Since 2012, the number of off-the-plan contracts in NSW has grown at around 20% per annum.[1]  Despite often negative media attention, it seems that buyers (particularly first home buyers) are still attracted to new developments.  The reforms aim to protect these buyers and mitigate some of the risks inherent in purchasing a lot that a buyer cannot yet inspect with their own eyes and may take many months (or even years) to be completed.

What follows is a summary of some of the key items of reform under the Conveyancing Legislation (Amendment) Act 2018 (NSW) and Conveyancing (Sale of Land) Amendment Regulation 2019 (NSW):

Longer cooling-off period

Currently, purchasers of residential property in New South Wales (and some other States and Territories) receive the benefit of a five business day cooling off period subject to certain legislative exceptions (e.g. auction sales).  This period allows the buyer to rescind (i.e. cancel) the contract for any reason and their only penalty will be 0.25% of the price, which is often forfeited from the initial deposit paid.

The reforms have extended the cooling off period for off-the-plan contracts to 10 business days.  In order to ensure buyers are made aware of this extended cooling off period, the prescribed warning statement that must appear in all contracts of sale has been amended to make reference to it.

While contracts for the sale of existing properties can continue to use the current warning statement until 1 June 2020, off-the-plan contracts must contain the new warning statement from 1 December 2019.  A failure to include the correct warning statement will entitle the buyer to cancel the contract under section 66X of the Act at any time before settlement (unless the buyer waived the cooling off period).

Disclosure Statement

In addition to the usual documents that a vendor must attach to a contract of sale (e.g. Title search, registered plans and dealings) before it is exchanged, a vendor under an off-the-plan contract must now attach a disclosure statement under new section 66ZM of the Act.  This disclosure statement has a prescribed form and must include the following:

• Details of the settlement timeframe;

• Details of the Sunset Date;

• Confirmation whether development approval has been obtained;

• A copy of the draft plan prepared by a registered surveyor (including the location, area and floor plan of the lot).  However, the plan does not need to show the location or area of any proposed parking or storage areas;

• The proposed schedule of finishes;

• Any instrument under section 88B of the Act (e.g. easements, restrictions etc.) that are proposed to be lodged with the plan;

• The draft by-laws (if in a strata scheme);

• Any proposed development contract; and

• Any proposed strata or building management statement.

If the disclosure statement and accompanying documents are not annexed to the contract before it is signed, the purchaser can cancel the contract within 14 days of exchange.

Notice of changes

One of the bigger risks of purchasing a property off-the-plan is that the developer may make changes to the plans and other important documents before settlement.  A vendor under an off-the-plan contract must now notify a buyer of any changes to a ‘material particular’ at least 21 days before settlement under new section 66ZN of the Act.  This notice must be in the approved form.  A ‘material particular’ is defined under section 66ZL of the Act to include the following changes that will, or will likely, adversely affect the use or enjoyment of the subject lot:

• a change to the draft plan;

• a provision of draft by-laws;

• an easement or covenant;

• changes to the schedule of finishes;

• a strata management statement; and

• a (strata) development contract.

However, the new regulations specify that inter alia a change in lot number, street name or parking/storage area location will not be a ‘material particular’.

If after receiving notice of such changes, the buyer can cancel the contract within 14 days under new section 66ZO of the Act if they would not have entered into the contract had they been aware of the change AND would be materially prejudiced by the change.  If the buyer so cancels the contract, they will receive a full refund of the deposit paid.

Copy of registered plan and dealings

Similarly, a vendor under an off-the-plan contract must serve a copy of the registered plan (and any other documents that were registered with it) on the buyer at least 21 days before settlement under new section 66ZP of the Act.

After receiving these documents, if it becomes apparent that the disclosure statement now contains an inaccuracy in relation to a material particular such that the buyer would not have entered into the contract had they been aware of the inaccuracy AND would be materially prejudiced as a result, then the buyer can cancel the contract within 14 days with the deposit refunded in full to the buyer.

Claims for compensation

A buyer who is entitled to cancel the contract under section 66ZO or 66ZP of the Act may instead choose to make a claim for compensation from the vendor of up to 2% of the purchase price.  Like the right of rescission, this claim must be made within 14 days of receiving the notice of change or registered plan (and before settlement).

If, after the purchaser serves such claim, the vendor does not rectify the change or pay the compensation claimed within one month of service, the claim will be determined by arbitration.  Once a claim is determined by an arbitrator, the purchaser can no longer cancel the contract.

It is worth noting that the 2019 Law Society Contract provides that if a purchaser makes a claim under the new regulations, he or she will be prevented from making a claim under standard clause 7.

Professional Depositholders

Under new section 66ZT of the Act, the deposit under an off-the-plan contract can now only be held in the trust account of a real estate agent, law firm or licensed conveyancer.  This change will prevent buyers from losing deposits paid to developers who later become insolvent.  However, this new requirement does not affect deposits paid by deposit bond or bank guarantee.

If you require assistance with a property development or conveyancing transaction, please contact HPL Law Group on (02) 9905 9500.

[1] NSW Office of the Registrar General, Off-the-plan contracts for residential property, Discussion Paper (2017) 6.

The post When a Plan Comes Together: Reforms to Off-the-Plan Contracts to Commence Before Christmas appeared first on HPL Law Group Sydney.

Originally announced as part of the 2017-2018 Federal Budget, the Government has now passed legislation significantly changing the way GST is handled on the sale of new residential property. From 1 July 2018, purchasers of new residential property must pay the GST component of the purchase price to the Australian Taxation Office (‘ATO’) directly instead of to the vendor. The Government has explained these changes are necessary to “clamp down on GST evasion in the property development sector”.

