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How does Covid-19 impact on legal services and the law
Although undoubtedly, the present restrictions on human contact and movement are having an unpresented impact upon Australia’s economic prosperity and these same factors are undoubtedly impacting also on many people from a mental health perspective. For the most part, none of these restrictions should effect the way the law or the delivery of legal services have operated and/or apply.
Family Law Cases
The Chief Justice of the Family Court has issued a public announcement that unless a particular family is actually suffering a Covid-19 infection, the Court expects that pre-existing arrangements for the share of care and decisions making for the children should continue on unaffected. The existing family law principles already are flexible enough to adapt to a world where the value of businesses, stock market investments, superannuation and/or Real Estate are undergoing dramatic fluctuations as a consequence of broad base external factors as was previously seen with events such as the property boom in the late 90’s early 2000’s and the consequent global financial crisis of 2008. Otherwise, the Family Court itself is still very much open for business and is presently running all of its cases via telephone and video link. All court documents are now being filed via the Court’s online portal, a system which has been up and running now for several years. There are some disruptions and delays, but by enlarge the court is still functioning as normal.
Buying and Selling Real Estate
Although worries over job security and the potential for a dramatic drop in real estate prices are undoubtedly impacting on confidence and the consequent willingness of parties to enter into and/or proceed to complete real estate deals, the terms of the standard REIQ real estate contracts and the overall structure of the conveyancing process are both well capable of adapting to Covid-19 issues. Under the standard REIQ contract, there are already specific clauses that will suspend the operation of a contract should events such as a Covid lockdown occur. Under those same terms, the seller is also given the right to terminate the arrangement if government restrictions are to continue for an extended period. House inspections can still legally occur and the only events which are currently not possible are the group gatherings associated with auctions and open houses. In terms of the conveyancing process, the innovation of e conveyancing which has now been in operation for some time, now permits every task of the conveyancing exercise to be conducted online with the one exception of witnessing of signatures but this task can still be easily completed in face to face meetings provided social distancing is used.
Preparation of Wills and Enduring Powers of Attorney and the administration of Deceased Estates
Although much of these tasks have historically been conducted through face to face meetings, all of the required tasks to prepare and sign a will, an enduring power of attorney or attend to the administration of a deceased estate, can be conducted via use of telephone or video conferencing and in extreme cases this too can extend the execution of wills and enduring power of attorneys documents although most law firms preference is to continue to have these documents executed in face to face meeting which are all still perfectly doable provided everybody respects social distancing and hand sanitising.
General Legal Business and Consultations
Again with the ability to conduct business via telephone or video conferencing and also via the use of email and online document sharing platforms such as drop box, the business of providing and receiving general legal services is well capable of continuing to be conducted amidst a Covid lockdown environment.
So, the message generally from Zande Law and indeed the legal industry at large is that we are still open for business and do not foresee that any developments associated with Covid-19 will impact on our ability to provide services for you.
Put and Call Options are a special type of contract commonly used by land developers. In the most typical scenario, the developer is also a home builder who will use a Put and Call Option to secure the exclusive right to buy a property from its existing owner at a set/fixed price, but with no obligation to actually complete the purchase and pay over the money for an extended period of time of say 120 days. The developer then enthusiastically sets about marketing the property for on-sale to a third party as a finished “house and land” package. If all goes to plan, the developer will have found a buyer willing to sign up to a purchase contract for the land and a simultaneous building contract for the home within the first 90 days and with the new buyer secured, the developer can then go on and safely deliver the “call” to the original land owner to commit to the sale of the land before the 120 day time limit has expired. With the timing set up in this way the developer will be using the new buyer’s money (as opposed to its own) to complete the land purchase and once the land purchase is complete, the developer can then go on and happily build the new home for a profit assuming of course the developer has done its sums right. By using a Put and Call Option device, the whole project becomes much more affordable because the developer doesn’t have to borrow and pay commercial interest rates on the land purchase whilst trying to find a buyer and, if the documentation is done right, the land transfer will occur from the original owner directly to the third party house and land buyer, thus cutting out the developer as the middleman and saving the payment of double stamp duty in the process. Put and Call Options can and often are also used for other situations, such as a developer buying a larger parent block with the intent to subdivide and sell off smaller blocks for profit, but in those scenarios, usually paying the double stamp duty is going to be unavoidable.
Michael Zande is the Principal of Zande Law Solicitors, with 30 years’ experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
A retaining wall is a structure designed to hold up an embankment of soil which has been artificially created following either the cutting and excavation or back filling of a sloped allotment of land. In most cases the earthworks are performed to create a more usable level platform of soil for building construction. However, given the fact that these works may have an impact on any neighbouring property, what are the rules around the design, positioning and maintenance of these structures?
Generally, the wall will be positioned inside the boundary line of the property that benefits from it and consequently, it usually follows that the cost of construction and maintaining the wall will always be the full responsibility of the owner of that property from time to time.
Local Council approval for the structure is usually not required unless the wall either, rises above 1 meter or is positioned within 1.5 meters of a building structure and/or directly along a boundary line with a neighbouring property.
