Property Law

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GUEST OBSERVER
Where the land, or the interest in the land, is worth $2 million or more, the new law requires the purchaser to withhold 10 percent of the purchase price and send it to the ATO unless the vendor has obtained a ‘clearance certificate’ from the ATO and provided it to the purchaser prior to settlement.
This obligation arises regardless of whether the vendor is a foreign resident or not.
Parliament recently passed legislation amending the taxation law to impose withholding obligations on the purchasers of certain Australian assets – generally property purchased from a non-resident.  However, the changes will affect most purchases of property in Australia!
The amendments impose a 10 percent withholding obligation on purchasers of ‘Taxable Australian Real Property’ (generally, this means an interest in Australian land) from certain foreign residents, as well as certain ‘indirect Australian real property interests’ (such as shares in companies that own a lot of land) and options to acquire such assets.
The amendments will generally apply where the contract to purchase an applicable asset is signed on or after 1 July 2016.
Example
On 1 August 2016, Harvey enters into a contract to purchase a residential property in an affluent Sydney suburb for $2.5 million, with settlement proposed to occur on 1 October 2016.  He does not know whether the vendor is a foreign resident.
Despite many requests from Harvey’s lawyer, the vendor refuses to obtain a clearance certificate from the ATO to give to Harvey.
As Harvey is acquiring Australian land with a market value greater than $2 million and he has not received a clearance certificate from the vendor by the time settlement occurs, Harvey will be required to withhold and pay to the ATO $250,000, whether or not the vendor is an Australian resident.
The vendor will be able to apply for the certificate online BUT it is the purchaser’s responsibility to request it from the vendor. Ultimately, the purchaser is relying on their agent or solicitor to organise everything for them. Makes us wonder how many will forget so make sure you have a good one.
For more information, click <a href="https://xperion.com.au" target="_blank">here</a>.
 
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jchancellor-FAypfDUnLy

Property 101: Seller and buyer obligations with $2 million plus clearance certificates

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GUEST OBSERVER
There are many hidden costs and inefficiencies in housing markets. Blockchain is poised to transform that.
An emerging technology, blockchain, could transform the way we buy and sell real estate by doing away with the hidden costs and inefficiencies of our housing markets.
Blockchain is an online ledger that records transactions. It’s capable of recording the movement of any kind of asset from one owner to the next.
It’s public and isn’t owned by any one corporation, there are no charges to record transactions. Its openness ensures the integrity of transactions and ownership, as everyone involved has a stake in keeping it honest.
This means there are fewer intermediaries; less middle-men who increase the costs and time to complete a transaction.
There are risks associated with the system as it’s only as strong as the code that supports it, which has come under attack in the past. Despite this, examples from overseas show it is possible to apply this technology successfully to our housing market.
Problems in how the property market is run
For buyers able to find the right property, secure a mortgage and save a deposit, they must also pay for a range of so-called “hidden costs”. These are additional payments associated with the transaction over the cost of the home itself. Many legal and title-related costs would become near-obsolete in a blockchain system.
The combined costs of title registration, title insurance, and legal fees associated with register the property transfer approach A$1,000 on the average Australian house. Costs continue to rise as the prudent buyer undertakes further due diligence, through building inspection documentation, previous sales records and so forth.
On top of the financial cost, it then typically takes over a month to settle a real estate transaction in Australia. The blockchain system can speed things up, as currently tedious checks undertaken by hand, move to an automated system overseen and approved by the relevant stakeholders.
There is also the risk that land titles offices with a single database simply get things wrong too. In 2016 it was reported that 300 incorrect certificates had been issued in NSW, with 140 of those being recent property buyers affected by government plans for major motorways in Sydney’s west.
There are now concerns that the system’s quality could be compromised in several states, including NSW and South Australia, as land titles offices become privatised.
A blockchain real estate market
If blockchain were applied to the property market in Australia, every property would be encoded with a unique identifier. Property IDs already exist in most land registry systems, so these would need to be migrated to a blockchain.
Next, the blockchain ecosystem then needs to have defined who the people behind the transaction are, those stakeholders that include the owner, lender, and government.
Transactions of property are conducted via “smart contracts” – digital rules in the blockchain that process the agreement and any specified conditions. Buying and selling could still take place via agents, or the smart contract can be advanced to incorporate the sale rules and make this decision automatically. The blockchain for each property grows as transactions are added to the ledger.
A housing market without agents, conveyancers and a land-titles office may seem decades away, but a handful of countries have already piloted blockchain land registration system.
In Australia, our current land titles system is among the world’s best, but it is not infallible. A range of hidden taxes and transaction costs increase market inefficiencies.
And while the electronic system Property Exchange Australia or PEXA, has brought us to the point of a near paperless property market, it’s still an intermediary between the parties and the record of the transfer in the Torrens system - our current land title system.
The added advantage of a blockchain system is in eliminating risks, in particular the risk of records being accessed fraudulently and altered or deleted because it is a permanent and immutable record. This means that a huge amount of computing power would be required, probably along with some collusion, and the alteration is easily detected across the ledger. That’s not to say the blockchain system is perfect.
Blockchain’s advantage in restricting any changes to historical records becomes a disadvantage when incorrect or fraudulent entries are added. Digital currency managers, Ether and Bitfinex, learned this the hard way through cyber attacks.
Last year these attacks siphoned off over US$50 million in ether tokens from The DAO, the largest crowdfunded venture capital fund. This breach led to a controversial split of Ether into two separate active digital currencies.
Only months later, Hong Kong-based crytocurrency trading firm, Bitfinex, had the equivalent of US$68 million stolen by hackers in a security breach reminiscent of the hack that bought down Mt Gox in 2014. It is little comfort to cautious market regulators that the thieves behind these attacks can not spend it without revealing their identity on the blockchain.
These hacks demonstrate that blockchain systems are only as secure as the code which supports them. As a nascent technology, its cracks are detected only when they are exposed.
Where blockchain has worked before
Sweden became the first western country to explore the use of blockchain for real estate in July last year. At the time, the Swedish Land Registry partnered with blockchain startup ChromaWay to test how parties to a real estate transaction – the buyer, seller, lender, government – could track the deal’s progress on a blockchain.
Other countries at the forefront of blockchain for real estate include The Republic of Georgia, Honduras, and Brazil which announced a pilot program earlier this month. While this might seem like a disparate list, it’s in these countries where the long-term potential of a blockchain for real estate are most significant.
Systemic corruption and insecure database management in these countries, and many other emerging economies, is seen as a major constraint on growth and prosperity. Why would you invest in a house, or any other asset, if there is a distinct possibility that the record of your ownership could simply disappear?
With ever increasing demands for improvements to transaction efficiency and local real estate industry giants like CoreLogic appointing research teams dedicated to new technology applications, it might not be long before we see a real estate blockchain system in Australia.
Danika Wright is a Lecturer in Finance, University of Sydney and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/danika-wright-121868">here</a>.
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How the blockchain will transform housing markets: Danika Wright