To what transactions does the new withholding scheme apply?

The GST withholding requirements apply to the sale or long-term lease (generally leases or licences for a term of at least 50 years) of the following types of real estate:

• ‘New residential premises’ that have not been created through substantial renovations of a building.  A ‘new residential premises’ is defined under the existing GST law as premises that have not previously been sold as residential premises and have not previously been the subject of a long-term lease, or contain a building that has been built to replace demolished premises on the same land;
• ‘New residential premises’ that are not ‘commercial residential premises’ (i.e. a hotel, motel, inn, hostel, boarding house, premises used to provide accommodation in connection with a school, certain ships, a marina at which one or more of the berths are occupied by ships used as residences, a caravan park, a camping ground or anything similar); and
• Land that it is permissible to use for residential purposes, but that does not contain any buildings (‘potential residential land’), and is included in a property subdivision plan (e.g. strata plan or land subdivision) and does not contain any building that is in use for a commercial purpose.In our view, the above categories will mostly affect those conveyancing transactions commonly referred to as ‘off-the-plan’ purchases.While the transitional provisions exempt any contract made before 1 July 2018 from the GST withholding requirements, they will apply to any part of the purchase price is paid after 1 July 2020. This effectively means that the withholding regime will apply to all conveyancing transactions involving the above property categories if they settle after this date regardless of the contract date.

What does a vendor need to do?

Before selling any residential property (not just new residential property in the above list), a vendor must give a prospective purchaser a written notice stating whether the purchaser will be required to make a GST withholding payment to the ATO and, if so, include the following:

• The vendor’s name and ABN;
• The amount that the purchaser will be required to pay to the ATO;
• When the purchaser will be required to pay that amount;
• If some or all of the purchase price will not be expressed as an amount of money, the GST inclusive market value of that part of the price; and
• any other matters specified in the regulations.

If the vendor fails to give the above notice, then the ATO can fine them up to $21,000.

What does a purchaser need to do?

If the purchaser is not registered for GST, they must deduct the GST component from the purchase price and pay it to the ATO on or before the date that the purchase price (other than the deposit) is paid to the vendor. In the vast majority of cases, this will be the settlement date under the contract. However, where the price is payable by instalments, the obligation to pay the full GST amount to the ATO will arise when the first instalment is due. If the purchaser fails to make the required payment to the ATO on or before settlement, the purchaser is liable for a penalty equal to the GST amount.

It is important to note that the purchaser’s obligation to make the required payment to the ATO is not dependent on the vendor giving the requisite notice as outlined above. However, the purchaser may be absolved from liability if the vendor gave them a notice stating that the premises are not new residential premises or indicating that the purchaser will not be required to pay an amount to the ATO and, at settlement, there was nothing in the contract or any other circumstances relating to the sale that made it unreasonable for the purchaser to believe that the vendor’s statement was correct.

The amount to be paid to the ATO is a percentage of the GST-inclusive purchase price specified in the contract, disregarding any usual adjustments for outgoings, and will depend on whether the vendor will be applying the margin scheme to the supply. If the margin scheme will be applied, then the rate will be 7% of the purchase price (although the Government has the power to increase this as long as it does not exceed 9%). Otherwise, the rate will be 1/11th of the purchase price.

Changes to the NSW Law Society Contract

The contract for the sale of land that is commonly used in New South Wales, which is prepared by the NSW Law Society, has been amended to reflect the new withholding scheme (called a ‘residential withholding’ payment in the contract). The main changes in the 2018 contract include:

• A new yes-no box to indicate whether or not the purchaser must make a GST withholding payment at settlement;
• A new section that sets out the particulars required to be disclosed to a purchaser. Interestingly, in relation to the amount of GST to be withheld, the NSW Law Society is advising that when a property is sold at auction and the amount is not completed, the vendor must provide all these details in a separate notice to the purchaser within 14 days of the contract date; and
• New clauses have been inserted in the standard conditions that allow the purchaser to make the required GST payment. These clauses inter alia require the purchaser to produce evidence that they have submitted the required notification form to the ATO at least five days before settlement.

Implications for purchasers and vendors

Vendors of all residential property will need to ensure they comply with the notice requirements under the new withholding scheme and purchasers must ensure they pay the GST payment when they are buying new residential property. In some cases, simply relying on the vendor’s notice will not be a sufficient excuse for the purchaser not making the required payment. A failure to comply with either requirement could see the purchaser and the vendor facing heavy penalties.

If you require assistance with a property development or conveyancing transaction, please contact HPL Law Group on (02) 9905 9500.

The post Purchasers Forced to Help Stop GST Evasion by Property Developers appeared first on HPL Law Group Sydney.

Changes to the Foreign Resident Capital Gains Withholding regime (‘FRCGW’)

Introduced as part of the 2016 Federal budget, the FRCGW created an obligation on the part of purchasers of real estate to remit 10% of the purchase price (less any GST if the purchaser is GST-registered) to the Australian Taxation Office (‘ATO’) if the price was $2 million or more unless the vendor provided them with a clearance certificate prior to settlement. The purpose was to assist the ATO in collecting capital gains tax from foreign residents and applied regardless of whether the vendor was in fact a foreign resident.

However, the Federal Government has announced that for contracts entered into from 1 July 2017, the threshold is reduced from $2 million to $750,000.00 and the withholding amount has been increased from 10% to 12.5% of the price. With a median house price of approximately $1.1 million, this change is anticipated to affect most conveyancing transactions in Sydney.

Vendors of property sold for at least $750,000.00 will need to ensure they obtain clearance certificates from the ATO before settlement or risk 12.5% of the price being withheld from them. Purchasers on the other hand will need to ensure they receive a clearance certificate from the vendor prior to settlement otherwise they will face penalties from the ATO should they fail to remit the 12.5% as required.

