Author: baron + associates

From July 1 all foreign investors in property and development must pay a new 10% capital gains tax. This new tax comes under the Taxation and Superannuation Laws Amendment (2015 Measures No. 6) Act 2016 and will apply to all property purchases over $2 million. Australian vendors must apply for a clearance certificate to provide at settlement in order to prove their local resident status and avoid the tax.

The Minister for Planning, Rob Stokes, has begun the process of introducing a new bill that would require developers and renovators to ask neighbours’ opinions as part of a development application.

A similar bill was introduced in 2013, however, failed to pass. Taking into account the failure the new bill will not contain the contentious requirements of the 2013 bill including code assessments and an attempt to replace “ecologically sustainable development” with “sustainable development.”

After community consultation the NSW government is expected to introduce a new bill in the second half of the year to introduce a requirement for developers to ask neighbours’ opinions as part of a development application.

Traditionally, home owners have a duty to mitigate losses caused by builders. Legalese December 2014 explored the obligations relating to the principle, specifi-cally, that an owner is required to give the builder an opportunity to minimise the damages it must pay by remedying the defects unless refusal to give the opportunity is reasonable or the builder has repudiated the contract through refusal to conduct repairs. However, in a recent case in the NSW Supreme Court the principle was restated with the judge emphasising that “mitigation only has to be reasonable.”

In Owners Strata Plan 78465 v M D Constructions Pty Ltd [2016] NSWSC 162, an owner corporation made claims against a builder under the statutory warranties granted by s 18B of the Home Building Act 1989 (NSW). The owners were left with buildings that were “systemically” defective, having leaks, no flashings around the windows and doors and, balcony balustrades did not comply with the Building Code. The question left for the court was whether the owner had reasonably miti-gated losses and could refuse the builder access to the property to rectify damages.

The Court found that the owner had reasonably attempted to mitigate its losses and could even refuse the builder an opportunity to remedy the defects. Refusal to give a builder an opportunity to repair damages can only occur if it was reasonable, Justice Hammerschlag provided a detailed list of why in the circumstances the by the owner’s corporation refusal was reasonable. Foremost, the owner corporation had no confidence in the abilities of the builder because the original work was so poor. Also, the builder did not hold a current building license and refused to meet with the owner corporation to discuss plans on rectification with an expert. Finally, the builder did not take responsibility for the damage, blaming third parties such as the manufacturers and, consistently refused to repairs the damage or carried out repair while, not addressing the underlying defects.

The NSW government has com-menced a review into new regula-tions for the removal of loose-fill asbestos insulation from residen-tial properties. Under the proposed rules a register for properties that have been af-fected by loose-fill asbestos will be established. If the proposed changes are made planning certificates will have to state if a property is listed on the register.

Comments to the review closed on 15 April 2016. In the mean-time, the NSW Government has set up a Voluntary Purchase and Demolition program, to purchase properties affected by loose-fill asbestos.

Sometimes a contract for the sale of land will conflict with the actual final intention of both parties and, in such cases where there is a common mistake and there is clear proof of the common intention the Court can rectify the written contract. In SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2016] NSWSC 362, just such circumstances arose. The reserve price letter from the vendor was handed around prior to an auction stating that it was the intention of the vendor that GST will be added to the “knock down” price. The auctioneer restated the intent that the sale price was exclusive of GST and that the tax must be added to the price agreed upon at auction.

Subsequent to the auction of the property at $3.325 million the written contract stated “if a party must pay the price… to the other party under this contract, GST is not to be added to the price.” The NSW Supreme Court’s decision turned on the principle of whether there was a “clear and common intent” and that a “mutual mistake” had occurred in the written contract that did not reflect the final intention of the parties.

The Court found that the auctioneer’s statement and the reserve price letter were sufficient proof of intention being conveyed and that the purchaser entering the contract at auction was proof of a mutual intention to GST being exclusive. The purchaser was ordered to pay GST on top of the purchase price.