy for at least one year after the agreement ends[3]. 

Where the tenant does not return a signed copy, they are required to keep an unsigned copy of the report[4].

At the end of a tenancy

The tenant must;

Prepare (in the approved form) a condition report for the premises and any inclusions and give this to the lessor or lessor’s agent as soon as practicable after the agreement ends[5]. This must be signed by the tenant[6].

The lessor or agent must sign the copy, unless the lessor or agent disagrees with the report. In the case of disagreement, the lessor or agent must show the parts of the report they disagree with by marking the copy[7]. This must be returned to the tenant and a copy held by the lessor or agent for at least one year after the agreement ends[8].

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[1]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s65 (2).

[2]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s65 (5).

[3]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s66 (1).

[4]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s65 (6)(b).

[5]

[6]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s66 (1)(b).

[7]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s66 (2).

[8]Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s66 (3).

Special Residential Contract Conditions

You asked, we listened!!

We have now added Special Residential Contract Conditions to our Estate Agent tab on our website.

http://www.bcglaw.com.au/EstateAgents/EstateAgents-440/

We welcome your Feedback and if you require any other subject matter added we would love to hear from you.

Contracting Death- Real Estate

What happens when a contract is signed and the vendor or purchase passes away before settlement?

A ‘party’ is defined in the latest REIQ contract[1] to include the party’s executors, administrators or successors.

The take home message is simple: death does not release a party from their rights and obligations under the contract. This includes the parties’ obligation to complete the contract.

Do I need probate?

Practically, it may not be possible for the contract to settle until a grant of probate has been issued by the Supreme Court. A grant of probate, or a grant of letters of administration on intestacy, is a court order granting a person authority to execute the deceased’s will, or deal with property in accordance with the rules of intestacy (the Government’s rules). The grant takes approximately 10 weeks to be issued so the parties usually need to extend the settlement date out until the deceased’s executor has been able to get the grant.

The most unfortunate scenario here is where you act for the deceased’s party and the other side refuses to allow an extension of time.

What if the other party refuse to extend the settlement date?

Where a purchaser dies and the vendor refuses an extension, the vendor may place the purchaser in breach. On breach, the vendor could choose to take the purchaser’s deposit as well as either;

·        Terminating the contract, reselling the property and suing the purchaser’s estate for any loss they suffer on resale, or

·        Applying to the court for an order of specific performance, which compels the purchaser to complete the contract.

Where the vendor dies and the purchaser refuses to allow an extension, the purchaser may place the vendor in breach. On breach the purchaser could;

·        Terminate the contract and sue for damages, or

·        Apply for specific performance as above and sue for damages.

Who gets the proceeds?

In the event a vendor passes away before settlement, on settlement their personal representative becomes entitled to receive the balance of the purchase price on behalf of the deceased’s estate. In the event a purchaser passes away before settlement, if the contract settles then the property forms part of the deceased’s estate. In practical terms this means the property vests in the parties’ personal representative/s.

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[1] Clause 10.9(1)(d).