Purchasers will also need to ensure the contract of sale contains sufficient clauses allowing them to remit the 12.5% otherwise they risk being in default by complying with their legislative requirements. To this end, we note the NSW Law Society has released an updated 2016/2017 version of their contract of sale that should be used for contracts entered into from 1 July 2017. Earlier contracts should include a special condition on the same terms as the Law Society’s standard clause 31.

Surcharge purchaser duty

The existing surcharge duty charged for foreign purchasers of residential property in New South Wales has been increased from 4% to 8%. This surcharge is calculated on the dutiable value of the property (e.g. the price). For example, if a foreign purchaser buys a property for $1 million, they would be required to pay $80,000.00 on top of the normal stamp duty amount.

Furthermore, the permanent residents and New Zealand citizens will no longer enjoy the same exemption as Australian citizens when it comes to surcharge duty. Permanent residents and New Zealand citizens will only be exempt from surcharge duty if they reside in the property as their principal place of residence for 200 continuous days for the first 12 months. This means surcharge duty will be imposed on any investment properties purchased by permanent residents and New Zealand citizens.

New Home Grant scheme cancelled

Purchasers of new homes in New South Wales can no longer receive the $5,000.00 grant per financial year. This removes another incentive for investors in real estate.

Off-the-Plan extension

The existing extension of the due date for stamp duty in New South Wales off-the-plan purchases will no longer be available to investors. Instead, only those who intend to reside in the off-the-plan home or apartment for a continuous period of six months within 12 months from settlement will be eligible to receive the 12 month extension.

First Home Buyers

In addition to making foreign investment less attractive, the NSW Government has announced a new First Home Buyers Assistance scheme. First home buyers will not have to pay stamp duty for any home they purchase (whether it is new or existing) if the price is under $650,000.00 with concessions if the price is between $650,000.00 and $800,000.00.

First home buyers can also receive a $10,000.00 grant for building a new home in New South Wales where the prices in the land and building contracts do not exceed $750,000.00 or purchasing a new home worth up to $600,000.00.

If you require assistance with purchasing your first home or have a conveyancing related enquiry, please contact HPL Law Group on (02) 9905 9500.

The post A Leg-Up for First Home Buyers: 2017 Budget Changes to Impact Real Estate Investors appeared first on HPL Law Group Sydney.

In New South Wales, a stepchild is only eligible under the Succession Act 2006 (NSW) to make a family provision application in relation to their stepparent’s estate if they satisfy the following criteria:

1. The stepchild was, at any particular time, wholly or partly dependent on the deceased stepparent;
2. The stepchild was, at that particular time, a member of the deceased stepparent’s household; and
3. The stepchild satisfies the court that there are factors that warrant the making of the family provision application.

A decision of the New South Wales Supreme Court (‘Court’) last month has highlighted the seeming unfairness of this eligibility criteria compared with those of other Australian States. For example, in Queensland, a stepchild is automatically eligible to bring a family provision application and does not need to satisfy any further criteria.

Background

In Spata v Tumino; Estate of Gina Spata [2017] NSWSC 111, Gina Spata died in 2014 aged 77 years and left her entire estate to her nephews. Mrs Spata had married Ross Spata in 1980, who died before her in 2010. While Mr and Mrs Spata had no children together, Mr Spata had three children from a prior marriage. One of these children, John, applied to the Court for a family provision order in respect of his stepmother’s estate.

When Mr Spata died in 2010, his last will directed that his estate (worth approximately $1.2 million) was to be divided equally between his three children. Mrs Spata subsequently brought a family provision application in respect of Mr Spata’s estate on the basis that she had not received adequate provision under his will. Mrs Spata’s application was successful and accordingly, the Court ordered that further provision be made for her from Mr Spata’s estate by way of a legacy and one of Mr Spata’s houses (with a combined value of around $743,000).

Despite being successful, Mrs Spata agreed to vary the Court’s order so that she did not receive the legacy of $143,000 and instead received a 1/6th interest in one of Ross’ properties. This was in response to requests from John and his siblings that in order to fund the legacy of $143,000, they would need to sell one of Ross’ properties that John was living in (John had claimed that he was destitute). This effectively left John and his siblings with one of their father’s properties to share, which after it was sold, provided them each with around $200,000.

By the time Mrs Spata died some four years later, her estate consisted of an apartment worth around $675,000 and bank account monies totalling around $70,000. She had used the assets received as a result of the family provision application to purchase the apartment. After the respective legal costs of the parties were deducted, the distributable estate would be around $515,000. Additionally, Mrs Spata held $300,000 in a joint account with one of her nephews, which although it passed by way of survivorship to her nephew, at least half of which could constitute notional estate if required.

John’s needs

John was aged 61 years at the time of the decision but continued to operate a plumbing business. His annual income was around $26,000 whereas his partner’s income was around $40,000. He and his partner owned a house with a mortgage. Their net assets were around $100,000. John also claimed to suffer bipolar disorder, hearing loss and cateracts. His primary needs were to repay the mortgage and a personal loan from his partner’s family.

John’s eligibility

As a stepson, in order to be eligible to bring a family provision application, John needed to prove not only that was he a member of Mrs Spata’s household at any time but that he was also dependent on Mrs Spata at that time. The Court accepted that for about six months in the 1980’s, following Mrs Spata’s marriage to Mr Spatat, they shared a common residence with John and his first wife. The Court also accepted that John resided with Mrs Spata from about 1995 until 1999 during John’s separation from his wife.

