The new 2016 Contract for the Sale and Purchase of Land

Largely because of legislative changes, the Law Society of New South Wales periodically reviews and reissues the standard clause pages for the contract used when selling a property.

Despite the last edition being released only 2 years ago, there is another edition about to be released, mostly because of the introduction of legislation requiring purchasers to withhold part of the purchase price when the vendor was not an Australian resident.

Law Society

What were the major changes in the 2014 edition?

More room provided in pages 1 and 2 to include all required information.

Space for the nomination of a buyer’s agent – a change that was requested by the Real Estate Institute.

In light of the new concept of unfair terms in contracts introduced by the Australian Consumer Law (sections 24 and 25), clause 8 was amended to give the purchaser a right to terminate the contract.

Dealing with the use of deposit bonds – this includes specifying the process to be followed with providing and returning the deposit bond.

Dealing with the common practice of vendors attaching to the contract a form of requisitions to be asked, and often the form of the answers.

The use of electronic certificates of title (e-CTs).

Clauses dealing with electronic conveyancing (aka PEXA).

What are the major changes in the 2016 edition?

Amendments to deal with the Foreign Resident Withholding Tax – such as a space for the entry of the duty assessment number allocated by the OSR.

Changes to terminology – e.g. the Registrar General division of LPI will become the Office of the Registrar General.

The obligation on the vendor to provide either a Certificate of Compliance or Certificate of Non-Compliance if the property has a swimming pool.

Introducing an obligation on the vendor (not the purchaser) to obtain a land tax certificate which is current for the year in which it is served on the purchaser.

Referring to an off-the-plan vendor’s obligation to comply with the newly introduced legislation governing a vendor’s right to rescind the contract during the sunset period (following the court’s decision in Jobema Developments Pty Ltd v Zhu and Ors [2016] NSWSC 3).

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If you require assistance with the sale or purchase of property, contact the team at Shire Legal on 95263444 or info@shirelegal.com.au.

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Swimming pool compliance – doesn’t matter if your pool is big or small, you still need to comply

As most people know, if there is a swimming pool on your property, then you are required by section 7 of the Swimming Pools Act 1982 (NSW) to ensure that the swimming pool is, at all times, surrounded by a child resistant barrier which complies with the Building Code of Australia as prescribed by the Swimming Pools Regulation 2008 (NSW).

A number of self-assessment checklists are available online to determine what the specific requirements are for your type of pool, but in general, you require:

  • a 1200mm high pool fence with a self-closing outward-opening gate;
  • a non-climbable zone (that is, no hand holds or foot holds) within 900mm outside the fence;
  • a non-climbable zone within 300mm inside the fence; and
  • a resuscitation sign.

What a lot of people may not realise is that Section 7 does not only apply to above ground pools, in ground pools or spa pools.  The laws also apply to inflatable pools such as children’s pools and semi-permanent pools with a filter system – all of which can be bought online or from most major retail stores.

It is important to note that the Act does not distinguish between a permanent pool structure and a temporary pool.  Not only do temporary pools need to be compliant, they must also be registered.

PoolSo what is the definition of a swimming pool?

The Act defines a swimming pool as:

an excavation, structure or vessel:

  • that is capable of being filled with water to a depth greater than 300mm; and
  • that is solely or principally used, or that is designed, manufactured or adapted to be solely or principally used, for the purpose of swimming, wading, paddling, or any other human aquatic activity,

and includes a spa pool but does not include a spa bath , anything that it situated within a bathroom or anything declared by the regulations not to be a swimming pool for the purposes of this Act.

Does the pool need to be approved?

Under the Environmental Planning and Assessment Act 1979 (NSW) any pool that can hold more than 2,000 litres must be approved by Council.  This means that the larger temporary pools or semi-permanent pools need Development Approval from your local Council before being set up.

What about the Swimming Pools Register?

All swimming pools are required to be registered on the Swimming Pools Register.  Any property with a swimming pool must have a Certificate of Compliance included in the Contract for Sale or the Lease, before selling or leasing the property.

So what if my pool is not compliant?