If neighbours fall into dispute over the construction and/or maintenance of a retaining wall positioned on a boundary line between their properties, the dispute generally cannot be managed under the relatively simple Qld dividing fences laws* and is instead resolved under an old legal principle known as the law against nuisance. This same law also covers a situation where the wall is wholly located inside the boundary of one property but now poses as a landslide threat to the neighbouring property through poor design or disrepair of the wall.
In each case, this anti nuisance law apportions the liability for the wall in the same proportion that the wall supports the excavation and/or filling which has occurred on either side of the wall structure. For example, where a one meter wall between property A and property B supports a soil fill on property A to a height of 300 mm and an excavated fall in property B to a depth of 700 mm, the cost of the wall will be shared as to 30% for A and 70% for B.
Some local Councils maintain records of the original topography of sections of land prior to subdivisions and cut/fill earthworks. If these records are not available, Consultant Engineers can be engaged to make the calculations.
*See section 35 (1)(f) of the Neighbourhood Disputes Resolution Act 2011 for limited circumstances where QCAT still has jurisdiction
Michael Zande is the Principal of Zande Law Solicitors, with 25 years’ experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
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THE CONVEYANCING PROCESS FOR BUYERS
Conveyancing (that is transferring) land in Queensland is a process that actually differs significantly from the practices conducted in other States of Australia, such as New South Wales and Victoria and dramatically from the process followed in other foreign countries like the United Kingdom.
Under Queensland legislation, the professional service to assist a Buyer or a Seller in the conveyance process can only be done for a fee by a law firm or other organisation which has a practicing Lawyer as its nominee for professional indemnity insurance purposes.
Some important features of a standard contract are:
A standard contract term in Queensland requires a conveyance within 30 days with conditions such as finance and building and pest to be complied with in 14 days. These timetables are doable but require swift action and co-operation if they are to be met.
The standard contract states that “time is to be of the essence”. This means that any deadlines contained in the contract are critical and if not completed will give the innocent party rights of termination commonly also with the right to demand compensation.
If a Buyer defaults, compensation for a Seller typically involves:
forfeiture of the deposit – note agents are entitled to claim commission against this;
recovery of the difference between the contract price and any price at which the property is subsequently sold (if lower) provided reasonable efforts on resale are made.
It is important to note that Contracts in Queensland are routinely prepared by licensed Real Estate Agents without assistance or intervention from a Solicitor and are only delivered to the Solicitor after the Contracts are signed by both parties. If the client wishes to receive legal advice upon the Contract before committing to it, it is critical that the Contract be provided to the Solicitor for advice before it is signed.
Otherwise the Solicitor is usually named on the contract and receives a copy of the contract direct from the Agent once signed.
Under Queensland law a Buyer is afforded a cooling off period of 5 business days from date of signing contract within which the Buyer can terminate and walk away from the deal. There is however, a penalty of 0.25% of the contract price.
The conveyancing process for a Buyer falls into a number of distinct tasks:
Step 1 – Review of Contract and advice on its terms:
Usually, the Solicitor will send out to the client an introductory letter which summarises the salient points of the contract which are typically:
the settlement date;
the deadline for completion of any conditions such as the obtaining of finance or a satisfactory building and pest report and/or the payment of the balance of a split deposit.
The introductory letter will normally have a client questionnaire to be completed by which the client confirms their names and contact details, their intentions concerning occupancy of the property, searches that they wish to perform or not perform and the timing for delivery of those searches. That letter will also contain an authority to act form that must be signed and returned or the Solicitor cannot act.
Step 2 – Satisfying Special Conditions:
The Solicitor will need to monitor and clear off of the contract’s special conditions such as:
the obtaining of finance approval; and
satisfactory building and pest report; and
any other special conditions.
The Lawyers keep “bring up” diaries which prompt them to chase clients for the answers to these conditions if not communicated however, ultimately the Buyer must take responsibility for satisfying the condition or suffering the consequences of termination of the contract.
In working through these special conditions it is important to note the Buyer is responsible to seek out and engage their own chosen financier/contractor although some Solicitors maintain referral lists for these service providers.
Step 3 – Conduct of Searches:
The Solicitor performs searches which are intended to confirm that free and clear title to the property can be conveyed to the Buyer so that the Buyer obtains outright ownership and rights of enjoyment and use within the restrictions of the “present use” described in the contract or otherwise relevant Council’s zoning. If the searches reveal any impediments on the property (for example, an easement or other liability to a third party that would pass with the property or a right given to a third party to make some use of the property) then the discovery of these issues may entitle the Buyer to terminate the contract with full deposit refund, the right to demand that the Seller remove the impediment before or at settlement and/or the right to demand financial compensation.
The cost of the searches vary depending upon the relevant authorities. Generally speaking though they pitch in the range of $850.00 for a dwelling or unimproved land.
On receipt of the searches, the Solicitor is then able to calculate the final settlement price. Adjustments are made in the purchase price to, for example, ensure that the Seller’s responsibility for payment of council rates up to the day of settlement and/or land tax are met. This is important because these liabilities stay with the land and consequently pass to the Buyer after settlement if not paid.
