The introduction of the Conveyancing (Sale of Land) Amendment Regulation 2019 will affect the cooling off notice period for off the plan residential contracts. From December 1st 2019, the new cooling off notice will be for a period of 10 days. This has been extended from the ‘old’ notice period of 5 days. The transitional arrangement for cooling off notices include:
- A six month transitional period so that residential contracts that are not off the plan, need to contain the new cooling off notice from 2 June 2020.
- Residential off the plan contracts exchanged after the publication of the amendment (now) but prior to the implementation of the amendment (1st December 2019) are able to contain either the ‘new’ 10 day notice period or the ‘old’ 5 day notice period.
The introduction of new safe harbour rules by the Commissioner of Taxation will now assist executors who face unexpected difficulties in selling estate properties within the current 2 year limitation period. On the 27th June 2019 the Commissioner introduced the practical compliance guideline, extending the time given to executors to dispose of a deceased’s estate’s property, whilst still being able to claim the main residence CGT exemption. The exemption typically applies to the disposal of a deceased’s estate, providing that it is sold within 2 years of the date of death. The new safe harbour gives executors an additional 18 months to dispose of the property, meaning executors will now have a total of 42 months to settle a deceased’s estate, provided that they meet the specified conditions. This new safe harbour decision will assist executors administering estates who are unexpectedly caught up in time consuming provision applications and who face delays in carrying out their duties.
The recent case of Eckford v Six Mile Creek Pty Ltd (No 2)  FCA 1307 involved a property developer (SMC) who made representations to an interested buyer (‘Eckford’) that a lot for sale would have ‘Ocean Views Forever’. This was due to the fact that the apparent ‘sold’ adjacent lots had height restrictions. In 2007, Eckford entered into a contract to purchase the lot for sale for approximately $895,000, with the contract stipulating that the height restrictions of the adjoining lots were to bind their owners ‘forever’. However, the unconditional contracts on the adjacent lots were later terminated, and eventually sold without the height restrictions. Eckford subsequently claimed that SMC and its director had engaged in misleading or deceptive conduct, and had contravened s52(1) of the Trade Practices Act 1974 (Cth) (now s18 of the Competition and Consumer Act 2010). At trial, the Court held that Eckford was attracted to the lot by its views and the promise of their protection, with the purchase price being paid on reliance of the developer’s representations. The Court determined that SMC induced entry into the contract by engaging in conduct that was misleading & deceptive, making false and misleading representations. The Court awarded Eckford damages in the sum of $2,573,354.46 to be paid by SMC and its director. This case provides a warning to property developers and real estate agents, who should ensure that potential purchasers are informed of any material changes to a property that is subject to purchase negotiations.
In the case of Hanna v Raoul  NSWCA 201 the NSW Court of Appeal set aside a deed of arrangement for the transfer of property after deeming it unjust under the Contracts Review Act 1980 (NSW). Mr Raoul was an elderly widower who defaulted on his mortgage. After speaking with his nephew, Mr Hanna, Raoul agreed that he would transfer the property to Hanna if he paid out the mortgage, subject to the condition that Mr Raoul could remain living in the property until his death. Mr Hanna’s solicitor prepared a deed of arrangement and a memorandum of transfer, but advised that Raoul should meet with another solicitor in order to have the terms explained.
However, the deed contained terms that significantly disadvantaged Mr Raoul, including the fact he would have no access to capital if he needed it as he aged, it subjected him to the discretionary decisions of Mr Hanna as to the management of the land and there was nothing in place to protect Mr Raoul in the event that Mr Hanna sold the property or died. In 2015 Mr Raoul’s home was destroyed by fired. Later that year proceedings were begun by a tutor for Mr Raoul to recover the land from Mr Hanna on the basis that he did not have the capacity to enter the transaction and the transaction was unconscionable. The court found that Raoul’s solicitor appropriately explained the purpose of the agreement, but did not properly explain the aforementioned consequences. It was ultimately held that it was an invalid, unconscionable agreement as Mr Raoul there was no reasonable degree of equality between the parties; Hanna knew of Raoul’s desperation to discharge the mortgage as well as his frailty, and still sought to retain any benefit he could.
In the case of Kurmond Homes Pty Ltd v Marsden  NSWCATAP 23, NCAT highlighted that monetary orders may be made in place of work orders even where a work order is preferred by the offending party. In this case, KH was appealing an order to pay $231,770 for defects in a home they built for Marsden. They argued that a work order to rectify the defects could have easily been made instead of damages, and that the Tribunal should not have considered any of their misconduct in previous building projects that were unconnected to this matter. KH also argued that under s48MA of the Home Building Act 1989 rectification of the defects by the responsible party is preferred.
