Mandatory green ratings for homes

Offices being sold or leased with 2,000 sqm or more must now obtain a BEEC - Building Energy Efficiency Certificate - before marketing the property. The BEEC will include a NABERS rating. Now, this is fine for commercial premises but what about our homes? Should energy efficient disclosure be mandated for the sale (and even for residential leases) of residential premises? This question is now being asked by key stakeholders.

The Property Law Commitee of the Law Society of NSW has submitted that should mandatory disclosure be introduced, it should be required at the marketing stage rather than as a required document for a contract for sale. They further submitted that currently there is no demand by parties to know the energy performance of residential property and thus no real demand for disclosure. In other words, the lack of awareness about the energy efficiency of houses and units is not currently a transparency/lack of information problem affecting the market.

So if mandatory energy disclosure was brought in for the marketing stage, what would it look like? Currently, the agent cannot market a residential property without having a draft contract available. If the energy disclosure became mandatory, then an agent would have to have both a contract and a energy efficiency certificate available to potential buyers. But the energy efficiency certificate (in whatever form that it would take) would not form part of the contract.  

Energy disclosure is not currently required for residential properties. But should vendors still consider obtaining one as part of marketing their property? Interesting question.Well, it would be a bit like having a pest/strata/survey report available from the agent for prospective purchasers. The benefit is that you are making it easy for the purchaser to make the decision to buy; you are removing more of their doubts about the property and helping them arrive at a price that they are prepared to pay.

Energy prices over the last 12 months have increased significantly. One wonders whether energy disclosure might give purchasers some comfort into the future, knowing that they are aware of what their new house can do when it comes to energy usage. However, there is a fly in the ointment. What if your home's energy rating is terrible? Well, that may affect the price. It may not be in your interest to disclose your energy rating if you are in an older house that has no insulation, faces west, poor ventilation and has gaps for cold and hot air to escape in every wall and floor.

So you can see that there are two sides to the coin. Energy disclosure will benefit purchasers in giving them the information to make an appropriate offer but it will penalise vendors with poor performing properties. Vendors who improve their house design and energy performance will benefit from increased sales prices as energy usage becomes a more important factor in the buyer's mind. Energy disclosure is not mandatory, yet. But the astute home owner will be preparing now, in readiness for likely disclosure requirements in the future.

When special becomes standard....

The other day an amazing thing took place. A contract arrived on my desk that only contained one page of special conditions (which technically should be called "Additional Conditions")!

Now this may at first glance appear to be a bizarre observation to make. However, when reviewing property contracts is your bread and butter you soon gauge what is normal practice and what is rare. All contracts will have the set of standard Law Society clauses, as it is established practice to use these in property transactions.What usually follows the standard clauses are pages of special conditions, dealing with things like warranties and delayed settlement and the payment of interest. However, a significant majority of the usual special conditions in effect just restate what is in the standard clauses. I suspect that this is due to the fact that many conveyancers and lawyers do not know what is contained in the standard clauses and also the fact that they are copying other conveyancers and lawyers who have the same clauses.

What's my issue? Well, extra special conditions adds time and cost to a transaction. Poorly worded special conditions can hold up a sale. The frustrating thing is that most of the time the standard clauses deal adequately with the issue in question - there is no need to restate the standard clause in different wording. But sometimes conveyancers and lawyers feel more comfortable with what they have always done, what everybody else does, rather than really thinking about what is necessary to protect their client's interest.

I thank the practitioner who provided me with the contract that provided such amazement. He was from the country, where perhaps things are simpler and people a bit nicer. But maybe us city folk could learn a thing or two by making our property contracts sensible and appropriate for each transaction.  

The party's over when there's no cross-easement

I recently came across the same issue in relation to a couple of contracts that I was advising on. The issue was that there were party walls on the property but no cross-easements for support registered on title. Now as dry as this topic sounds, it is important issue to keep in mind, especially when buying older terrace properties.

A party wall is a dividing structure that is shared between two properties. Each lot owns half of party wall. Where there is a party wall, there should be cross-easements for support for each respective lot owner, to ensure that each owner’s share of the wall is to be supported by the other owner’s share of the wall. These cross-easements are usually registered on title.

Where a property does not have a cross-easement, it means that the property owner does not have the benefit of requiring that the adjoining owner’s wall support their wall. In our experience, the lack of a cross-easement has not been a major issue as practically speaking, the adjoining owner is unlikely to risk removing their share of the wall. In addition, there may be an action in negligence if the adjoining owner’s work to their share of the wall damaged your property.