At about this point, the Buyer’s Solicitor should lodge a Settlement Notice with the Queensland Department of Natural Resources. This notifies any persons who might seek to take an interest in the property that the property is presently under contract for sale and protects the Buyer from the Seller attempting to give some other interest in the property to another person.
Step 4 – Preparation of Transfer Documents:
Transfer documents are technical forms that must be completed in strict compliance with regulation and the Buyers’ names as they appear on the contract. Failure to do this will result in a number of serious problems including a liability for double the cost in stamp duty, settlement being unable to be completed due to rejection of the transfer document by the Buyer’s Financier and/or the inability to actually become registered on the Title Deed even though the full purchase price has been paid over to the Seller. Transfer documents need to be sent out to the Seller for execution and return with careful attention to timetables to ensure that they are back with sufficient time before settlement to satisfy the Financier’s requirements for prior review and approval. On the return of the transfer, the transfer is then counter-signed by either the Buyers or (more commonly) the Buyer’s Solicitor as being correct for the purposes of registration. Note: The transfer document is customarily only returned by a Seller to a Buyer before settlement if the Buyer is being represented by a licensed legal practitioner by virtue of an undertaking (promise) given by the Solicitor to hold the transfer and not attempt to register or deal with it until the full purchase price is paid over at settlement. This is essential to enable the stamping of the transfer before settlement which will be a requirement of any Financier.
Step 5 – Stamping:
Stamping is the process by which the State Government Tax “Stamp Duty” is assessed and paid. Stamp duty is calculated according to the consideration paid under the Contract unless the transaction is not at “arms length” in which case independent valuation evidence for the property must be produced and stamp duty is paid upon the consideration expressed in the contract or that valuation whichever is the higher. Most Solicitors have the ability to stamp a contract “inhouse”. This means that the Solicitor can certify that the appropriate amount of stamp duty has been collected from the client and is being held in the Solicitor’s trust account in readiness to pay to the Office of State Revenue. If inhouse stamping through the Solicitor is not available, the Contract and transfer documents must be lodged directly with the Office of State Revenue, either through the post or possibly through a direct “online” facility. These tasks however, may take several days to complete. If stamping is being done inhouse with a Solicitor, the Solicitor will require the Buyer to have deposited the required stamp duty amount as cleared funds into the trust account before the contract is stamped. Stamp duty must be assessed on the contract within 30 days of the contract becoming unconditional and then paid within 14 days of assessment.
Step 6 – Settlement:
Settlement is the process by which the Seller, the Buyer and the entering and exiting financiers (where applicable) meet to hand over the money in exchange for title and transfer documents. Part of this exercise involves reaching agreement on a venue and time for settlement between the Seller’s Solicitor, the Buyer’s Financier (if applicable) and the Buyer’s Solicitor. If agreement can not be reached, then the Contract usually dictates a default time and venue at which all parties must attend. The default arrangement however can only be a last resort because the outgoing (ie: the Seller’s Bank or other Financier) and incoming (ie: the Buyer’s Bank or other Financier) tend to dictate terms on where they will or will not attend for settlement and impasses between the two organisations regularly occur requiring special intervention negotiation from the Buyer’s and Seller’s Solicitors. In the lead up to settlement, the Seller’s Solicitor notifies the Buyer’s Solicitor as to how the cheque(s) adding up to the purchase price are to be drawn. This will include a cheque to the existing mortgagee for the payout of that mortgage debt. The Buyer’s Solicitor then takes that information to instruct their Bank on the amounts and payee for the funds they are to provide. If the Buyer is also providing personal funds, then the Solicitor will have either arranged for these funds to be received in and cleared into their trust account or otherwise provided to the financing bank in sufficient time before settlement to be drawn upon as clear funds.
The Buyer’s Solicitor attends and ensures that the correct purchase price is paid over and will ensure that critical documents, such as a release of the Seller’s mortgage are received at settlement again to ensure that the Buyer receives free and clear title in exchange for the contract price.
If there is no Financier, the Buyer’s Solicitor will then take the transfer documents from settlement and attend to registration of the transfer in the following days. If a Financier is involved, the Financier will take the transfer and register it together with a following mortgage encumbrance which secures the advance amounts and gives to the Financier the ability to sell the property should the Buyer fail to meet the required repayments.
Step 7 – Registration of Change of Ownership:
The transfer document is lodged for registration at the Department of Natural Resources who controls the registration of ownership of land under a guaranteed title system in Queensland. This guaranteed system means that the person shown by the department as the owner of the property is guaranteed by the Government as the true owner such that the Government will actually pay compensation to an affected party if their registration details prove incorrect and someone relying upon those details loses money. For example, buying a property from a person who is not actually the owner or advancing money under a mortgage.
At the same time that the registration of change of ownership is recorded at the Department of Natural Resources, an accompanying form (currently a Form 24) is sent on to the Local Municipal Authority who will then correct it’s records to reflect the new owner so that all future rates (and other) notices affecting the property are addressed to the correct person.
If the Buyer purchased the property with borrowed monies provided by a financier (such as a Bank) the financier will usually take the transfer at settlement and attend to lodgement of the transfer for registration along with the accompanying mortgage.