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Consumer Affairs Victoria is undertaking a review of the following consumer property legislation:
<ul>
<li>Estate Agents Act 1980</li>
<li>Owners Corporations Act 2006</li>
<li>Conveyancers Act 2006</li>
<li>Sale of Land Act 1962</li>
</ul>
The review will:
<ul>
<li>identify opportunities to modernise and improve the legislation, taking into account stakeholders’ experiences and industry developments since each Act came into operation</li>
<li>examine whether the legislation efficiently and effectively regulates the conduct of licensed practitioners involved in the sale of land, real estate transactions and management of owners corporations</li>
<li>recommend changes to improve the way the legislation operates. </li>
</ul>
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<div id="GeneralBodyContent">
<h2>Consultation process</h2>
As part of this review, the Minister for Consumer Affairs has approved the release of three issues papers for public consultation. The purpose of these papers is to raise issues for consideration and comment, and draw out evidence and commentary from stakeholders about the nature of the issues and the extent of any problems.
Anyone may make a submission for consideration in response to the issues papers.
Each issues paper includes a series of questions as a guide to writing your submission. We also welcome your suggestions for other issues you believe should be considered in the lead-up to the release of an options paper in mid-2016.
<h3>Making a submission</h3>
You can make a submission until 11 March 2016:
By mail: Consumer Property Law Review Policy and Legislation Branch Consumer Affairs Victoria GPO Box 123 Melbourne VIC 3001 By email: <a href="mailto:consumerpropertylawreview@justice.vic.gov.au" target="_blank">consumerpropertylawreview@justice.vic.gov.au</a>
Unless you label your submission as confidential, your submission or its contents will be made publicly available in this and any subsequent review process. Submissions may be subject to Freedom of Information and other laws. Consumer Affairs Victoria reserves the right to not publish information that could be seen to be defamatory or discriminatory.
Please ensure any documents sent via email do not exceed 5 MB in size. Word documents are preferred, for accessibility reasons.
Your submission must include:
<ul>
<li>your name</li>
<li>organisation name (if applicable)</li>
<li>your email address.</li>
</ul>
Submissions will be made available on our website after 11 March.
If you have any queries, please email <a href="mailto:consumerpropertylawreview@justice.vic.gov.au" target="_blank">consumerpropertylawreview@justice.vic.gov.au</a>
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Property 101: Consumer property law review - February 2016

