Earlier this year, a former director of the Kleenmaid Group became the first person to be sentenced to imprisonment for insolvent trading as a shadow director. The case centered around Kleenmaid Group a whitegoods company that had a chain of stores and franchises across Australia. In 2006 the Group was placed into voluntary administration. ASIC then commenced investigations into the Group’s affairs and the conduct of the directors and referred the matter to the CTH DPP. The DPP prosecuted Andrew Young, the founder and previous director of the Group, for insolvent trading, even though Mr Young was not a Company Director. Under the Corporations Act the duties owed by directors also extend to persons in accordance with whose instructions or wishes the directors of the company are accustomed to (shadow directors). Ultimately, Mr Young was charged with multiple counts of insolvent trading and fraud on the basis that he was shadow director of the Group. The jury found Mr Young guilty of 19 charges and Judge Devereaux sentenced Mr Young to 9 years imprisonment with respect to the fraud charges, and 3 years imprisonment with respect to the 17 charges of insolvent trading. This case illustrates that individuals who give instructions to the directors of a company, but are not formally appointed as directors themselves, should be aware that they may nonetheless be held to the same duties as directors by virtue of their role as shadow directors.
COVID-19 has resulted in the Government’s enforcement of a number of restrictions. This has resulted in parties involved in conveyancing transactions, questioning whether their property settlements are able to proceed. Due to the widespread adoption of technology throughout the conveyancing process, and the implementation of online technologies such as PEXA, State Revenue Office Duties Online and DocuSign, means that all documents that are required for property settlement can be prepared, signed and lodged electronically, without the requirement of parties to sign copies physically. Furthermore, settlement monies are able to be electronically dispersed to the receiving party (via PEXA) which removes the need of a party to attend a bank to deposit settlement cheques. As a result, property settlements can continue to be conducted seamlessly despite the existence of COVID-19
The Federal Government has introduced a $680 million HomeBuilder scheme in order to stimulate the building and construction industries. From now until 31 December 2020, eligible home owners/occupiers, not just first home builders, will have the opportunity to access a $25,000 tax-free grant to build a new home, or substantially renovate their existing home. To be eligible, applicants must:
- If single, have earned less than $125,000 per annum based on 2018-19 tax return or later, or, if a couple, earned less than $200,000 per annum based on 2018-19 tax return or later.
- Enter into a building contract between 4 June 2020 and 31 December 2020, with construction commencing within 3 months of the contract date.
- Either build a new home as the main residence, where the property value must not exceed $750,000 OR substantially renovate their existing home where the renovation contract must be valued between $150,000 and $750,000 and the value of the home prior to renovations must not be worth more than $1.5 million.
Since the Opal Tower disaster in 2018, a raft of legislative changes have been introduced to dramatically alter the building certification industry. On 1 December 2019, new provisions in the Environmental Planning and Assessment came into effect introducing new powers and responsibilities of certifying authorities. Further, from 1 July 2020, the new Building and Development Certifiers Act 2018 and the corresponding Building and Development Certifiers Regulation 2020 will both come into effect. This new legislation will abolish the Building Professionals Board and will move the regulation of building certifiers under the control of NSW Fair Trading. Certifiers will no longer be accredited, and instead will be registered, and will be subject to provisions which prohibit them from providing services with respect to design and compliance in cases where they are also acting as the principal certifier. The legislation also introduces a code of conduct for certifiers, where a failure to comply could result in a certifier being fined a maximum penalty of $11,000 per offence. Such changes may result in private certifiers increasing their costs in order to balance the risk of increased liability. This will likely impact developers, especially those with impending large-scale developments who may have not factored this possible increased price into their project feasibilities.
Foreign persons who acquire an interest in registrable water entitlements or contractual water rights are required to register their interest on the Register of Foreign Ownership of Water Entitlements. This mean registration is required by a foreign person who acquires a registrable water entitlement or contractual water right [e.g. water licence] OR by someone who becomes a foreign person while holding a registrable water entitlement or contractual water right. If either of these things occur, the Register of Foreign Ownership of Water Entitlements must be updated no later than 30 days after the end of the financial year. The Register must also be updated if the interested person is no longer a foreign person, if the volume of the registrable water entitlement changes, or if the foreign person’s interest is disposed. Penalties may apply to those failing to register or update changes.