You should keep in mind that sometimes the non-existence of a cross-easement can create a barrier to reselling the property, depending on the concerns of the potential purchaser. So you need to factor this in when you are considering purchasing such a property.

There are legislative provisions which allow for the automatic creation of a cross-easement if the term “party walls” are used on a transfer or other conveyancing document. However to search the historical records for such a transfer, can take considerable time and could cost a few hundred dollars to perform and the worst thing is that there is no guarantee that it exists.

It is always possible to reach an agreement with your neighbour about registering a cross-easement but this will involve significant cost for surveys and drafting. 

Try Before you Buy, not necessarily Renovate before you Buy

This article in the SMH rightly raised concerns about the practice of some purchasers beginning to renovate a property before settlement.

There are many issues associated with obtaining access to a property prior to settlement to do some 'work' on the property:

• Insurance and Liability - who is liable for accidental damage to the property from the works?
• OHS Issues - who is liable for OHS breaches and issues?
• Council approvals - does the work require approval from Council?
• Does the early access constitute early possession? 
• Commercial risks associated with the sale not proceeding, having to make good and other insurance issues.

If you are buyer and are interested in doing some work before settlement, you should raise this with your lawyer before exchanging the Contract. Amendments to the Contract may need to be drafted to protect your interests and appropriately apportion liability for the risks involved.

Similarly, if you are a vendor and your purchaser asks you for permission to begin work, you must get the right advice to ensure that your renovator's delight doesn't become your renovator's nightmare!

Jonathan Marquet
Emil Ford Lawyers

The greener grass is often the riskier one....

You're looking to move. Maybe downsize. Maybe a tree-change or sea-change. You've just started looking and suddenly you see it. Your new perfect house (your current place was also perfect when you bought it, but now is less than ideal). It has everything you could possibly want. But. It has to be sold right now. Perhaps the auction is in 3 days time. Perhaps there are a number of potential buyers lined up make offers. What do you do?

I have seen this scenario with a few clients. They are in the difficult position of wanting to buy a new property but have not sold their current property (and often haven't even put their current property on the market).

It is important to take a step back and consider the consequences of purchasing the new property without having sold your current one. The obvious and key risk is that you are unable to sell your property in time for the settlement of your purchase. This is a real possibility, especially in the context of a sluggish market. Speak to a number of local agents and get an idea of the clearance rate for your type of property in your local area.

If you decide to go ahead you need to consider what kind of amendments to the contracts (purchase and sale) you should request to minimise your financial exposure. A longer settlement on the purchase and a shorter settlement for the sale, for instance. Use of deposit bonds. Having the deposit on your purchase broken up into instalments payable when you exchange on your sale. Ultimately, the safest way to do it, is to make the purchase conditional upon the sale of your current property. The problem is that most vendors would not agree to a conditional contract. But if they are desperate to sell, you never know, they might just agree. You should fully investigate the likelihood of you obtaining bridging finance should you have to settle the purchase before your sale. This is a crucial backup.

At the end of the day, be wary of the lure of a new perfect property, when you don't know if you can sell the ex-perfect one.

Jonathan Marquet
Emil Ford Lawyers

Buying off-the-plan - what to look out for

Some people (including my grandfather) will not go anywhere near an off-the-plan purchase, not even with a sixty-foot barge pole! Others are seduced by the glossy developer magazines selling innovative designs in premier locations at a price that will never be repeated. Whether buying off-the-plan is or isn't your cup of tea, you should be aware of the legal issues involved.

Often with the large urban developments, the developer uses a large firm to draft the Contract and manage the property transactions on their behalf. What this can mean is that you have top-tier corporate/property lawyers drafting a watertight, one-sided Contract (complete with a number of volumes) with very little room for negotiation. (As a quick aside, if you come up against one of these Contracts, there may be scope to challenge them on the basis of unfair terms in the Australian Consumer Law. But rest assured, that would be an expensive and time consuming process.)

Here are some of the key things to look out for in Contract for an off-the-plan purchase:

• Rights to alter design/plan: The Contract will most likely give the Vendor a right to alter the design/plan if required (by Council etc). This is necessary as it is difficult to foresee what issues might arise in the development. However, there should also be a right for you to terminate the Contract (or be compensated etc) if the change in the design/plan disadvantages you.
• Rights to alter materials/fittings/finishes: As above. Different materials etc may need to be used by the Vendor (eg. if they are unavailable etc) but should you have some recourse if they are significantly different from what was planned originally.
• Sunset Date: How long does the Contract give the Vendor to finish the development (the sunset date)? Are they given the right to extend the sunset date? These are important issues to consider as you don't want to sign up for a development that keeps dragging on. 
• Land tax and other costs: Is the Vendor passing on significant costs to you as the purchaser? Such as land tax? 
• Strata and Community Schemes: Large developments are often structured by having individual buildings as their own strata schemes and then all the buildings are part of a larger strata scheme or community scheme. This can mean that each of the strata schemes (and thus you as part of the owners corporation) can have significant liabilities for the maintenance and upkeep of the community scheme property - private roads, pools, gyms, saunas, recreational facilities. 
• Other construction work: Has the Vendor disclosed that they intend on constructing other buildings right next to yours? This may mean that your idyllic harbour-side pad will take on a kind of jackhammer ambience!