Having established that he was a member of Mrs Spata’s household for at least short periods, the next critical issue was John’s dependency on Mrs Spata during those periods of co-habitation. The Court affirmed prior definitions of the term ‘dependent’ as referring to “the giving of financial or other material assistance by the deceased over a significant period of time in order to meet a need of the eligible person, with the result that the recipient has come ordinarily to rely upon that assistance” but did not agree that dependence was limited to mere financial dependence.

John claimed that he was dependent on Mrs Spata during these periods for the carrying out of household duties like cooking, washing and cleaning for his benefit. However, the Court did not agree that these services constituted dependency as intended by the legislation. The Court explained its reasoning as follows:

“ The provision by Gina of services such as putting clothes in the washing machine, hanging them out to dry, preparing meals and shopping for groceries is an aspect of the arrangements of mutual living that makes a household, and reflects the division of labour and responsibilities within the household, but does not constitute a dependency – at least in the case of an adult child who is capable of performing the activities of daily living himself…Nor did Gina’s provision of comfort and solace when he was distressed in the circumstances of his marriage breakdown create a dependency; while dependence is not limited to financial or material dependence, the existence of an emotional relationship alone is insufficient. John refers to having received an occasional financial benefit – $50 or so, so that he could go out for a social occasion – from Gina – such trivial assistance does not make a case of dependency, even if it were established that it was sourced in Gina and not Ross, which it is not. To the extent that John had any remaining need for maternal services of this kind after the death of his mother Nancy – he was then aged 16 – it was his father who provided them.”

Furthermore, since only Mr Spata owned the house that John resided in, it was incorrect to say that John was dependent on Mrs Spata for accommodation. In fact, both Mrs Spata and John were dependent on Mr Spata for accommodation during the above periods. It would be interesting to see whether the decision might be different had Mrs Spata co-owned the properties with Mr Spata. Similarly, the Court indicated that had John been able to prove that Mrs Spata not only prepared but purchased food for him, a partial dependency may have been found.

In the context of stepchildren, the Court held that dependency was more likely to be found with young stepchildren as opposed to able-bodied adult stepchildren.

Decision

Having failed to discharge the onus of proof that he was dependent on the deceased, the Court was forced to dismiss John’s family provision application. However, had John been able to prove that there was dependency present, the Court said it would have concluded that there were factors warranting John’s family provision application and that he did not receive adequate provision for his proper maintenance and advancement. Accordingly, the Court would have ordered John receive a legacy of $300,000 from Mrs Spata’s estate to repay his home loan with enough left over for contingencies.

Although the Court did not find John’s relationship with Mrs Spata was analogous to a parent-child relationship, the main factors that led to the Court’s conclusion that John’s family provision application was warranted were:

1. the contributions by John (and his two brothers) to the estate of his father, most of which comprised Mrs Spata’s estate;
2. John’s expectations regarding the inheritance from his father, which was significantly reduced by Mrs Spata’s earlier family provision claim; and
3. Mrs Spata made representations that she would honour her husband’s testamentary wish that his sons would inherit his estate.

Implications

This case demonstrates that the family provision legislation in New South Wales requires reform to relax the eligibility requirements for stepchildren. Under the current regime, an able-bodied adult stepchild faces the difficult task of proving dependence on their stepparent. Even if the stepparent’s estate was significantly enlarged by the natural parent’s estate, the stepchild is prevented from making any claim on that estate without proving both co-habitation and dependence.

Had the requirement for dependence been removed, the plaintiff in this case would have been successful. Some readers may consider this result unfair. However, until the eligibility requirements for stepchildren are amended in New South Wales, adult stepchildren will continue to face obstacles to making family provision applications notwithstanding that there may be factors justifying the bringing of such applications.

If you require legal advice about your rights with respect to a deceased estate or making a family provision application, please contact HPL Law Group on (02) 9905 9500.

The post Independence Day: NSW Supreme Court Dismisses Adult Stepson’s Family Provision Application appeared first on HPL Law Group Sydney.

In Re Oliver (deceased) [2016] QSC 264, Mr Oliver signed a will on 11 October 2011 that had been prepared by the Public Trustee (‘Will’). The Public Trustee had managed Mr Oliver’s affairs since 1990 as he suffered from severe and chronic schizophrenia most of his adult life. In fact, he had been confined to hospital from the time he was 19 years old until his death.

As he never married or had any children, Mr Oliver’s next of kin were his four siblings. However, the Will benefited Mr Oliver’s sister to the exclusion of his three other siblings (although one brother was a substitute beneficiary). After the Public Trustee applied for probate of the Will, Mr Oliver’s brother lodged a caveat against the grant being issued. Mr Oliver’s brother sought to have the Will declared invalid and, on the basis that there were no other wills in existence, be appointed as the administrator of Mr Oliver’s estate to be administered under the rules of intestacy.

In disputing the brother’s claim, the Public Trustee argued that the Will appeared on its face to be rational and it should therefore be presumed to be valid. While the Court accepted this argument despite the fact it excluded two siblings, it ultimately found in favour of Mr Oliver’s brother since the evidence of Mr Oliver’s schizophrenia sufficiently displaced the usual presumption of validity.

Critical to the Court’s decision were the following deficiencies on the part of the solicitor who prepared the Will:

• The solicitor’s note did not reveal whether Mr Oliver named all four siblings (or just some) or explain why Mr Oliver only wanted to benefit his sister. It did not appear from the note that the solicitor investigated whether Mr Oliver was aware of those who had claims on his bounty in accordance with the requirements for testamentary capacity as outlined in Banks v Goodfellow (1870); and
• Although the solicitor procured a doctor to complete a form at the time the Will was executed that answered questions about Mr Oliver’s testamentary capacity in line with the matters outlined in Banks v Goodfellow, the doctor’s answers were not helpful or responsive nor did the doctor state what involvement they previously had with Mr Oliver.