As discussed in May – a commercial or residential landlord who has been required to reduce its tenants’ rent as a result of COVID-19, including if the Code of Conduct applies, may be eligible for the NSW Government’s land tax relief. If eligible the relief may reduce up to 25% of one’s 2020 land tax liability, defer one’s land tax payments by up to 3 months, provide a refund on the amount of rent reduction one has given to a tenant, or reduce the amount of 2020 land tax payable if payment has not yet been completed. Applications for Land Tax concessions can be done on Service NSW. In order to apply one must meet the eligibility criteria and must have a land tax client ID, land tax correspondence ID, the land details the relief is being applied for, EFT details, evidence of rental reduction and evidence of the ant’s financial distress. Please contact b+a if you would like us to assist in completing this application on your behalf.
As previously noted, in our March 2020 Newsletter, Prime Minister Scott Morrison announced that the National Cabinet had agreed to a six month-moratorium for evictions for residential and commercial tenancies impacted by COVID-19. However, like a number of Coronavirus regulations, it was necessary for individual State governments to legislate such provisions in order for them to become effective. On 15 April 2020, the NSW Government amended the Residential Tenancies Act 2010, introducing a 60-day ban and a further six-months of restrictions on evicting tenants financially impacted by COVID-19. In order to meet the requirements for a 60 day stop on evictions and the longer six-month restrictions a household must demonstrate that they are impacted by COVID-19. A household will have been impacted if:
- One or more rent-paying members of a household have lost employment or income due to COVID-19 closure of business or stand downs; or
- One or more rent-paying members of a household have had to stop working or reduce work hours due to illness with COVID-19 or due to COVID-19 carer responsibilities; AND
- The above factors have resulted in a reduced household income that is reduced by 25% or more.
If you would like to find out more please click here.
Agents may claim commission payable as a result of a buyer inspecting the property whilst the property was listed with an agent, however, is this sufficient for the agent to be entitled to commission? The majority of contracts for sale contain a warranty that the buyer was not introduced to the property by any other person than the agent listed on the front page of the contract, with the effect of holding the buyer liable to reimburse the seller if an alternate agent claims commission. In the case of LJ Hooker v Adams (1977) the High Court ruled that to be entitled to commission and agent must be able to demonstrate that their introduction must be the “effective cause” of the sale. In the recent case of Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall (2019) the Court clarified what is deemed “effective cause” with 6 criteria. In ruling on the case and applying the criteria, the Court held that despite the fact that the agent played a “significant causal role” introducing the buyer to the property, holding inspections and reaching the point of a sale contract, the agent was not the “effective cause”. The intervention of the second agent that provided clarification on the seller’s price and resulted in the buyer increasing their offer, was deemed to be the effective cause and subsequently they were entitled to commission.
Under the changes to FIRB requirements resulting from the Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 all new commercial leases will require FIRB approval, regardless of size. Previously very few commercial leases would have been subject to FIRB approval as the monetary threshold was extremely high (between $60 million and $1.192 billion). As a result of the lowering of thresholds to $0 during the COVID-19 pandemic, all foreign persons entering into leases that will likely exceed 5 years, will require FIRB approval. This amendment only applies to leases entered into after 29 March 2020. Both landlords and tenants must be aware of what or who is classified a ‘foreign person’. A foreign person is defined as:
- Individuals: a person that is not ordinarily a resident in Australia
- Corporations: a corporation where a foreign person holds a substantial interest (20%), or where two or more foreign persons hold an aggregate substantial interest (40%)
If a tenant is required to obtain FIRB approval and does not seek the approval, the Treasurer has the power to rescind the lease. Penalties may also apply. Furthermore, the approval time-frame has been extended from 30 days to 6 months, thus the Board may take up to 6 months to approve a FIRB application.
In February we discussed the new Real Estate and Property Reforms which involved new rules of conduct for Agents and Assistant Agents. A reminder that these reformed commenced on Monday 23 March 2020, and are therefore now enforceable. If you would like to find out more about the changes under the reforms please click here.