There will be other issues that need to be considered as well. You should always obtain advice from a property lawyer for a Contract for Sale but this doubly applies for off-the-plan purchases. You need to know what you're getting into.

Jonathan Marquet
Emil Ford & Co. - Lawyers

Demystifying the money you pay at settlement

Many purchasing clients, particularly first home buyers, don't understand why they had to pay more than the balance of the purchase price at settlement. This is perfectly understandable. You fastidiously crunch the numbers before and after exchanging contracts: calculating duty payable and then what the rest of the purchase price is after the deposit is paid. But you then find out that instead of paying $450,000.00 at settlement, you are actually obliged to pay $451,489.78.  What you didn't know is that there are always "adjustments" to be made in the settlement figures, which tend to increase the amount of money a purchaser has to pay to the vendor at settlement.

What are these "adjustments"? Are they just a flow on from a Matt Damon movie? No, not really. Adjustments are done at settlement because a vendor is liable for council rates, water, strata levies etc up until and including the day of settlement and the purchaser is liable from after settlement for those charges. Adjustments ensure that both parties have paid their share of the charges for the property. For example, if the vendor has paid all the council rates for the year (which run from 1 July to 30 June) and settlement is to take place on 15 June, then the purchaser is to "reimburse" the vendor for the 15 extra days that the vendor has paid but for which the purchaser is actually liable.

Water usage charges are generally estimated for settlement and this will mean that the vendor, in effect, provides the purchaser with a "discount" for the costs of the vendor's estimated water usage (water usage is only recorded periodically and it is only fair that the vendor pays to the purchaser for their water usage, which will be payable down the track).

Sometimes I have purchasers asking me why they are paying council rates at settlement. The adjustments are done on the basis that the charges have in fact been paid. If the charges have not been paid, then a cheque is drawn from the money to be paid to the vendor to pay the council rates. For example, let's say that the council rates are $1500 for the year, but they have not been paid by the vendor. Settlement is on 15 June. This is how the adjustment would look:

   Council Rates $1500
   Purchaser allows 15 days (being 15 days from after settlement to the end of the year)
   $61.64 is payable by the purchaser to the Vendor

   Cheque at settlement: $1500 to Council

You can see from the above that the purchaser pays the vendor for their share of the rates and then from the overall settlement moneys a cheque is made to council to pay for the full rates (so the vendor pays for their share as well).

In certain situations, there may be more complicated adjustment calculations for things such as rent or strata insurances etc. The key thing to remember is to budget for some extra moneys at settlement so that you are not surprised when there is a bit extra to pay.

Jonathan Marquet
Emil Ford & Co - Lawyers  

Your title under the microscope - Part 3

In my final installment, I consider sewerage and drainage and planning issues. Whilst sewerage and drainage systems and planning issues are not registered on title, they affect your use of the property.

Sewerage/drainage diagrams indicate the position of pipes on your property and how your property is connected to the sewer main. Things to look for are whether there are structures built over the pipes and whether your property is connected to the main via another property. If there is a pipe that runs through the back of the property, you will need the approval of the relevant authority to build there. If a structure has been built over the pipe without appropriate approval, you may be required to remove the structure. If you access water and sewerage via an adjoining property, then you should consider whether an easement may be required to ensure that the adjoining land owner has to keep the pipe on their property functioning properly.

Planning issues relate to the approved use and development of the property and whether the land is affected by things such as contamination, tree preservation orders and road widening proposals. If you intend to use the property in a particular way or plan on undertaking certain development (such as constructing a duplex), then you need to ensure that this type of use/work is allowed by Council. Most of this information is contained in a planning certificate known as a "Section 149 Certificate". However, you should always contact Council directly to obtain their advice on your intentions for the property.

Jonathan Marquet
Emil Ford & Co - Lawyers

Your title under the microscope - Part 2

If you own a strata property, then you will be aware that you own your lot (the unit, apartment, townhouse etc) and you also own a share of the common property through the owners corporation. You are responsible for your lot and the owners corporation is responsible for the common property, such as the lifts, front entrance, car park etc.