Because of the Public Trustee’s unsatisfactory solicitor notes and medical evidence, the Court was “not actually persuaded on the balance of probabilities that the deceased had capacity at the time he made the will” and accordingly declared the Will invalid. Following from this, the Court refused to order that the Public Trustee’s costs be paid from Mr Oliver’s estate since it “came to Court propounding a will which it could not prove because of its own default in documenting, by its solicitor and by the doctor it contacted at the time of making the will.”

Interestingly, although Mr Oliver’s brother was successful in having the Will declared invalid, the Court appointed the Public Trustee as administrator rather than him since they did not think he would rationally and impartially fulfil the duties of an administrator.

If you require legal advice about the validity of will or simply need assistance in preparing a will, please contact HPL Lawyers on (02) 9905 9500.

The post Will Made by Schizophrenic Man Declared Invalid by Queensland Court appeared first on HPL Law Group Sydney.

Since 1970 in New South Wales, the Limitations Act 1969 (NSW) specifies that a person must be in adverse possession of a property for at least 12 years before applying to become the registered owner. A recent decision of the New South Wales Supreme Court (‘Court’) looks at the requirements for a claim of adverse possession where two parties brought competing claims.

Background

Strel v Cordia [2016] NSWSC 1596 concerned a dispute between two persons claiming ownership of a property at Petersham (‘Property’) on the basis of adverse possession. The registered owner, Sylvia Graef, entered into a terms contract of sale with Richard Strel in 1959 (‘Contract’) who moved into the Property in 1960 with his wife and daughter. Mr Strel lived in the Property until his death in 1987.

After Mr Strel’s death, his daughter agreed to let the next-door neighbour Robert Cordia use the Property to store his belongings. Since he was using the Property for storage, he took it upon himself to pay the council rates and water for the Property from around late 1991 until March 2015. He also paid electricity to make the Property look “lived in.” In addition to performing maintenance on the Property, Mr Cordia removed the boundary fence that separated the Property from his property. According to Mr Cordia, Ms Strel raised no objection to these works.

In about October 1998, Ms Strel moved to the Blue Mountains and did not return to the Property for some time. She believed that Mr Cordia was looking after the Property for her and paying the expenses in exchange for him being able to use it for storage. Despite accepting that the Property was not his residence, Mr Cordia admitted to sleeping at the Property on infrequent occasions and using it as a mailing address.

Ms Strel did not take any steps to obtain legal ownership of the Property until 2015, when she lodged a caveat as the sole beneficiary of Mr Strel’s estate (Mr Strel’s wife had predeceased Mr Strel in 1981). She explained this delay because of the circumstances of her father’s death. Mr Strel’s death was caused by a violent assault he suffered in the Property one night and ever since, she found it too upsetting to be in the Property for very long. She stated that she rarely visited the Property and left all of her father’s belongings in the Property in the same state as when he died. Nevertheless, she believed that as the only child, she had inherited the Property.

Ms Strel later commenced proceedings claiming she was entitled to become the registered owner of the Property either on the basis of the Contract or, alternatively, on the basis that her family had possessed the Property since 1960 and thus extinguished Ms Graef’s title. On the other hand, Mr Cordia contended by Cross-Claim that he was entitled to be the registered owner since he exclusively possessed the Property from 1991.

The Contract

The first question for the Court to determine was whether Mr Strel had any right to become the registered owner of the Property pursuant to the Contract. At the time of the proceedings, neither the Contract nor Ms Graef could be located. While a caveat lodged by Mr Strel in November 1959 referred to the Contract and his standing as purchaser of the Property, there was no further documentation adduced to reveal the terms of the Contract.

However, based on evidence from a lawyer in the 1960’s about the usual provisions in terms contracts, the Court was willing to find that the Contract likely provided for Mr Strel to pay Ms Graef a purchase price by instalments over an unknown period of time. Ms Strel’s former husband gave evidence that in about 1970, Mr Strel referred to the Property as “my” property and that he had paid off the Property. The Court accepted this evidence as suggesting that by this time, Mr Strel had completed his payment obligations under the Contract and as such, was entitled to ownership of the Property.

The absence of any action taken by Ms Graef to recover possession of the Property supported this conclusion despite the absence of any action taken by Mr Strel to become the registered owner. The Court viewed Mr Strel’s inaction as more explicable than Mr Graef’s inaction in light of Mr Strel’s continued possession of the Property and the perceived security of Mr Strel’s caveat.

Therefore, upon Mr Strel’s death and the grant of letters of administration to Ms Strel on 15 May 2015, all of his rights in the Property vested in Ms Strel under section 44 of the Probate and Administration Act 1898 (NSW). Since Ms Strel was successful in enforcing the Contract, the Court did not need to consider Adelaide’s alternative claim to the Property pursuant to adverse possession.

Mr Cordia’s claim for possessory title

Having found that Ms Strel was entitled to become the registered owner of the Property, the Court then turned to determine whether her rights were defeated by Mr Cordia’s claim. The Court did not agree with Mr Cordia’s submission that Ms Strel granted him an indefinite lease of the Property from 1991. Instead, the Court characterised the arrangement as a contractual licence to use Property pending Ms Strel sorting out the “situation”. This did not amount to exclusive possession or indicating that Ms Strel would need to seek Mr Cordia’s permission to access the Property.

Several neighbours of the Property gave evidence that in the late 1990s and early 2000s, Mr Cordia told them that Ms Strel was letting him use the Property and referred to the Property as “her place”. The Court found this evidence did not support that Mr Cordia believed Ms Strel had abandoned the Property. The evidence from neighbours also did not support that Mr Cordia padlocked the front gate from 1991. Instead, the Court found it was more likely that the padlock was in place from 2012.