If your pool is not compliant or has not been approved by Council, you may be liable for the following fines:

No development approval (individual) – $1,500

No development approval (corporation) – $3,000

No child resistant barrier – $550

No resuscitation sign – $110

No registration – $220

As with most things, there are statistics to show how many children drown each year because the pool was not fenced or was fenced but the fencing was not adequate. There are unfortunately no statistics to reflect how many children are saved by ensuring your pool is compliant.

For further information:

So what you may have thought was a cheap purchase to provide some fun over summer may not turn out to be so cheap after all …

If you are unsure of what you need to have in place, or if you are unsure if what you have is compliant, contact a pool technician, private certifier or your local council who will be able to help you make sure your pool is safe for everyone to enjoy this summer.

Now that contracts are exchanged, can I start renovating?

Gaining access to your recently purchased property to commence renovations can provide you with an opportunity to save time before moving into your new home or alternatively, reduce any time your new investment property remains vacant. However, there are inherent risks involved and the potential benefit can be outweighed in the event that there are complications with the settlement.

Renovations

The ownership of the property does not actually change hands until settlement (also referred to as completion).  But if you want to gain access beforehand to paint, lay new carpet, or even upgrade the toilet, you must first negotiate with the vendor or their representative.

The vendor is under no obligation to provide access to the purchaser prior to settlement. The vendor’s only obligation under the Contract for the Sale and Purchase of Land (clause 12.3 of the 2014 edition) is to do everything reasonable to enable you to make one (1) inspection of the property in the three (3) days before a time appointed for completion (subject of course to the rights of any tenant who may be living in the property).

Whilst a vendor may allow access to take measurements, it is unlikely that the vendor will consent to allow the purchaser access between exchange and completion to undertake significant renovations as the vendor remains responsible for the property and its insurance during this period.  There are also other considerations which will have an effect on the vendor’s decision such as:

  • whether there is a tenant in the property,
  • whether the vendor is currently occupying the property and
  • whether the vendor is unwilling to take on the risk that the purchaser may not be able to complete the transaction after undertaking the renovations.

In the event that a vendor does allow access, the terms of such access should be determined prior to undertaking any work. The purchaser must ensure any appropriate building or planning permits are in place before commencing any work. This is especially relevant where substantial work is being undertaken.  Also the purchaser should ensure that adequate insurance is in place before commencing any works.

As a purchaser it is crucial that an agreement is in place as you are taking on risk that the time and money spent on improving this property prior to settlement will be wasted in the event that the sale does not proceed.

Whilst getting a head start on your renovations upon purchasing your new home seems like a great idea, the potential downside of investing time and money and energy into improving what is essentially someone else’s property (up until settlement) is significant.

There are alternatives which we can explore including:

  1. Negotiating with the vendor for a shorter settlement period to get you into your new property sooner; or
  2. Negotiating for you to take possession prior to completion (which usually involves paying a token rent or licence fee to the vendor) – although if you want to renovate during this time, you will still need to negotiate this with the vendor.

Contact Andrew Morris, Solicitor, on 9524 3444 if you have any questions about buying or selling property.

The importance of requisitions on title when purchasing a property

As part of the normal conveyancing process, the purchaser will make enquiries with the vendor about the Title of the property.  These are referred to as “requisitions on title”.

The purpose of requisitions is to ask the vendor information which may not have been disclosed in the contract or discovered during an inspection of the property.  The information can range from whether there is a dispute with the neighbour regarding fences, to whether there is any matter that could justify the making of a demolition order.

Requisitions

There are four categories of requisitions:

  • Requisitions as to title – these are matters relating to the title of the property for sale, such as whether there is an easement affecting the property.
  • Requisitions as to conveyance – these are matters relating to how the property will pass to the purchaser, such as the documents to be handed over at settlement. For example, the proper execution of documents to be handed over at settlement and the time and place for settlement.
  • Requisitions in the nature of general enquiries – these are best described as things that are routinely asked and may include information on how matters are to be dealt with on completion. For example, adjustments to be made, documents to be handed over, or the existence of any statutory notices.
  • Requisitions in the nature of reminders – these are as they sound, simply reminders to comply with the Contract.  For example, any caveat on title must be removed before settlement, vacant possession must be provided on settlement, and so on.