When looking at strata titles, it is important to understand the interests that are registered on the common property certificate of title. What are usually listed are the applicable by-laws, covenants and restrictions on use and interests in any bigger strata schemes or community title schemes. Generally speaking, the by-laws for a strata scheme will be the standard ones which are part of Schedule 2 to the Strata Schemes Management Regulation. However, they will vary depending on the scheme's approach to pets and whether the scheme has added to or amended the standard by-laws. Newer and larger strata developments often adopt unique by-laws for the scheme. By-laws can be quite extensive, so often your solicitor will not be able to advise you in relation to them. But that doesn't mean that you shouldn't have a good read for yourself. If you have particular plans for how you intend to use the property, such as have a pet, let out your car space, purchase an air-conditioner, hang your washing out on the balcony, then you should carefully review the by-laws to ensure that the scheme will permit these uses.

Sometimes a car space is not part of the lot area but is an exclusive use of common property. This means that you do not own the car space as part of your unit, but that the owners corporation has given you an exclusive right to use the area as your car space. This is obviously not as ideal as actually owning the car space, so you should look out for this scenario if you are looking to purchase a strata property.

In the newer and larger strata developments, for example, Breakfast Point or Jacksons Landing, Pyrmont, each strata scheme is part of larger strata scheme or community title scheme. This enables responsibility for certain common property such as key private roads, pools and gyms to be shared across multiple strata schemes. However, being under bigger strata schemes may increase your overall levies.

Finally, you should note any easements, covenants or restrictions on use for the common property. Whilst they will generally not affect you, it is worth knowing about them so that you keep watch on how the common property is being used. If the owners corporation breaches the covenant or restriction on use in some way, you as an owner will be impacted.

Jonathan Marquet
Emil Ford & Co - Lawyers  

Your title under the microscope - Part 1

The document that is the proof that you own a particular property is the Certificate of Title. If you are the owner (know as the "registered proprietor"), then your name will be listed on the title. If you have a mortgage over your property, the mortgage will usually be registered and noted on the title.

Sometimes there will be other interests registered on the title. There could be an easement on title, allowing your neighbour to use your driveway to access their property (very common for battle-axe blocks)  There could be a covenant on title, either in the form of a positive covenant (requiring you as the owner to actively do something) or a restrictive covenant (requiring you as the owner to refrain from doing something). There may also be a restriction on use which the local council may have required before approving the development of the property. The restriction could relate to an easement for drainage or maintenance of a sewer system, requiring the owner to not build over specified areas and maintain certain infrastructure on the property.

How do these impact on you? From the perspective of the purchaser, you should be fully aware of any restrictions or obligations that are attached to the property before you buy it. Your solicitor should advise you of any significant interests on the title that may have detrimental impact on you. If you are planning to build a huge in-ground swimming pool against the back fence, you may have to change your plans if there is an easement that runs parallel to the back fence. Sometimes covenants dictate the type of materials that could be used to construct the dwelling. If you have grand plans of building a mud-brick house in the middle of a suburban subdivision, make sure there aren't any covenants against non-brick housing materials.

If you are the owner, are you complying with any covenants or restrictions on use? Are you maintaining the pipes? Have you built over an easement? Are you renovating with prohibited materials? These are all important questions to ask yourself to ensure that no action is taken against you by council or a person who has the benefit of the easement or covenant.

Jonathan Marquet
Emil Ford & Co - Lawyers

Try Before you Buy

In our age of online shopping, we often forget to 'try before we buy' - to give the thing a whirl before we hand over our hard earned cash. Most people when they buy a car, will take it for a test drive. But what about a house?

Well, you probably won't be able to live in it before you buy it. It would be difficult to imagine a Vendor saying: "Sure thing. Come and stay over. Sleep in the bedroom, watch TV in the lounge room, cook up a storm in the kitchen." However, this does not mean that you can't have a good look at the property before buying it. Open house inspections are often quite short, but if you are keen on the property, you may be able to arrange a personal showing. This is your chance to check the plumbing, test the air-conditioner, turn on the oven and stove-top, open and close the doors and windows or swing around on the hills hoist (not recommended!).

Why does it matter to try before you buy when it comes to buying a home? Most contracts for sale contain a clause that says that you, as the buyer, agree to take the property in its current condition including all defects and damage. This means that if the oven isn't working at the time you sign the contract, then the Vendor doesn't have to fix it before settlement (if it was working at exchange of contracts then you may have a case to say that the Vendor should repair it).