The Court ultimately dismissed Mr Cordia’s claim and ordered that Ms Strel was entitled to possession of the Property against him. The Court explained why Mr Cordia’s claim failed as follows:

“ I accept that Mr Cordia may have known in 2001 that the registered proprietor was Sylvia Graef, not Ms Strel, but I find that he did not then form the view that Ms Strel had abandoned the property and had no right to give him permission to occupy it. He continued to assume that Ms Strel was taking or would take steps to transfer the property into her name. It was not until 2013 that Mr Cordia came to the conclusions that Ms Strel was not in a position to give him permission to occupy the property, and that she had abandoned the property…It is well established that for possession of land to cause time to run under the Limitation Act the possession must be open, not secret; peaceful, not by force; and adverse, not by consent of the true owner…Use or occupation derived from permission or grant cannot be adverse…At least until 2013, any possession of the property by Mr Cordia was with Ms Strel’s consent. It follows that Mr Cordia’s claim that he has been in adverse possession for more than twelve years such that Ms Strel’s title is extinguished…must fail.”

Implications

Cases like these always act as a warning for those who wish to assert rights to a property. Both the plaintiff and the defendant in this instance could have benefited from taking action sooner. For registered owners, it is important to properly document the arrangements of those who you permit to occupy your property and avoid behaviour that may be seen as abandoning the property. And for those who are not the registered owner but nonetheless assert ownership rights to a property, seeking legal advice is paramount.

If you require legal advice about your rights with respect to a property, please contact HPL Lawyers on (02) 9905 9500.

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The primary decision

Behman v Behman [2016] NSWSCA 295 concerned a dispute between a father (Terry) and his son (Daniel) regarding the father’s home. After Daniel left school and commenced working, he continued to live with his father in the family home for a period of five years until he was 24 years old. During this period, Daniel paid all of his income ($204,000) into a bank account controlled by Terry and used predominantly to pay Terry’s mortgage. Daniel said he did so on the basis that his father had represented to him that he had an interest in the home.

These representations to Daniel, which Terry admitted to have started from when Daniel was only 11 years old, included the following statements:

• “This isn’t only my home, it’s yours and your brother’s so everyone needs to help”;
• “I’m not keeping it [the home] for me”; and
• “It is not just my money and your money. We all own the house so we all pay for it as a family”.

The Supreme Court of New South Wales (‘Court’) held that when the boys were young, given their age, it would have been unlikely that they understood their father to have meant by these representations that they were given an equal share in the home. However, this changed once Daniel became an adult and commenced employment at an accounting firm. From that time, the Court likened Daniel’s contribution to the various liabilities of the home to that of a de facto.

The Court ultimately ordered that the home should be charged with repayment to Daniel of an amount representing 1/5th of the net value (i.e. $120,000) and this was a reasonable reflection of what Daniel had contributed towards meeting the burden of the mortgage repayments “beyond what could be expected of a son living at home.” The Court granted this relief to the son on the basis that it would be unconscionable for Terry to retain Daniel’s wages without giving him an interest in the home.

Although the Court charged the home in support of Daniel’s equitable interest in the property, the Court also recognised that Daniel could have succeeded in his alternative equitable proprietary estoppel claim (i.e. preventing Terry from denying his interest in the home):

“ Having regard to the undisputed fact that Terry told him at the time after Daniel had become an adult that “this is everyone’s house”, “I’m not keeping it for me”, “we all own everything” and “it’s yours and your brothers”, I accept that Daniel understood that he would, by continuing to make his extensive contributions, have an interest in the property which reflected those contributions although the extent of that interest was somewhat vague. In a context where significant contributions had commenced to be made it is not surprising that Daniel should have so understood the words used by Terry and Terry’s response when Daniel asked for return of his money was “the house is the family’s and since you’re no longer part of the family you don’t own it anymore” effectively recognising the existence of the interest that Terry denies Daniel ever had.”

Equitable interest upheld on appeal

Terry appealed the Court’s decision on the ground that the primary judge erred in finding a common intention that Daniel expected to receive a joint interest in the property. Terry argued that the representations were informal conversations between family members that started when Daniel was a child and continued into his adulthood. As such, these conversation should be interpreted in light of their informal nature and not given a new meaning simply because Daniel became an adult.

The Court of Appeal rejected Terry’s arguments and dismissed his appeal, explaining its reasoning as follows:

“ At that time [March 2007] he [Daniel] commenced university and a new job and made clear that he wanted to be independent, to move out of the home and to manage his own affairs. The appellant [Terry] persuaded him not to do so because the contribution of his wages was necessary to enable the repayment of the mortgage and retention of the family home in which he had a joint interest. Exchanges to that effect continued over the subsequent period and, as the primary judge found, were a “factor in [the respondent] continuing to provide most of his wages and permitting those wages to pay for the mortgage and related property expenses such as council rates.””

Implications for parents

The Court did not recognise Daniel’s interest in his father’s home merely because his father told him that the home was his. It would not be unusual for a parent to make such representations to their children with the common understanding that the home would be theirs after the parent’s death. However, in this case, the child acted on this representation to his detriment by contributing all of his income to the mortgage payments. By such conduct, the Court was more willing to interpret such representations as conveying an immediate interest in the home rather than an interest delayed until the parent’s death.

By paying all his income into his father’s bank account, these payments were properly categorised not as rent, but as the pooling of resources for a common enterprise of maintaining the family home. Where children living at home are expected to contribute more than what would be reasonable in the circumstances, absent a written agreement to the contrary, there is a risk that they may be granted an equitable interest in their parents’ home in light of any statements made by the parent to the child. The Court found the father’s use of the word “own” was also significant so, unless intended, parents should avoid using words that connote ownership when talking with their children.

