Author: baron + associates

A new strata building bond and inspection scheme commenced on 1 January 2018. The scheme applies to building contracts entered into from 1 January 2018 for new residential or mixed strata properties of four storeys or higher. The reform is designed to encourage developers to address building defects early to avoid litigation.

Developers are required to pay a building bond equal to 2% of the contract price for the work to the Secretary of the Department of Finance. The Department will hold the bond for two years. An independent building inspector must be engaged by the developer to undertake inspections. An interim inspection occurs 15-18 months after completion of the work, and a final inspection occurs at 21-24 months after completion. If the interim inspection uncovers defects which are not rectified by the final inspection, the owner can use the bond for rectification.

On 6 November 2017, the federal government released new draft GST legislation that will take effect from 1 July 2018. Purchasers of new residential premises and home sites will be required to pay the GST on the purchase price directly to the ATO.

Developers will be required to provide written notice to the purchaser stating the amount of GST to be withheld. A penalty of $21,000 applies for non-compliance. Also, the purchaser will need to withhold GST equal to 1/11^th of the total price, even if the actual GST is lower such as when the margin scheme is used. Developers will report the actual GST amount in their business activity statement and be entitled to a credit for the amount paid to the ATO by the purchaser and a refund if this exceeds the actual GST.

In REW08 Projects Pty Ltd v PNC Lifestyle Investments [2017] NSWCA 269, REW08 entered into a contract to sell land to PNC. A special condition allowed the two parties to perform quarterly rescissions and subsequent re-entry into new contracts. Following a dispute, PNC sought an order to enforce one of the subsequent contracts. REW08 alleged that the contract was void for illegality because it had been entered into to avoid stamp duty. PNC then paid the full stamp duty amount.

The Court held that the Duties Act 1997 (NSW) and Taxation Administration Act 1996 (NSW) do not expressly nor impliedly render a contract unenforceable if it is made to avoid stamp duty. In this case a delay in the stamp duty payment was not essential to the bargain and did not invalidate the transaction. Depriving PNC of the benefit of the sale of land would have been a disproportionate penalty given PNC eventually paid stamp duty and REW08 suffered no loss. The Court ordered the contract to be enforced. Read full case

In Strathfield Municipal Council v C & C Investments Trading Pty Ltd [2017] NSWLEC 155, Investments Trading carried out building works on a block of units not in accordance with the development consent. Investment Trading were issued an interim occupation certificate which breached the Environmental Planning and Assessment Act 1979 NSW. Investments Trading then leased the units. The Council sought interlocutory relief to stop the building work and to evict the tenants.

The Court granted the Council interlocutory relief to stop the building work. However the Court was not satisfied that removing the tenants was justified. The Court reasoned that eviction of the occupants would have removed the rental income which could have caused a default with the bank. Also, the evictions may have caused anxiety, disruption and expense on the relatively poor tenants. Read full case

In Ryde Ex Services Memorial and Community Club Ltd v Kaloriziko Ryde Pty Ltd [2017] NSWSC 1576, the purchaser of premises failed to complete the transaction by the settlement date. The vendor sought a court order to enforce the sale as the purchaser was not financially able to complete the transaction.

The Court held that specific performance may be refused due to the purchaser’s inadequate finances. However such refusals should be issued cautiously by the Courts. Generally it is not ideal that purchasers should be able to escape compliance with a sale of land contract based on financial problems. Read full case

In Chaudhary v Chaudhary [2017] NSWCA 222, Vincent advanced $1,200,356.42 to his son Adrian who was married to Justine. The advances were for the purchase of a property. After the marriage broke down, Vincent demanded repayment of $1,200,000. The Court considered whether the advances constituted a loan or a gift.

The court held that the deposit was initially a gift that was conditional upon the purchase of the property, especially since the deposit was payable to the agent. However it later changed to a loan due to a subsequent agreement between Adrian and Vincent. Regarding the stamp duty, incidental costs and the outstanding purchase price, Vincent had clearly stated that these were loans. It was agreed that if the marriage broke down Adrian would have to repay the loan. This agreement was included in a clause in the mortgage. The Court ordered Adrian to pay Vincent $1,200,000 plus interest. Read full case

On 18 October 2017 The NSW government introduced the Environmental Planning and Assessment Amendment Bill 2017 which amends the Environmental Planning and Assessment Act 1979. Planning authorities will be required to develop community participation plans which outline how they will consult the public regarding their planning decisions. There will also need to be public exhibition periods for any plans. Local strategic planning statements will be required to state the economic, social and environmental foundations for a Council’s planning decisions. A regulation will introduce a uniform style for development control plans.

Klein v McMahon [2017] NSWSC 1531 concerned the sale of land held by a husband and wife couple who were co-owners. The husband did not sign the contract for the sale. Instead the wife signed the contract personally as well as for her husband. The Court determined that the contract was legally enforceable since the wife was acting for her husband as his agent. This was supported by the circumstances including:

• The front page of the contract listed the wife as the Vendor’s Representative
• They previously discussed and agreed to the sale
• The husband customarily allowed his wife to handle his finances
• The husband suspected a contract had been entered into and so must have known he would be a party to it