Whilst a great deal of the information sought in Requisitions on Title are now covered in a vendor’s duty to disclose matters affecting the property, there are some areas that are not covered by this duty of disclosure.  Given that purchasing property is probably one of the biggest decisions and investments a person will make in their lifetime it goes without saying that it is vitally important that as much information as possible is obtained about the property before settlement takes place.

The vendor is required to answer Requisitions on Title honestly and to the best of their knowledge.  There are a range of remedies if this is not done, some of which can be quite severe.

Incorrect  Answers

A vendor who deliberately answers a requisition falsely is liable for damages for deceit if the false answer was intended to, and does, induce a purchaser to complete the purchase.  This not only applies to the answers originally given but also to situations where the vendor unintentionally provides an incorrect answer, becomes aware that the answer is incorrect and does nothing to disclose the truth to the purchaser.

If a vendor or their practitioner intentionally conceals a matter that is material to the title of the property in order to induce the purchaser to settle, then they may both face criminal and civil charges (s183 Conveyancing Act 1919).

If the reply is honest but incorrect the vendor and possibly their practitioner may be liable for negligent misstatement.

Incorrect replies may also be found to be a breach of consumer protection legislation such as the Australian Consumer Law.

If a vendor is unable or unwilling to reply to a requisition the contract provides that the vendor may rescind the Contract but only if:

  • the purchaser has made a proper requisition;
  • the vendor is acting on reasonable grounds, not for ulterior purposes or out of recklessness.

Any notice of intention to rescind under this clause must give the purchaser a reasonable time to waive the requisition (s56 Conveyancing Act 1919).

Selling a home with a swimming pool?

PoolAs you may be aware, in 2012 the New South Wales Government introduced significant changes to the laws relating to swimming pools.  In addition to requiring Councils to develop a program for compulsory inspections of existing swimming pools, and requiring homeowners to register their swimming pools, the laws will soon require all vendors to ensure their pools comply with the legislation.
From 29 April 2014 2015 **, all vendors selling properties on which a swimming pool is located MUST include in the Contract for Sale a Certificate of Compliance.  From this date, the Certificate of Compliance will become a “prescribed document” under the vendor’s warranty laws – just as you are required to include a title search, zoning certificate, sewerage diagram etc in your Contract, you will also require a Certificate of Compliance for your swimming pool.
Please note that if you exchange contracts on the sale of your property BEFORE 29 April 20142015 you do not require a Certificate.  It is only for contracts which exchange ON or AFTER 29 April 20142015.
If you do not have a Certificate of Compliance by 29 April 20142015 and your property has not yet sold, then legally, it will need to be pulled off the market until you have a Certificate.
These laws come into effect in 6 weeks’ time, therefore wWe suggest that you take immediate steps to book a certifier so that you can obtain a Certificate within time.
To do so, you will need to contact either a private certifier or your local Council.
For properties located within the Sutherland Shire, you can also make enquiries with  http://www.southernsydneybuildingcertifiers.com.au/Home
For more information about the swimming pools laws, go to http://www.swimmingpoolregister.nsw.gov.au/inspection
** Prior to 29 April 2014, the legislators amended the commencement date for the swimming pools legislative changes.  It became apparent that many pools were non-compliant on first inspection, and took on average three months to comply and be certified.  There are a number of other issues with the legislation to be further discussed, hence why the commencement date has been delayed for 12 months.

Do you need to disclose a death or suicide when selling your home?

Like many commercial transactions, the transfer of ownership of property is underpinned by the common law doctrine of “buyer beware” (aka “caveat emptor”).  That is, the purchaser needs to make sure they make their own enquiries and carry out their own pre-purchase inspections to be satisfied as to the title and quality of the property being purchased.  They cannot rely on anything said by the vendor and/or the vendor’s agent, other than what is disclosed in the Contract.