Step 8 – Delivery of Settlement Letter and Statement:
Once registration of the transfer is complete, a Certificate to confirm this is issued from the Department of Natural Resources and this along with a settlement letter confirming the full settlement figures that were used to calculate the monies paid over at settlement, a copy of the searches and a copy of the contract and/or transfer (with notation showing payment of stamp duty marked on it) are provided out to the Buyer usually with the Solicitor’s invoice (if not already delivered).
The Buyer’s Solicitor will usually request that there fees be deposited into their trust account before settlement is completed and may request payment up front of the anticipated search fees before the searches are ordered.
Michael Zande is the Principal of Zande Law Solicitors, with 25 years experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
Comments Off on The Conveyancing Process For Sellers
THE CONVEYANCING PROCESS FOR SELLERS
Conveyancing (that is transferring) land in Queensland is a process that actually differs significantly from the practices conducted in other States of Australia, such as New South Wales and Victoria and dramatically from the process followed in other foreign countries like the United Kingdom.
Under Queensland legislation, the professional service to assist a Buyer or a Seller in the conveyance process can only be done for a fee by a law firm or other organisation which has a practicing Lawyer as its nominee for professional indemnity insurance purposes.
Some important features of a standard contract are:
A standard contract term in Queensland requires a conveyance within 30 days with conditions such as finance and building and pest to be complied with in 14 days. These timetables are doable but require swift action and co-operation if they are to be met.
The standard contract states that “time is to be of the essence”. This means that any deadlines contained in the contract are critical and if not completed will give the innocent party rights of termination commonly also with the right to demand compensation.
If a Buyer defaults, compensation for a Seller typically involves:
forfeiture of the deposit – note agents are entitled to claim commission against this;
recovery of the difference between the contract price and any price at which the property is subsequently sold (if lower) provided reasonable efforts on resale are made.
It is important to note that Contracts in Queensland are routinely prepared by licensed Real Estate Agents without assistance or intervention from a Solicitor and are only delivered to the Solicitor after the Contracts are signed by both parties. If the client wishes to receive legal advice upon the Contract before committing to it, it is critical that the Contract be provided to the Solicitor for advice before it is signed.
Otherwise the Solicitor is usually named on the contract and receives a copy of the contract direct from the Agent once signed.
Under Queensland law a Seller is afforded a cooling off period of 5 business days from date of signing contract within which the Buyer can terminate and walk away from the deal. There is however, a penalty of 0.25% of the contract price.
The conveyancing process for a Buyer falls into a number of distinct tasks:
Step 1 – Review of Contract and advice on its terms:
Usually, the Solicitor will send out to the client an introductory letter which summarises the salient points of the contract which are typically:
the settlement date;
the deadline for completion of any conditions (typically the Buyer’s) such as the obtaining of finance or a satisfactory building and pest report and/or the payment of the balance of a split deposit.
The introductory letter will normally have a client questionnaire to be completed by which the client confirms their names and contact details and some property exit information to confirm there will be no penalties in stamp duty or mortgage break fees for selling inside mandatory holding periods. That letter will also contain an authority to act form that must be signed and returned or the Solicitor cannot act.
Step 2 – Satisfying Special Conditions:
The Solicitor will need to monitor and clear off of the contract’s special conditions such as:
the Buyer obtaining finance approval; and
the Buyer obtaining a satisfactory building and pest report; and
any other special conditions.
The Lawyers keep “bring up” diaries which prompt them to chase clients for the answers to these conditions if not communicated however, ultimately the Buyer (or where applicable the Seller) must take responsibility for satisfying the condition or suffering the consequences of termination of the contract.
Step 3 – Conduct of Searches:
The Solicitor for the Buyer performs searches which are intended to confirm that free and clear title to the property can be conveyed to the Buyer so that the Buyer obtains outright ownership and rights of enjoyment and use within the restrictions of the “present use” described in the contract or otherwise relevant Council’s zoning. If the searches reveal any impediments on the property (for example, an easement or other liability to a third party that would pass with the property or a right given to a third party to make some use of the property) then the discovery of these issues may entitle the Buyer to terminate the contract with full deposit refund, the right to demand that the Seller remove the impediment before or at settlement and/or the right to demand financial compensation.
On receipt of the searches, the Solicitor is then able to calculate the final settlement price. Adjustments are made in the purchase price to, for example, ensure that the Seller’s responsibility for payment of council rates up to the day of settlement and/or land tax are met. This is important because these liabilities stay with the land and consequently pass to the Buyer after settlement if not paid.
The Seller’s Solicitor monitors the Buyer through this process and remains on standby to respond to any issues that may arise. Those issues may involve defending the contract against an attempt at termination or a renegotiation in price. To double check the position with rates adjustments the Seller’s Solicitor usually asks the client to provide a copy of their most recent rates notice.
At about this point, the Buyer’s Solicitor should lodge a Settlement Notice with the Queensland Department of Natural Resources. This notifies any persons who might seek to take an interest in the property that the property is presently under contract for sale and protects the Buyer from the Seller attempting to give some other interest in the property to another person.