A wise purchaser makes sure they have a thorough look at the property and ascertains what is and what isn't working. If you know that the oven isn't working, then that will help you in working out an appropriate price to offer. As always, caveat emptor applies - 'let the buyer beware'.

Jonathan Marquet
Emil Ford & Co.

Streamlining Conveyancing - A Computer Sold My House!

More and more correspondence in property transactions is being done by email and often with draft documents as attachments. Banks such as CBA, now enable solicitors to book settlements and provide cheque directions via an online settlement booking system. Notices of Sale can now be lodged electronically in the form of an eNOS.

But with the Land and Property Information's recent Consultation Feedback - Initial Report, the key question on practitioners lips is whether the proposed electronic conveyancing system will work. The proposed system is still in the initial consultation stage, so it is unclear exactly what the finished product will look like.

What the system is likely to involve is authorisation from clients for a solicitor to complete the relevant legal documents on their behalf. The documents would have a digital signature (rather than the traditional "wet signatures" on paper) provided by a certifying body and then would be lodged electronically through the system with the end result of a new Certificate of Title with the LPI. The current proposal is based on the principle of "tell-me-don't-show-me". What this will mean is that the due diligence steps of confirming accuracy and legitimacy of documents is pushed down from the LPI to the certifiers and subscribers. Documents will need to be certified as authentic before being registered. At the moment, whilst practitioners make certain confirmations, the LPI is responsible for ensuring the authenticity of the documents prior to registration. The benefit of a more streamlined authentication and certification process will be costs-savings and increased efficiency.

Some of the other key aspects of the proposed system are:

• Client Identification: The system will rely heavily on practitioners doing the appropriate checks to ensure that a client is who they say they are. This is an increasing problem in an age of identity theft and primarily electronic communication. 
• Responsibility of Solicitors/Third Parties: Solicitors and other parties will need to ensure that documents are correctly completed and all relevant requirements are satisfied. This is not much of a change from current practices. However, there is scope for abuse by unethical practitioners as solicitors will be given a significant amount of responsibility on behalf of clients to complete the relevant documents. 

There are obvious benefits to an electronic conveyancing system. But as they say, "the devil is in the detail". It will be important to understand the exact mechanics of such a system.  

Jonathan Marquet

Emil Ford & Co.

When it comes to property, be wary of the advice you take....

How do you know who you can trust in the real estate game? Your agent, your buyer's agent, your broker, your investment manager?

There is an insightful article in the May edition of The Monthly by Christine Kenneally (no, not the former Premier!) on media reporting of the property market. Kenneally highlights the fact that commentators portraying the market as "bullish" or in other words ripe for growth, often have a personal interest in providing that type of diagnosis. You can only expect agents to say that there has never been a better time to buy, when they are under pressure to meet sales targets and obtain hefty commissions. But is this actually what is happening in the market? When a premium property is lauded as being sold for a high price, is there information available as to what it sold for 2 years ago? The glow of a property that sells at auction for $2 million starts to fade when it is discovered that it was  purchased 18 months earlier at $3.5 million.

Professionals in the property industry often gain directly or at least indirectly from commentary that supports a buoyant market. This doesn't mean that you should ignore what is said by real estate agents or other property professionals in the papers or other media. What it does mean is that you should carefully and critically evaluate what is said about the state of the property market. When you read, hear or watch a piece on the real estate market, consider the following:

1. Who is the author/presenter? Who do they work for? How might their interests be affected by the article?
2. Consider the nature of their source. Is it a primary source (such as government statistics etc) or is it a secondary source (i.e. just parroting what another agent said)?
3. Evaluate any research/statistics used. Is it based on surveys, academic research or property industry bodies?   

Jonathan Marquet
Emil Ford & Co.

Let the Buyer Beware - do your homework when buying a property

Caveat emptor - let the buyer beware! Due diligence. Doing your homework. Call it whatever you want, if you are purchasing a property you must ensure that you fully investigate all aspects of the property. You are about to spend a substantial sum, so you don't want to be stuck with a property that has serious problems.

What property searches you will need to do will depend on the type of property in question. Your property lawyer will be able to advise you on what searches you should obtain. Below are some of the common searches:

House (Non-Strata)

1. Building inspection: This involves getting a builder to inspect the property and note any issues with the structural integrity of the building, any existing damage and potential issues with Council approval. Unless you are a builder yourself, it is well-worth ensuring that you know exactly what condition the building is in before you purchase. 
2. Pest inspection: Similar to the building inspection, a pest inspection involves a pest exterminator inspecting the property for evidence of termite activity and other pests. Termite issues is one of the most significant problems as it will affect the structure of the building.
3. Survey: A survey will assist in identifying the boundaries of the property and will indicate whether there are any encroachments onto the property and by the property onto adjoining blocks. The surveyor will also note whether any buildings appear to be built in accordance with the local government regulations.
4. Building Certificate: If you want to be sure that Council will have no issues with what is built on the property (such as an unapproved back deck or recently built car-port or garage), then you will need to obtain a building certificate. You must have obtained a survey before applying for a building certificate and a building certificate can take a couple of weeks to be received.