Over time, however, statutory protections have been introduced to require the vendor to assist the purchaser by disclosing certain information about the property and including certain documentation in the Contract.  For example, the sale of property in New South Wales is subject to “vendor disclosure” laws requiring certain documents and statements relating to the title of the property to be included in the Contract for the Sale of Land (see section 52A of the Conveyancing Act and Schedule 1 Conveyancing (Sale of Land) Regulation 2010).  These documents include a title search, zoning certificate, and sewerage diagram.

Failure to comply with the vendor disclosure laws enables the purchaser to rescind (that is, pull out of) the Contract and obtain a full refund of any deposit paid (clauses 16 and 17 of the Conveyancing (Sale of Land) Regulation 2010).

Apart from the vendor disclosure legislation, the vendor is not otherwise required to disclose other defects, such as structural defects, irrespective of their impact on the value or use and enjoyment of the property.

House

But what about the history of the property?  Does a vendor need to disclose the fact that a violent death or even a suicide took place at the property, if such facts are within the vendor’s knowledge?  Should a distinction be drawn between an actual murder and an attempted murder?  What if a rape or a violent assault took place?  Or what if the elderly owner passed away peacefully in their bed?

Generally speaking, no, the vendor is under no such obligation.  However, the real estate agent may be so obliged.

Real estate agents are under an obligation to disclose “material facts” in relation to any property they are selling.  Failure to disclose “material facts” may constitute misleading and deceptive conduct, enabling a purchaser to seek appropriate orders from the Court to have the contract set aside and an award of damages made in their favour.  The agent could also be prosecuted for breaching consumer protection laws.

But what exactly is a material fact?  What is material to one person may not be so material to another person.  Obviously, if disclose of the fact risks the home suffering a significant drop in price, then an agent would prefer to not disclose it.

Whether or not a fact is a material fact that should be disclosed depends on whether the disclosure of the fact might affect the purchaser’s decision to proceed with the purchase.  If so, then the fact must be disclosed.

Agents are also under a general obligation not to mislead or deceive:

3 Honesty, fairness and professionalism

(1) An agent must act honestly, fairly and professionally with all parties in a transaction.

(2) An agent must not mislead or deceive any parties in negotiations or a transaction.

(Schedule 1 of the Property, Stock and Business Agents Regulation 2003).

The issue of “material facts” disclosure has arisen a number of times in recent years, as reported in various media reports.  Perhaps one of the most publicised cases was the Gonzales house in north-western Sydney, the scene of a horrific triple murder in 2001 by the family’s son.  Following the exchange of contracts for the home’s sale in 2004, the purchasers found out about the murders and demanded a full refund of their deposit.  The agent ended up refunding the deposit and fines totalling $21,000 were imposed on the agent for failing to disclose this fact.

The agent for the infamous Snowtown bank vault property mentioned in the listing:

 Buyers should note that illegal activities were conducted in the old bank building and you should enquire as to the nature of these activities prior to bidding.

The agent for a notorious home in Easey Street, Collingwood, where murders took placein 1977 referred to the home as having a place in Melbourne’s “folklore” – until victims’ groups took offence, which resulted in the agent amending the wording to “history”.

The agent selling the Cremorne home of murdered businessman Michael McGurk make a conscious decision not to disclose the fact that the businessman had been murdered on the front footpath – he took the view that as the murder did not take place within the home, it was not a material fact.  “The buyers would have known about its history anyway”, he is quoted as saying at the time.

The recent re-leasing of a unit where Morgan Huxley was stabbed to death in his bedroom in 2013 involved a below-market rent and a qualifying statement in the advertising: “Recent crime scene occurred”.

The different views often relate to a person’s particular spiritual, religious or ethnic background.  For example, Chinese buyers are among the most superstitious and will usually avoid homes where recent deaths or unsavoury acts have taken place.

If in doubt, we suggest it would be best practice for agents to disclose all facts in relation to the property.

And if you are in the market to purchase a property, we suggest that you ask the agent: “Is there anything else about the house we should know?”  Then if you do subsequently find out something about the house (a “material fact”), perhaps by speaking to the neighbours, then you may have more ground to dispute the sale.