Step 4 – Preparation of Transfer Documents:
Transfer documents are technical forms that must be completed in strict compliance with regulation and the Buyers’ names as they appear on the contract. Failure to do this will result in a number of serious problems for the Buyer including a liability for double the cost in stamp duty, settlement being unable to be completed due to rejection of the transfer document by the Buyer’s Financier and/or the inability to actually become registered on the Title Deed even though the full purchase price has been paid over to the Seller. For these reasons the transfer documents are prepared by the Buyer’s Solicitor.
Transfer documents need to be sent out to the Seller for execution and return with careful attention to timetables to ensure that they are back with sufficient time before settlement to satisfy the Financier’s requirements for prior review and approval. On the return of the transfer, the transfer is then counter-signed by either the Buyers or (more commonly) the Buyer’s Solicitor as being correct for the purposes of registration. Note: The transfer document is customarily only returned by a Seller to a Buyer before settlement if the Buyer is being represented by a licensed legal practitioner by virtue of an undertaking (promise) given by the Solicitor to hold the transfer and not attempt to register or deal with it until the full purchase price is paid over at settlement. This is essential to enable the stamping of the transfer before settlement which will be a requirement of any Financier.
Step 5 – Instructions for Discharge/Payout of Mortgage:
If the Seller still has a mortgage debt secured against the property (even if the loan has been paid out, but the mortgage is still registered against the property) the Seller will need to sign a written instruction form to the Bank. This is the process by which the Bank is formally notified that the property is under contract for sale and prompts the Bank to prepare the necessary discharge of mortgage document and be ready to calculate a payout figure for the mortgage debt as at the future settlement date.
Step 6 – Stamping:
Stamping is the process by which the State Government Tax “Stamp Duty” is assessed and paid. Stamp duty is calculated according to the consideration paid under the Contract unless the transaction is not at “arms length” in which case independent valuation evidence for the property must be produced and stamp duty is paid upon the consideration expressed in the contract or that valuation whichever is the higher. Most Solicitors have the ability to stamp a contract “inhouse”. This means that the Solicitor can certify that the appropriate amount of stamp duty has been collected from the client and is being held in the Solicitor’s trust account in readiness to pay to the Office of State Revenue. If inhouse stamping through the Solicitor is not available, the Contract and transfer documents must be lodged directly with the Office of State Revenue, either through the post or possibly through a direct “online” facility. These tasks however, may take several days to complete. If stamping is being done inhouse with a Solicitor, the Solicitor will require the Buyer to have deposited the required stamp duty amount as cleared funds into the trust account before the contract is stamped. Stamp duty must be assessed on the contract within 30 days of the contract becoming unconditional and then paid within 14 days of assessment.
Under Queensland law, all of the parties to a land sales contract are jointly and severally liable for any stamp duty payable. Standard contract terms however, usually state that the Buyer is to be solely liable for the stamp duty and consequently “stamping” is not usually a task/liability that should concern the Seller.
Step 7 – Settlement:
Settlement is the process by which the Seller, the Buyer and the entering and exiting financiers (where applicable) meet to hand over the money in exchange for title and transfer documents. Part of this exercise involves reaching agreement on a venue and time for settlement between the Seller’s Solicitor, the Buyer’s Financier (if applicable) and the Buyer’s Solicitor. If agreement can not be reached, then the Contract usually dictates a default time and venue at which all parties must attend. The default arrangement however can only be a last resort because the outgoing (ie: the Seller’s Bank or other Financier) and incoming (ie: the Buyer’s Bank or other Financier) tend to dictate terms on where they will or will not attend for settlement and impasses between the two organisations regularly occur requiring special intervention negotiation from the Buyer’s and Seller’s Solicitors. In the lead up to settlement, the Seller’s Solicitor notifies the Buyer’s Solicitor as to how the cheque(s) adding up to the purchase price are to be drawn. This will include a cheque to the existing mortgagee for the payout of that mortgage debt. The Buyer’s Solicitor then takes that information to instruct their Bank on the amounts and payee for the funds they are to provide. If the Buyer is also providing personal funds, then the Solicitor will have either arranged for these funds to be received in and cleared into their trust account or otherwise provided to the financing bank in sufficient time before settlement to be drawn upon as clear funds.
The Seller’s and Buyer’s Solicitor both attend settlement to ensure that the correct purchase price is paid over in the manner directed by the Seller and to ensure that the Seller’s mortgage is paid out.
If there is no Financier, the Buyer’s Solicitor will then take the transfer documents from settlement and attend to registration of the transfer in the following days. If a Financier is involved, the Financier will take the transfer and register it together with a following mortgage encumbrance which secures the advance amounts and gives to the Financier the ability to sell the property should the Buyer fail to meet the required repayments.
If the Seller is using sale proceeds to fund a simultaneous purchase of an alternate property, then typically any surplus funds from the sale of the Seller’s property are simultaneously paid on to that subsequent purchase. If there is no ongoing purchase, then the surplus sale proceeds are drawn as a cheque in the Seller’s name and then either brought back to the Seller’s Solicitor’s office for the Seller to collect, directly deposited by the Seller’s Solicitor’s settlement agent into a bank account as directed by the Seller or taken by the Seller’s own existing mortgagee Bank for deposit into a credit account being retained by the Seller with that Bank. At this time, the Seller’s Real Estate Agent is notified of the settlement and is authorised to payout the deposit monies being held directly to the Seller less the Real Estate Agent’s commission.