If you require legal advice about your living arrangements, please contact HPL Lawyers on (02) 9905 9500.

The post Flying the Nest with Part of the Nest Egg: Son Obtains Interest in Father’s Home by Paying Mortgage appeared first on HPL Law Group Sydney.

In light of the impending removal of paper certificates of title, New South Wales has recently amended the Real Property Act 1900 (NSW) (‘Act’) to allow purchasers to lodge a ‘Priority Notice’ to protect their interests in land. As part of a national transition to electronic conveyancing, priority notices have also been introduced in Victoria and South Australia, while similar notices have already existed in Queensland and Tasmania for some time.

What is a ‘Priority Notice’?

A Priority Notice is a prescribed electronic form that can only be lodged through the national electronic conveyancing platform, PEXA, from 28 November 2016. A Priority Notice can be lodged under section 74T of the Act by anyone who intends to lodge a dealing to give effect to an entitlement to a legal or equitable interest in land and any associated dealings (e.g. a mortgage or discharge or mortgage). For most Priority Notices, this will be a purchaser under a contract of sale. If the Priority Notice is in the approved form, the Registrar-General may accept the lodger’s entitlement to lodge it on face value.

Under section 74W of the Act, while a Priority Notice is current, similar to a caveat it prevents the registration of any dealing or plan relating to the land other than the following:

• A dealing specified in the Priority Notice;
• A dealing lodged with the lodger’s consent;
• A dealing in registrable form that was lodged before the Priority Notice;
• A caveat or the withdrawal or lapsing of a caveat;
• A vesting or dealing effected in accordance with an order of a court or a provision of a law of New South Wales or the Commonwealth;
• A transmission application by an executor, administrator or trustee in respect of the estate or interest of a deceased registered proprietor;
• A dealing that effects or evidences a replacement of existing trustees or the appointment of new or additional trustees;
• A notice of death;
• In relation to a mortgage, charge or covenant charge recorded or lodged in registrable form before the lodgment of the Priority Notice, a dealing effected by the mortgagee, chargee or covenant chargee in the exercise of a power of sale or other power or a right conferred by the mortgage, charge or covenant charge or by or under law; and
• In relation to a lease recorded or lodged in registrable form before the lodgment of the Priority Notice, a dealing effected by the lessee pursuant to a right conferred by the lease or by or under law.

How long does a Priority Notice last?

Once a Priority is lodged, it will last for 60 days under section 74V of the Act. If required, a lodger can apply to the Registrar-General for an extension of this period by 30 days. Provided such application is made before the expiration of the 60-day period and is in the approved form, the Registrar-General will grant the requested extension.

If the dealings specified in a Priority Notice are lodged or the 60-day period expires (subject to an extension), the Priority Notice will be automatically removed. At any time before the expiration of a Priority Notice, its lodger, a person protected by the Priority Notice or their lawyer/conveyancer can withdraw the Priority Notice under section 74X of the Act. Otherwise, the Registrar-General has the power to remove a Priority Notice if he or she is satisfied that the:

• Priority Notice has expired; or
• Priority Notice does not relate to the land to which it purports to relate; or
• dealing or dealings to which the Priority Notice relates are unlikely to be lodged or registered before it expires; or
• person who lodged the Priority Notice has not provided evidence required by the Registrar-General under section 74T(5) of the Act within the period specified by the Registrar-General.

If you require assistance with buying or selling property or electronic conveyancing, please contact HPL Lawyers on (02) 9905 9500.

The post NSW Says Hello to Priority Notices and Starts to Farewell Paper Certificates of Title appeared first on HPL Law Group Sydney.

An executor enjoys a position of great trust and power. As the person (or persons) responsible for administering a deceased person’s estate and carrying out their wishes, it is not surprising that courts hold executors to a high standard of care in fulfilling their duties and exercising their powers.  A recent decision of the New South Wales Supreme Court (‘Court’) highlights once again the duties of executors and the serious consequences should they fail to discharge these duties.

The executor’s conduct

In Parsons v Davison [2016] NSWSC 1491, the deceased appointed his brother as executor in his last will dated 2 July 1990 (‘Will’). The Will left the deceased’s estate to the Plaintiffs and the executor’s three children. The Court granted probate of the Will to the executor in March 2011.After four years had passed and administration of the estate had still not been completed, the Plaintiffs applied to the Court for the executor’s grant of probate to be revoked and for letters of administration to be granted to them in his place on the grounds that the executor had failed to promptly and properly administer the estate.

The executor’s conduct during the course of the administration included the following:

• He had not yet sold or transferred to the beneficiaries two blocks of land, some farmland and 1001 shares in a private company;
• He paid himself a commission of $46,500 from the estate without the consent of the beneficiaries, although he later repaid this to the estate;
• He had lived rent-free in one of the deceased’s properties for approximately four years;
• He claimed that he was entitled to a third interest in the deceased’s company shares; and
• He did not keep proper accounts of the estate and as a result, was unable to pass such accounts through the Supreme Court of Western Australia.

The decision

Following earlier authorities, the Court decided that the case was one that warranted the removal of the executor since “the due and proper administration of an estate has been put in jeopardy or has been prevented by reason of acts or omissions on the part of the executor…establishing that he is not a fit and proper person to carry out the duties involved in the due administration of the estate.”