Apartment (Strata)

1. Strata report: This is an absolute must have if you are looking at buying a strata property. Strata reports will indicate the financial status of the owners corporation and will often foreshadow future works and repairs that will need to be undertaken. A strata report will have the insurance details for both the common property and the relevant lot.
2. Pest inspection: A pest inspection may not be required if details of pest issues have been highlighted in the strata report.
3. Building inspection: As above, strata reports often outline any structural issues in the minutes of the meeting.  

Due Diligence on the Contract

You will need to get your property lawyer to review the Contract and in particular, ensure that the property is properly identified in the Contract and that the Vendor has good title to be able to sell the property. Any unusual or particularly onerous provisions should be identified by your lawyer with a view to having them removed or amended. A good property lawyer can provide advice on a Contract within hours of receiving the Contract in draft form.

Buying a property is a significant step. Given the value of the transaction, it pays to do your homework. Once you sign the Contract, you generally won't be able to back out if you find something wrong with the building. Make sure you get the right searches so that your dream home doesn't turn out to be a bricked nightmare.

Jonathan Marquet
Emil Ford & Co

What to look for in a property lawyer: Part 3 - Final

In my final instalment on what to look for in a property lawyer, I discuss two key aspects to consider.

Value for Money


Let me say at the outset, this does not mean cheap! Too many buyers/sellers let the price determine who they will use. There is nothing wrong with obtaining a few quotes too compare. However, what many people forget to take into account is the value and significance of the property transaction. If you are spending $2,000.00 on a holiday it is perfectly understandable that you will try to minimise other transaction costs. But if you are spending $600,000.00 or $1,500,000.00 to purchase a property, the costs of a property lawyer form a very small proportion of the overall costs. More importantly, the purchase is one of the biggest transactions you will ever enter into. Isn't it worth paying for expertise, experience and quality service?

A property lawyer will charge more than a conveyancer. But you should consider this as an appropriate investment in your property. A good property lawyer will ensure that your sale or purchase is handled professionally with minimal hassles.

Contactable and Personal Attention


What clients have mentioned to me about using conveyancers is the lack of personal care and attention that they have received. This is linked directly to the fees that you pay. If the conveyancer is going to be half the price (or often more) of a property lawyer, then you can expect half the time spent on your transaction. This may mean not being able to speak to the person in charge of your sale or purchase or delays in getting back to you etc. Spending the money on a good property lawyer means that you will be able to speak to someone who knows exactly where your transaction is up to. It means that your lawyer will understand the context for your sale and purchase and will guide you through it in a stress-free manner.


Jonathan Marquet
Emil Ford & Co.

What to look for in a property lawyer: Part 2

Earlier this year, I met up with a commercial leasing agent to discuss how our businesses might be able to assist each other. One of the questions I asked the agent, was "what do agents think of lawyers?". He replied with "deal breakers". Sadly, that is how many lawyers are perceived and how many lawyers actually operate in property transactions, whether in a commercial/retail lease or sale of property. 


Practical and Commercially Aware


Property lawyers have to walk a tightrope between sound advice that minimises risk and facilitating the transaction for the client. Your lawyer should appreciate and clearly understand your desired outcomes from the transaction. An understanding of what you want out of the deal will help your lawyer work out what things to fight for and what things are less relevant. Too often lawyers operate in a legal vacuum and give advice without considering the needs of a client.


Honesty and Frank Advice


We all make mistakes. This is a fact of life. However, I know for myself, that if I am about to make a mistake, I would rather have someone raise it with me than just let me continue along ignorant of the fact. Clients can have particularly ideas that are just not practicable or legally relevant or necessary. Your property lawyer should be honest with you and be willing to disagree (politely) with you when they feel it is timely to do so. This doesn't mean that you have to agree with your lawyer. Ultimately, your lawyer can't make the commercial decision for you. However, you are paying them for legal counsel, and you don't want a lawyer who turns out to be a 'yes-man'. 