Step 8 – Registration of Change of Ownership:
The transfer document is lodged for registration at the Department of Natural Resources who controls the registration of ownership of land under a guaranteed title system in Queensland. This guaranteed system means that the person shown by the department as the owner of the property is guaranteed by the Government as the true owner such that the Government will actually pay compensation to an affected party if their registration details prove incorrect and someone relying upon those details loses money. For example, buying a property from a person who is not actually the owner or advancing money under a mortgage.
At the same time that the registration of change of ownership is recorded at the Department of Natural Resources, an accompanying form (currently a Form 24) is sent on to the Local Municipal Authority who will then correct it’s records to reflect the new owner so that all future rates (and other) notices affecting the property are addressed to the correct person.
If the Buyer purchased the property with borrowed monies provided by a financier (such as a Bank) the financier will usually take the transfer at settlement and attend to lodgement of the transfer for registration along with the accompanying mortgage.
Step 9 – Delivery of Settlement Letter and Statement:
A settlement letter confirming the full settlement figures that were used to calculate the monies received at settlement and a copy of the contract are provided out to the Seller usually with the Solicitor’s invoice (if not already delivered).
The Seller’s Solicitor will usually request that their fee be deducted from the sale proceeds and paid over at settlement or otherwise deposited into their trust account before settlement.
Michael Zande is the Principal of Zande Law Solicitors, with 25 years experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
IS IT NECESSARY TO DOCUMENT THE PROPERTY DIVISION DEAL?
When a couple decides to separate, decisions of course must be made about the division or disposal of assets and liabilities. For some, the stakes and/or the emotions run so hot and high that nothing can be resolved without the assistance of Lawyers and Courts. For others, the mutual desire to keep things dignified and amicable can mean that they are able to work out how the division should be done without the need to consult a Lawyer at all. For the couples who are able to separate cooperatively therefore, the question begs, do we need to have anything documented at all and if so what are the options?
Generally, there are at least four reasons why formal Family Law documentation should be prepared and as for the documentation options, there are three choices to consider:
Reason #1 – No come back – Once proper Family Law documents are prepared and executed, each spouse is free to go off and live their life (make or break their fortune etc) without the need to be constantly looking over their shoulder in fear that their former partner might change their mind and start the legal processes for a re-division of the assets on more advantageous terms.
Reason #2 – Enforceability – With proper documentation, both spouses are locked into the deal meaning neither can subsequently refuse to carry through with the required transactions (sale of the home, payment of money etc) nor suddenly introduce additional demands (more money etc) in return for their continued cooperation to carry out the terms of the deal.
Reason #3 – Stamp Duty Exemptions and Capital Gains Tax (CGT) Rollover – If the family home or an investment property is to be transferred into one spouse’s name alone, that transfer is stamp duty free (saving $000’s) if it is done pursuant to a recognised Family Law Agreement. CGT is not charged on the transfer/sale of personal residences but for investment properties, even a transfer between the spouses will trigger an immediate obligation for payment of CGT (which can run to $000’s) if there is no recognised Family Law Agreement in place*.
Reason #4 – Superannuation Splits – If the deal involves one spouse transferring part of their personal accumulated superannuation account to the other spouse, that transfer can only happen if authorised by proper Family Law documentation.
*Importantly though, the tax liability carries forward with the property (it is not zeroed out) and consequently will still be payable if/when that property is subsequently sold at any time in the future.
When it comes to documenting a Family Law property settlement deal, there are three choices:
Choice #1 – Family Court Consent Order – Using a specialised application form, the two parties can write down the terms of their deal into a document expressed to be a “Consent Order” and then place it before the Court for approval. The Court will not automatically approve the deal unless convinced that the settlement is roughly in line with what the Court would have ordered anyway. A “Solicitor sign off” on the documents is not mandatory, but without it, the Court itself will take a much closer look at the matter and is more prone to reject or requisition the Orders if it finds irregularities or cause for concern. The time frame of obtaining the Court’s approval does vary, but generally the Orders are returned with Court approval within 2 – 4 weeks.
Choice #2 – Binding Financial Agreement (BFA) – Unlike Consent Orders, BFA’s are not filed in or approved by the Courts and therefore they do allow scope for the parties to be more flexible with the deal they wish to strike and how it is to be carried out. In a default scenario, the BFA can be registered in the Court which upgrades the terms to the equivalent of Court Orders, but the Courts cannot be forced to enforce the Orders if the Court doesn’t like the BFA’s terms. When the BFA has been properly thought out and drafted, the risk of non-enforcement is slight to non-existent, but nonetheless for this reason some Lawyers do refuse to use them. Two big advantages with BFA’s are cost and speed. Generally, BFA’s are around 30%- 50% cheaper to prepare than Consent Orders and are binding/active as soon as they are signed compared to the 2 – 4 week waiting time required for Consent Orders. With BFA’s however, a Solicitor’s sign off (that is an independent Solicitor for each of the parties) is mandatory, such that the Agreement is completely unenforceable and invalid if this is not done.
