Comments Off on How does Covid-19 impact on legal services and the law
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.
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.
Comments Off on What happens when the Seller breaks the contract?
Take a look at any standard contract for the sale of property in Queensland and you will fairly easily find some specific clauses that clearly explain what happens to the Buyer if they default under a contract and wrongfully fail to complete. Typically, any deposit paid is forfeited to the Seller and the losses on resale of the property to an alternate Buyer at any lesser price can also be recovered. In cases however, where it is the Seller who is in default, standard contracts typically say nothing and therefore seemingly leave the Buyer with no rights at all. In this scenario, the protection for the Buyer sits outside the contract in old legal principals available in common law and equity.
Damages: Like any contract, a Seller who wrongfully fails to complete a contact is liable to financially compensate the Buyer for any losses as a result of going into the failed deal. Money spent on expensive building and pest reports, legal fees and any other out-of-pocket expenses that might have been reasonably foreseeable can all be recovered from the Seller. These losses are typically called “damages” and if the Seller refuses to pay, the Buyer can apply to Court for an Order to compel payment. Typically in this scenario, the Seller will then not only be required to pay the damages, but also pay the Buyer’s costs (or at least a substantial proportion of them) in having to bring that application.
Specific Performance: This is a special type of Order which actually compels the Seller to go through with the deal and transfer the property to the Buyer in exchange for the agreed contract price. To succeed, the Buyer must first demonstrate that they had the money/capacity to complete the purchase and that the property was sufficiently unique to render mere “damages” as inadequate compensation. The Seller has a variety of defences, the most common of which fall into eight different categories.
Mistake & Misrepresentation – This arises, for example, when the Seller owns lots 1 and 2 and has signed to sell lot 1 when the intention was to sell lot 2. Specific performance will generally be refused when a mistake or misrepresentation has been made which puts doubt that the subject matter of the contract was not what the parties were bargaining for.The mistake or misrepresentation must be of a substantial nature anything less and the contract will be usually left to stand and the debate will be moved to the compensation that should be paid to address the error.
Hardship – To prove “hardship” the Seller must show that completing the sale would cause them extreme adversity amounting to oppression which would far outweigh the inconvenience to the Buyer in simply having to look elsewhere and/or being compensated for damages. This is one of the more important defences to specific performance.
Unconscionable conduct – Here the Seller is seeking to establish that the Buyer has abused some kind of inequality between the two parties to his or her own personal advantage. For example, an adequate purchase price was not contracted to because of the Seller’s illiteracy, low intellect, drunkenness or physical or mental problem in negotiating the terms of the contract of sale.
Absence of fairness or candour – This defence focuses on the Buyer’s conduct at the time or before entering the contract and whether it would be unjust and/or unreasonable to grant specific performance. There could be a wide range of conduct relevant here, but a good example is making misleading statements to the Seller or whether the Buyer has conducted themselves honestly or would benefit from their own wrongful conduct.
Impossibility – If the Seller is not potentially able to complete the contract then the Seller cannot be held to it. This might occur where the property has since been sold to another party or the Seller’s bank is refusing to release a mortgage because the debt is greater than the sale price. In the first example though the Buyer may be able to recover compensation or an account of the profits from the resale.
Illegality – In particular circumstances, if a contract becomes unenforceable under the law, it will not be able to enforced unless it’s capable of being performed legally. An example here might be where the property has been attained under proceeds of crime order. However, in some situations, the illegal or unenforceable terms of the contract can be severed and the remainder of the contract enforced.
Laches – If the Buyer has unreasonably delayed in commencing proceedings for specific performance and the Seller can show that due to the delay it would now be unjust to grant specific performance, the Buyer may be denied the remedy of specific performance. However, it the Seller cannot prove that the delay has prejudiced him or her, the defence will not be successful.
Just because these rights are not embedded in the written word of the contract does not in any way mean that these rights are any less powerful for the Buyer. Whilst it is true that these issues can only be resolved by way of litigation if the Seller refuses to co-operate, that litigation will be every bit as inconvenient and expensive for the Seller as it will for the Buyer and this usually keeps most Sellers (at least the ones who are getting good legal advice) suitably engaged in the process of co-operatively working with the Buyer to resolve the dispute.
We would like to acknowledge the assistance of Matt Hannam, Law Clerk at Zande Law, for the research for this article.
Jenny Zande is a Solicitor of Zande Law Solicitors, with 20 years experience in practice. Jenny has 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.