Co-operative and Commitment to Achieve the Goal


Property transactions, particularly sales and purchases, have a mutually beneficial outcome. You want to sell and the purchaser wants to buy. A sound property lawyer will be willing to co-operate with the other side to facilitate the transaction. A lawyer who is not looking after their client's interests will take an oppositional/aggressive approach to the transaction and quibble over each step with the other side. There will be times where a lawyer will need to assist their counterpart in someway (and vice versa) to allow the deal to reach its goal. Lawyers are part of a fraternity of professionals and they should approach each transaction with professionalism and mutual respect for their legal counterpart. 


Similarly to being co-operative, a good property lawyer knows how to get the job done. They can think outside the box to solve the problem that is standing in the way. Conveyancing transactions are notorious for creating a crisis at the last minute. How would your property lawyer respond? Would they just shake their head and say that there's nothing that they can do? Or would your property lawyer be creative, work with the other side, and try something that has never been done before to close the deal for you?


Jonathan Marquet
Emil Ford & Co.

What to look for in a property lawyer: Part 1

Some may see outlining what makes a good property lawyer by a property lawyer as a fairly self-serving exercise. However, the quality of property lawyers and conveyancers in the market varies significantly. Many clients don't know what they're missing out on.

Specialist knowledge/expertise

The property lawyer that you use should have a thorough understanding of property law. That's a bit obvious, I know. But in actual fact, many practitioners and particularly conveyancers, don't understand the theory and legal basis for property transactions. You need a property lawyer who not only knows the procedures for ensuring you get good title to a property or that you transfer your property smoothly, but who understands why those procedures are in place. When you understand why certain things need to be done, it gives you a stronger basis to come up with an effective solution to a problem that may arise.

Other related knowledge/expertise

Property transactions touch on a number of different areas of law. Your property lawyer should have an adequate understanding of GST, duty, capital gains tax, land tax and trusts. There may be ways to minimise taxation or reduce liability by structuring the transaction in a particular way. Sometimes contractual or litigious issues arise in a property transaction. Your property lawyer should be able to advise you in relation to all these issues.  


Jonathan Marquet
Emil Ford & Co.

Land tax: Whether you love it or hate it, at least get to know it

Whether you are a supporter of land tax or feel that the NSW government "should get its dirty hands off my property", land tax is an issue that cannot be ignored.

Many of us will be exempt from land tax under the principal place of residence exemption. However, there may be other circumstances where land tax will be payable.

It is important to register for land tax with the Office of State Revenue (see info here: OSR - Land Tax). If you fit snuggly under a warm exemption blanket, then you can declare this on the application form and on the basis that you are correct and your circumstances do not change, then the OSR won't bother you.

If you are liable for land tax on an investment property, then the OSR will send you a land tax assessment notice indicating how much land tax you are liable to pay. This will be based on the valuer-general's valuation of your property for that year.

I regular act for those in rain-drenched but ever so culturally sophisticated Victoria, who are selling property in NSW but have been unaware that land tax has been payable since their purchase. When you purchase a property, make sure that you are investigate and are aware of all the taxation and other governmental charges that are applicable to your property.

You may have enjoyed the principal place of residence exemption in the past but if you are absent from your property for more than 6 years you may lose the exemption and be liable for land tax. Similarly, if you rent out a few of your spare rooms, then you may be hit with a land tax liability proportionate to the percentage of the property the rooms make up. These are just a few examples of situations where land tax may be applicable.

Perhaps our new Premier will scrap land tax. Perhaps not. But in the meantime, get in touch with the OSR and ensure you know where you stand when it comes to land tax.

Jonathan Marquet
Emil Ford & Co.

To include or not to include, that is the question

In a sale of land, items that are fixed to the property (fixtures) are sold along with the land - they automatically pass with the property. Items that are not fixed (chattels) do not pass with the property.

"Thank you for the property law lesson, Jonathan, but what has this got to do with me?", I hear you ask. Well, it is an important consideration in how the Contract should be drafted in a conveyancing transaction. If something is a fixture but you want to take it with you when you vacate the property, then this item needs to be "excluded" in the Contract. This means that it will not pass with the property when the keys are handed over.

What many people selling their property forget to think about, is that unless a chattel has been specified as an inclusion in the Contract, your cant't just leave it at the property for the new owners (unless of course they agree to you doing so). Leaving wardrobes, old fridges etc may seem like a generous gesture, but chances are the purchaser will see them during their final inspection and want them removed before they settle. The last thing you want as a vendor, is to have settlement held up because of a cupboard left in the second bedroom.

If there are furniture or other items that you don't want to take with you when you move, then make sure these are listed as inclusions in the Contract.

Jonathan Marquet
Emil Ford & Co.