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Your home may be the biggest investment you'll ever make. But if it was built before the 1980s, it could be affected by hazardous loose-fill asbestos insulation. Loose-fill asbestos is raw crushed asbestos, which in the 1960s and 70s, was installed as insulation.
Over time hazardous airborne fibres can move from the ceiling into your living space.
If your home contains loose-fill asbestos insulation, its value in the market will be affected.
The NSW Government is proposing new laws to protect the community from unknowingly purchasing a property that contains loose-fill asbestos. Under these laws, when selling your property, you must confirm in the contract of sale if your property:
<ul>
<li>contains loose-fill asbestos; or</li>
<li>is free of loose-fill asbestos.</li>
</ul>
If you do not comply with these laws you risk significant financial loss and potential legal action. The Government's assistance program is your chance to protect yourself from the financial consequences of loose-fill asbestos.
NSW Fair Trading will provide financial assistance and support to affected homeowners and tenants, but you must register by 1 August 2016.
The NSW Government is providing free sample testing to owners of pre-1980s residential premises in 28 identified NSW local government areas.
For more information <a href="https://www.fairtrading.nsw.gov.au/ftw/Tenants_and_home_owners/Loose_fill_asbestos_insulation/Register_for_free_testing/Additional_free_sample_testing.page" target="_blank">click here</a>.
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jonathanchancellor-7SQnKwU6yx

Property 101: Loose-fill asbestos in NSW homes

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Ian Hugh Sargent, trading as WA Prestige Properties in Subiaco, has been reprimanded by the State Administrative Tribunal (SAT) for transferring $75,000 from his agency's trust account into its operating account in May 2012.
On the same day, $71,312 was withdrawn from the agency's operating account to pay a debt to the Australian Taxation Office. The funds used included $50,000 that was paid to the agency as a deposit relating to a property purchase that was the equivalent to the commission owing to the agent, however the sale didn't go ahead and the offer was withdrawn.
The SAT found that the agency had contravened the Real Estate and Business Agents Act by receiving a commission prior to settlement of the property, making an unauthorised withdrawal from their trust account and paying trust account funds to a person not lawfully entitled to receive them.
The tribunal took into consideration that the withdrawal was an 'isolated event' and the agent had not previously been subject to any disciplinary proceedings.
Acting commissioner for Consumer Protection, David Hillyard said this was a serious breach of the law with serious consequences for the agent and his business.
“Real estate agents who illegally pay commissions to themselves prior to settlement are playing with fire as these sales can often fall through,” Mr Hillyard said.
The nine-month suspension begins June 2016.
 
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WA agent reprimanded over trust account transfer

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Consumer Affairs Victoria is undertaking a review of the following consumer property legislation:
<ul>
<li>Estate Agents Act 1980</li>
<li>Owners Corporations Act 2006</li>
<li>Conveyancers Act 2006</li>
<li>Sale of Land Act 1962</li>
</ul>
The review will:
<ul>
<li>identify opportunities to modernise and improve the legislation, taking into account stakeholders’ experiences and industry developments since each Act came into operation</li>
<li>examine whether the legislation efficiently and effectively regulates the conduct of licensed practitioners involved in the sale of land, real estate transactions and management of owners corporations</li>
<li>recommend changes to improve the way the legislation operates. </li>
</ul>
<h2>Consultation process</h2>
As part of this review, the Minister for Consumer Affairs approved the release of three issues papers for public consultation. The purpose of these papers was to raise issues for consideration and comment, and draw out evidence and commentary from stakeholders about the nature of the issues and the extent of any problems. 
Submissions will be made available on our website after the closing date for each paper. 
An options paper will be released in July/August 2016.
For more information, <a href="https://www.consumer.vic.gov.au/resources-and-education/legislation/public-consultations-and-reviews/consumer-property-law-review" target="_blank">click here</a>.
 