Ultimately the Tribunal dismissed the appeal, stating that they were within their power to consider the previous misconduct of KH, as s79U(2)(g) Fair Trading Act 1987 states that the conduct of the parties to the claim in relation to similar transactions is to be taken into account when making orders. They also held that the preference for rectification in s48MA does not lead to an absolute right, and monetary orders can be made.
The NSW government has released draft legislation that seeks to increase compliance in the building and construction industry. The ‘Design and Building Practitioners Bill 2019’ comes as a response to the recommendations provided by Shergold Weir Report, with the proposal addressing the following key points:
- Requirement of design and building practitioners to issue compliance declarations in accordance with Building Code of Australia (BCA).
- Implementation of a compliance and enforcement regime involving strict penalties for non-compliance.
- Increased registration and insurance obligations for designers and builders.
- Provision of statutory avenues that allow owners to claim against builders for economic loss due to defective building..
The NSW Government intends to present a final Bill to parliament by the end of the year, and is aiming to consult on Regulations which will be introduce alongside the bill in 2020. If you would like to find out more about the proposed Bill, please click here.
In Maxcon Constructions v Vadasz  HCA 5, Maxcon entered into a subcontract with Mr Vadasz in relation to piling works. A clause in the contract stated that Maxcon could retain a sum corresponding to 5% of the contract sum that would only be repaid when a certificate of occupancy and other requirements were obtained by the head contractor. The High Court held that this provision constituted a “pay when paid” provision, since it made the release of the retention dependent upon the head contractor obtaining the certificate. A pay when paid clause is a provision that states that the contractor is obliged to pay its subcontractors follow receipt of payment from the owner. The Court stated that a pay when paid provision makes the liability of money owing or the due date to pay money contingent on the operation of another contract. Accordingly, the Court held that the clause was void.
The recent case of Nguyen v Nguyen demonstrates the importance of written agreements when investing with family members. The case involved two siblings who agreed to purchase a residential property solely in the brother’s name, however with both of them being borrowers under the mortgage. The sister was involved in negotiating the sale price with the seller, and made payments in relation to agent’s fees and stamp duty. The sister also lived on the property with her family, during which time, she made renovations and repairs. After the sister moved out of the property, a tenant moved in.
Following the vacation of the property by the tenant, the brother changed the locks of the property. Subsequently, a matter was brought before the court with the brother arguing the he was the sole registered owner, and that his sister only occupied the property as a tenant. The sister claimed that the siblings were joint owners. Due to the absence of a written agreement, the Court was required to infer what was contained in the agreement made a number of years prior. The Court ultimately held that despite the fact that the brother was the sole registered owner, 40% of the property was held on constructive trust for the sister. In its decision, the Court found that neither party’s claim was correct, instead deciding that a combination of the two arguments was more suitable. This case demonstrates the importance of written agreements, as the proceedings could have been avoided if both party’s intentions had been expressly documented from the beginning.
In a recent NSW case two companies entered a contract of sale for land at an estimated value of almost $2 million. The Seller issued a notice to complete to the buyer for 17 February 2015 specifying that time was of the essence. Due to the fact that the buyer issued the seller with an incorrect form of transfer of the property, the seller could not execute as a company and instead the director executed the transfer in their personal capacity. At settlement on 16 February 2015, the buyer’s agent indicated that the transfer had not been executed properly and consequently settlement was rescheduled for the following day. The Seller’s mortgagee later indicated that settlement would not be effected due to internal policy that necessitated 3 business days to reschedule settlement. The buyer remained ‘ready willing and able’ to complete settlement. On 26 February 2019 the seller served on the buyer a notice of termination, terminating the contract and indicating that the 10% deposit paid by the buyer was forfeited. The buyer commenced proceedings against the seller in order to recover the deposit. The Court held that due to the fact that the seller was not in a position to settle at the specified notice of completion date, they should have withdrawn its notice to complete. Consequently the buyer was able to recover their deposit.
The case of Scanlon v McLeay  QDC 17 highlighted the fact that contributions to another person’s mortgage or purchase of property does not automatically give rise to a legal right in that property. In this case, the applicant sought equitable relief for the contributions she had made towards the property of her former partner, namely $49,000 towards a deposit for the property and $86,000 worth of ‘general contributions’ to the mortgage account.
While the respondent strongly argued that all of the payments were a gift, the court ultimately found that the deposit contribution did entitle her to an interest in the property by way of a trust of $49,000. However, the court took the opposite view on the more substantial contributions towards the mortgage, holding that these contributions were given for the applicant and her daughters in consideration to permanently live in the property.