Critical to the Court’s decision was the executor’s conflict of interest regarding the company shares and his failure to keep proper accounts:

“ The evidence is sufficient to establish that the defendant has a conflict of interest in relation to his holding of the 1001 shares in Moore Securities as an asset of the estate, both in respect of his expressed claim to be entitled to an interest in those shares, and also the possibility that he may have dealt with the assets of Moore Securities in an unauthorised manner. Furthermore, the performance by the defendant of his duty as executor to maintain proper accounts for the estate has been entirely unsatisfactory. It appears that the primary supervision of the execution of the deceased’s will has fallen to the Supreme Court of Western Australia. Registrar Boyle, of that court… referred to the fact that there had been four appointments in relation to the requirements to pass the accounts. At each appointment, while there had been some explanation of various estate accounting matters, the defendant had never been able to deal with all of the matters necessary to properly pass the accounts of the estate. The Registrar referred to this as being a ‘serious concern’.”

In addition to revoking the executor’s grant of probate, the Court also ordered that the executor pay the legal costs of the Plaintiffs. If that was not bad enough for the executor, the Court also ordered that he would not be entitled to have his own legal costs paid from the estate.

Implications for executors and beneficiaries of estates

This case demonstrates that Courts will step in if an executor is not performing their duties to a satisfactory standard. An executor cannot take as long as he or she wishes to administer an estate without reasonable excuse, nor can they do whatever they want. An executor also needs to ensure he or she keeps satisfactory records and accounts. Executors are under serious legal obligations.

An executor’s job can often be difficult and time-consuming. Navigating the duties and responsibilities of an executor can also be overwhelming. For this reason, lawyers can help ease the burden. The executor in this case did not appear to have any legal representation in administering the estate. Had he received professional assistance, as recommended by the Supreme Court of Western Australia, this decision may have been different.

Please contact HPL Lawyers on (02) 9905 9500 if you require assistance in administering a deceased estate.

The post Parsons v Davison: Court Removes Dilatory Executor appeared first on HPL Law Group Sydney.

The New South Wales Court of Appeal (‘Court of Appeal’) has handed down a recent judgment in Bonafair Holdings Pty Ltd v Hungry Jack’s Pty Ltd [2016] NSWCA 276 relating to a dispute between Hungry Jack’s and its landlord regarding who was responsible for the costs to replace a damaged switchboard in the premises.  Critical to the Court of Appeal’s decision was whether the damage was sustained before or after Hungry Jack’s became the tenant.

Background

Competitive Foods Australia Limited (‘Foods’), the holding company of Hungry Jack’s, was the tenant of a premises in Sydney from around 1980. During Food’s tenancy, it allowed Hungry Jack’s to occupy the premises to operate its fast food business. When the lease to Foods expired in February 2006, the landlord of the premises, Bonafair Holdings Pty Ltd (‘Landlord’), subsequently granted Hungry Jack’s a lease of the premises for 10 years commencing in March 2006 (‘Lease’).

Three months before Hungry Jack’s executed the Lease in July 2006, an expert report indicated that the 15-year old main electrical switchboard (‘MSB’) was in need of immediate replacement and relocation from the Hungry Jack’s kitchen to a main switch room. After complaints from Hungry Jack’s, the Landlord finally replaced and relocated the MSB to the basement in 2007.

Some five years later, the Landlord commenced proceedings in the District Court to recover the cost of replacing and relocating the MSB (approximately $246,000) from Hungry Jack’s on the basis that it was liable under the Lease for damage caused to the premises by its act or omissions. The primary Judge rejected this argument and found that Hungry Jack’s did not contribute to any damage sustained by the MSB during the term of the Lease (i.e. March 2006 onwards).

The appeal

The Landlord appealed to the Court of Appeal, who ultimately upheld the District Court’s original decision that Hungry Jack’s was not liable for the cost of replacing the MSB because the MSB had already reached the end of its life before Hungry Jack’s had executed the Lease. Therefore, Hungry Jack’s did not cause or contribute to the need to replace the MSB during the term of its Lease.

However, the Landlord argued that the relevant provisions of the Lease dealing with Hungry Jack’s liability should be construed to apply to its acts or omissions pre-dating the commencement of the Lease as occupier of the premises (but not as a tenant). The Court of Appeal again rejected this construction on the following grounds:

“ Clause 9.1 provides that, subject to certain qualifications, the Lessee must keep the Premises in good and tenantable repair, having regard to its condition at the Commencement Date. This language makes it clear that the obligation arises from the commencement of the Lease and cannot relate to any prior period of occupation by the Lessee in a different capacity. The other sub-clauses of cl 9, which impose a variety of obligations on the Lessee, including giving prompt notice to the Lessor of certain defects in the Premises, also are intended to apply from the commencement of the Lease. Again it is implausible to suggest that cl 9.6 is intended to impose liability on Hungry Jack’s for its acts or omissions prior to the commencement of the Lease, at a time when there was neither privity of contract nor privity of estate between it and Bonafair.”

The Court of Appeal commented that, if the MSB was damaged by Hungry Jack’s prior to the commencement of the Lease, the proper remedy was enforceable against Foods as the legal tenant at the time; not Hungry Jack’s.

Implications for Landlords

This case should serve as a warning to landlords regarding the liability of tenants. Landlords need to ensure that they do not allow access to premises before the commencement of a lease as the provisions in the lease may not be enforceable against the tenant for any damage sustained to the premises prior to the lease commencement.

Alternatively, landlords should put in place agreements that govern any period of occupation that precedes the lease commencement.

Also, it is important when dealing with related party tenants that landlords should be clear about which legal entity they are dealing with.

If you require advice regarding a New South Wales commercial or retail lease, please contact HPL Lawyers on (02) 9905 9500.

The post Court Orders Hungry Jack’s Not Liable for Repair Costs Under Lease appeared first on HPL Law Group Sydney.