Choice #3 – Divorce and wait – Under Section 44 of the Family Law Act, upon the expiration of one (1) year from the date of a divorce (for married couples) or the expiration of two (2) years from date of separation (for de facto couples) the power given to Family Court Judges to deal with a Family Law dispute is extinguished. Accordingly, if the assets are already divided or the parties are very confident they can do so voluntarily without having to rely on an Order/BFA for enforcement, the parties can simply leave the assets where they stand, or carry out the transactions and then apply for the divorce/wait out the 2 years after which time ownership of the assets will effectively stand where they fall. This option however will not carry the CGT rollover relief which is available under a BFA or a Consent Order. Stamp duty exemptions can still be claimed for married couples if the property transfer is delayed until a Divorce Order is obtained or at least applied for, but this is not available for defacto couples. A further risk/problem with this strategy is that the extinguishment of the Family Court’s power mentioned above is not absolute. Even after the 1-2 year period has expired, either party can apply to the Family Court for permission to commence proceedings out of time and, in appropriate cases that permission will be given.
Michael Zande is a Queensland Law Society Accredited Family Law Specialist with over 25 years’ experience in the field. He is the principal at Zande Law Solicitors, Suite 7, Norwinn Centre, 15 Discovery Drive, North Lakes. To contact Michael for advice, phone 3385 0999.
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
Comments Off on Purchasing off the plan – Vacant Land
Purchasing off the plan – Vacant Land (Updated December 2017)
Practically every vacant housing block purchased these days is sourced from larger blocks of land bought and subdivided by Commercial Property Developers. Whilst big profits can be made, the costs of the initial land acquisition, service roads, sewerage, power, phone and drainage are enormous. As a consequence, the financial backers for these projects understandably seek to secure ready Buyers to whom the properties can be sold as soon as the final subdivision and individual Title Deeds can issue. In the early days, unscrupulous Property Developers took deposits from Buyers and committed them to contacts which then took years to settle, or never settled at all.
To remedy the problem, laws were introduced prohibiting the sale of land prior to the subdivision development having attained a certain stage of completion. The threshold stage has changed over the years as the competing Developers and Consumer Groups have vied to pull the regulations to their favour.
The present day legislation is found in the Queensland Land Sales Act and listed below are some important points to note:
A sales contract for any land can now be entered into even though the development has not yet reached the point of Local Council approval to both the proposed plan of subdivision and the required subdivision works.
Any contract has a mandatory sunset clause which entitles the Buyer to terminate the contract if the Developer has not created a title which is capable of being conveyed to the Buyer within 18 months from the date of the contract.
The contract must contain a “disclosure statement” (or a copy of the actual registered survey plan) which contains a detailed plan showing the location, dimensions, orientation and contours of the subject lot.
The Developer must notify the Buyer if there is to be any change to the block as described in the disclosure statement and if the changes cause “material prejudice” to the Buyer the Buyer can be released from the contract on 21 days’ notice.
Any non complying contract is capable of termination without penalty at any time before settlement so long as the appropriate notices are given.
It is critical to note however that rights of termination extinguish once the money is paid over and the property is transferred. If termination is to be actioned therefore, it must happen before settlement occurs.
Because buying a block of land “off the plan” is effectively a contract to buy a product which is yet to be built, there are a number of important things to consider both in terms of what has been said in the contract and/or possible investigations and enquiries that need to be made before the contract is signed:
As said above, the Contract must contain a plan which shows the dimensions, contours and locations of the intended block. Whilst not obligatory, it is prudent that the Buyer should also receive a copy of the plan which shows all of the positioning of the services to be provided to the property such as sewerage, drainage etc. Similarly, the subdivision plan may indicate the property is to be encumbered by easements which give rights of use over part of the land to some other person or entity like the local authority for the subterranean carriage of stormwater or sewerage. Commonly, these easement agreement documents have not been drafted and so provision for their perusal with rights of termination/compensation if unsatisfactory should be considered for incorporation into the pre-settlement searches.
As said above, if the Developer notifies the Buyer that there has been a change to the block as described in the original disclosure statement, the Buyer only gains the right to terminate the contract if the Buyer can show the change will cause a “material prejudice” to the Buyer. The previous law only gave rights of termination for shortfall of linear dimension/overall area of the lot, so this provision is arguably wider. “Material prejudice” has been defined as “disadvantage in a way which is substantial or much consequence – it is an objective test applied subjectively ie. what is reasonable or unreasonable having regard to the Buyer’s personal circumstances” see Mirvac Qld Pty Ltd v Wilson [2010] QCA322 – The elderly lady and the security camera case.
Commonly, the plans will contain conditions which dictate the size of home and materials that must be used in its construction. There are usually also conditions which identify the “building envelope” which is the location within the block within which the home structure must be contained and/or mandatory setbacks which identify the minimum distance that must be maintained between the structure and any of the external boundaries.