First Home Owner's Grant: FAIL

Here is an interesting article on the First Home Owner's Grant in the SMH on the success (or apparent failure) of the First Home Owner's Grant. The focus on the demand side of the market has had very little impact on increasing home ownership (nor affordability for that matter). The failure to consider the hindrances to supply of property has been the key factor in lower house ownership now than many years ago.

Jonathan Marquet
Emil Ford & Co 

Liberals promise cheaper property

Unless you have had your head in the sand, you would be aware that our state will be heading to the polls on March 26 (although given the choices available, a head-in-the-sand approach is certainly arguable).

Here are a couple of highlights for you that concern the world of property:

• The Liberals have promised to remove the Torrens Assurance Levy or the "Homebuyer's Tax" as they call it. Labor has not offered to do the same, unsurprisingly. 
• Both parties are chomping at the bit over planning laws and it is hard to separate the two. Both are offering the same paradox of less red tape and more land releases whilst giving communities planning control.

Lower transaction costs are good for the property market, but it remains to be seen whether scrapping the "Homebuyer's Tax" will make homes more affordable for the average punter.

I will completely understand if I see people diving head first into the ground on March 26. 

Jonathan Marquet

www.emilford.com.au

New Residential Tenancies Act

The new Residential Tenancies Act commenced on 31 January 2011. The new Act incorporates a number of changes that resulted from the discussions and proposals from the Department of Fair Trading consultation paper. For information on the changes see Department of Fair Trading.

The new Act introduces some helpful protections to both tenants and landlords. If you are involved in the residential tenancy sector, make sure that you use the new standard form lease and conditions report. These can be downloaded from the Department of Fair Trading website (see link above).

From a conveyancing/property law perspective, one of the most significant changes is in Section 8, which lists the agreements to which the Act does not apply. In particular, the following in relation to contracts for sale:

   "(f) an agreement for the sale of land that confers a right to occupy residential premises on a party to the       

   agreement,"

Compare the above with the relevant part in the old act:

   "(a) if the tenant is a party to an agreement made in good faith for the sale or purchase of the residential
   premises,"

There appears to be a noticeable difference in coverage between the two sections. The old provision covered any tenancy arrangements where the tenant is either a vendor or purchaser in a transaction. The new provision only applies to rights to occupy that are specifically part of the agreement for sale.

If there is a possibility of the purchaser or the vendor becoming a tenant in the property, then you will need to consider whether a right to occupy should be inserted into the contract to avoid coming under the Act.

Jonathan Marquet
Emil Ford & Co.  

The Australian Consumer Law

The Trade Practices Act has now been replaced with the Competition and Consumer Act. The Competition and Consumer Act incorporates much of the Trade Practices Act provisions and also The Australian Consumer Law. Of interest to the conveyancing/property law industry are the unfair contract provisions contained in The Australian Consumer Law. Whilst these came in last year, they will most likely receive renewed attention in light of the new Act.

For a contract term to fall under the unfair contract provisions it must be part of a consumer contract. Consumer contracts include the sale or granting of land to an individual for personal use. This sounds like a normal sale or purchase in the residential property market. So we can tick the first box. Then it is a matter of whether the term is both unfair and part of a standard form contract. The question is this, is a contract for sale of land a standard form contract? Part 2-3 of the Australian Consumer Law lists some of the factors a court is to consider when deciding this question. These include factors such as bargaining power, opportunities for negotiation and whether the contract was tailored to the particular circumstances. A contract clause may be unfair if it significantly affects a party's rights, is not reasonably necessary and would cause detriment to a party.

It will be interesting to monitor the impact of The Australian Consumer Law on conveyancing contracts. It might have very little impact. I would suggest that it may affect contracts for off-the-plan purchases that tend to be of a very standard (and often one-sided) nature. However, practitioners would do well to at least consider the possibilities and perhaps remove that onerous clause or two that is not actually necessary for protecting the client's interests.

Torrens Assurance Levy and Stamp Duty

Whilst the Torrens Assurance Levy (TAL) has been in place for over 6 months now, it is still a surprise to many in conveyancing transactions. The TAL is an additional amount that is payable to the Land and Property Management Authority when the transfer is registered. It applies to purchases valued at $500,500.00 or more. The TAL can be a sting in the tail at the end of the transaction if the purchaser is unaware of its existence.

Stamp duty continues to be a significant cost in the purchase of land. First home buyers may be eligible for either an exemption or concession based on what the property is worth (full exemption if under $500,00.00 and partial exemption for property between $500,000.00 and $600,000.00). For high end transactions, premium stamp duty may apply if the property is more than $3,000,000.00.

One thing is for sure, the NSW government continues to reap a taxation harvest for property transactions.