Often the contract will also contain a statement or letter from the Local Authority addressed to the Developer which sets out the Local Council’s conditions for approval of the development. Mostly, the conditions will attach solely to the Developer but are well to note because these are things the Developer is obligated to ensure are done to the benefit of the block and are therefore things which the Buyer can rightfully insist on happening. Occasionally, these documents will identify obligations which will actually fall to the property owner and these are obviously items which the Buyer must fully understand. An example of this would be noise abatement measures which are commonly required where the subject lot is close to a very busy road or train line. Typically, the abatement measures will require certain additional materials to be used in the construction of the home, thicker windows, noise insulation etc all of which will definitely add to the cost of construction of a home and therefore should be thoroughly considered before the land purchase contract is signed.
The building covenants which are referred to in the two preceding dot points commonly will also obligate the land Buyer to extract a similar promise or covenant from any subsequent Purchaser of the property to similarly adhere to these building covenants. In the case of Council imposed noise abatement works, the obligations are even sometimes recorded as a covenant on the Title Deed to ensure that incoming Purchasers are bound by the same obligations without choice.
The contract will commonly state that the Developer gives no promise that the survey pegs located on the property correctly mark out the external boundaries of the block in compliance with the subdivision plan and instead gives to the Buyer the right to conduct their own survey to verify accuracy or identify discrepancy. If a discrepancy is identified then there are only rights to terminate if the blocks dimensions are materially different from that which was represented in the plan attached to the contract. Anything less than this only gives a right to demand compensation. It is however, critical to note that any survey performed will usually have to be done before settlement of the land purchase has been completed. Typically, if a boundary error is discovered after settlement, then the Buyer is stuck with the problem and has no recourse back against the Seller because the Buyer’s rights of termination or compensation are said to have “merged” in the settlement. Some land sales contracts however, do preserve rights to claim compensation at a later stage, so careful reading of the contract would be required.
Provision for soil test should also be made with care to ensure the test is actually performed on the soil after all of the Developer’s earth works have been completed. If the soil which is to support the building pad is determined by the test to be unstable then the Buyer would need to pay substantial additional monies for foundation which would significantly add to the cost of the home’s construction. To guard against this, the contract should be drafted to give to the Buyer rights of termination if the soil tests prove unsatisfactory with a right of termination in hand, the Buyer is then usually able to negotiate a discount in the purchase price in return for their agreement not to terminate the contract so as to cover the additional costs of the foundation.
Stamp duty aggregation. If the contract contains a condition which makes entry into the land sales purchase conditional upon signing up a simultaneous building contract, then the money to be paid to the builder under the building contract could well be assessable for stamp duty. This could add thousands of dollars to the stamp duty bill. Other circumstances where people can be caught is if the land sales contract for instance offers a discount to the buyer for the land purchase if a building contract is entered into.
The susceptibility of the property to flooding is also something to consider. As a condition to the approval for the subdivision, the Developer will always be required by Council to install drains and configure land fall so as to minimise the impact of flooding (commonly referred to as flood mitigation works) but the previous susceptibility of the property before the subdivision to floods is something that can be searched with Council (on the parent block) and would at least give greater insight into the susceptibility of the property to future floods.
The position of future main roads. The Developer is only obligated under the law to create a plan which identifies the piece of land being purchased. The Developer is not under any obligation to make any statements about things that might potentially affect the surrounding land. The Department of Main Roads and Queensland Rail however, do maintain future transport corridor plans that show the location and projected traffic carriage. The Civil Aviation Authority, also maintains future flight plans, for example, the second runway for Brisbane Airport.
Typically, the contract will also obligate the completion of home construction on the property within 2 years with a right for the Developer to buy the property back at market value if not completed.
Because steep or dramatically undulating contours on the property, soil test issues and/or other factors such as building envelope restrictions can significantly affect the cost and/or design of the buildings which are to go on to the property, it is always recommended that:
Quotes/Design drawings be obtained from your intended builder before you sign the contract; or
The Contract contains a Special Condition permitting termination if quotes and design drawings cannot be obtained until after the Contract is signed; and
Either way, in any discussions with the builder, all of the disclosure documents and plans given to you by the Seller should be shown to the builder so that the builder knows as much about the property as you do.
Finally, careful note should be made of the timing for the date of settlement for the purchase. Typically, the contracts will state that settlement is to occur within 14 days from the date when the Developer notifies the Buyer or the Buyer’s Solicitor/Agent that the Plan of Subdivision has registered with the Department of Natural Resources. In many cases, finance approvals obtained by Buyers for land purchases can actually lapse if the loans are not drawn down within 3 months. Once the approval does lapse, a new application for finance will typically take much longer than 14 days to process and of course if there has been a change in circumstances, may not actually be approved at all. Because contracts can potentially be stretched out to 18 months, it is therefore essential that Buyers maintain an up to date approval from their financiers capable of being drawn down on 14 days notice.
Most law firms are willing to look over “off the plan contracts” before they are signed and discuss these and many other potential issues and if necessary assist in the drafting of special conditions to solve those issues before contracts are signed.
Michael Zande is the Principal of Zande Law Solicitors, with 25 years experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.