 
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Property 101: Victoria's property law review

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REINSW and the Law Society of NSW have created a new edition of the Contract for Sale and Purchase of Land 2016 to comply with new legislation.
The new version highlights a law which was brought in on 1 July 2016, affecting foreign residents purchasing a property over $2 million.
Under the new law, vendors selling a property for over $2 million will need to apply for a clearance certificate to avoid the purchaser withholding 10 percent tax from the purchase price.  
It also affects companies buying a property, if any of the owners are a foreign resident. Find out more <a href="https://www.reinsw.com.au/imis15_prod/Web/Posts/Latest_News/201603/New_withholding_tax_regime.aspx?WebsiteKey=fc035f62-aa1d-4485-9a5d-f9989cc37ba9" target="_blank">here</a>.
As a result, to deal with this new law the REINSW and Law Society of NSW have updated the Contract for Sale of Land and Purchase of Land. This new edition is not available as a paper copy but can be purchased in digital form by visiting the <a href="https://www.lawsociety.com.au/ECOS/index.htm" target="_blank">ECOS </a>website.
The new 2016 edition of the contract has prompts and clauses to deal with the new withholding tax law, and also includes a warning about the new <a href="https://www.reinsw.com.au/imis15_prod/Web/Hot_topics/Swimming_Pools/Web/Posts/Topics/Swimming_Pools.aspx?hkey=0ca667d3-d548-451b-a6a0-64a0e782a0ce" target="_blank">swimming pool compliance</a>. Find out about the main changes <a href="https://www.lawsociety.com.au/cs/groups/public/documents/internetcontent/907643.pdf" target="_blank">here</a>.  
Barry Johnston, Principal of Balmoral Partners said: “REINSW CEO Tim McKibbin has spent a lot of time time lobbying the government to make sure the legislation is workable.
“The new contract reflects this - so it is best practice to make sure you are using the latest contract because it is there to protect us.”
To find out more about the Contract for Sale and Purchase of Land 2016, watch the webinar with Barry and Gary Newton, Partner in TressCox Lawyers, <a href="https://www.youtube.com/watch?v=-hxgbBC4M5Q" target="_blank">here</a>. 
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Property 101: The new NSW contract for sale

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GUEST OBSERVER
After you separate from your spouse, you will likely need to make arrangements to divide your property and separate your finances.
You can begin working out a property settlement any time after you separate from your spouse. You do not need to wait until your divorce comes through.
Even if all the property is in the other person’s name, or you did not make direct financial contributions to property (such as paying the mortgage), you will usually still be entitled to a property settlement according to the four-step process used by the Family Court. 
How do we go about dividing property?
You should first try to reach an agreement with your former partner about financial issues. You could attempt property settlement through Family dispute resolution or other non-court based dispute resolution methods. Often this will resolve the matter without the need to go to court. For more information, see Other ways to resolve a family law dispute. Sometimes it will not be safe for you to negotiate directly with the other person (for example, where there has been family violence). For more information, see Family violence and family law.
If you are unable to come to an agreement with your former partner, you may need to ask the Family Court to make a decision for you. There are certain steps you must take before you commence proceedings for property settlement in the Family Court.
How do we know what our property is worth?
If you want to find out about how much your property is worth, you can try the following:
<ul>
<li>For houses – ask three or more real estate agents to give you a valuation of your house. They will provide these free of charge. Ask that they put down what they think the house would actually sell for, as some agents will give the best possible price rather than the more likely price to try to secure your business. You can then take an average of the estimates to use in working out your property settlement. If this method does not produce a result you can agree on, you can consider having a certified valuer visit the property. They will give a sworn valuation of your house for a fee. You can find the name of a certified valuer by asking a real estate agent or looking in the Yellow Pages.</li>
<li>For cars/boats/bikes you can use a website such as RedBook as a starting point and look at local advertisements for similar items (as RedBook is based in Victoria values may differ slightly in Western Australia). If these values cannot be agreed, you can obtain a sworn valuation from an expert.</li>
<li>Get printouts from your bank and superannuation fund of your current balances.</li>
<li>For other items such as tools, trailers and so on you can try looking at local advertisements for similar items, and if the values cannot be agreed you can seek a sworn valuation from an expert with the knowledge, skills and experience to value the particular item.</li>
<li>If there is a business involved, you may know and be able to agree upon its value. If not, you can seek a sworn valuation from an expert licensed to value businesses. </li>
</ul>
Expert valuers for different types of property can be found in the Yellow Pages.
There are no set rules about how things must be valued. When working out a property settlement with your former partner you can agree to value property as you both see fit. For example, while your household contents may only be “worth” a certain amount if you were to sell it, you might choose to think of its value as the cost it would take one person to set up a new residence with furniture and whitegoods. 
You may decide not to have your property valued at all during the process and choose to take a more practical approach. For example, you may decide that regardless of the exact value of your home, you would prefer your children be able to stay in the family home and that it not have to be sold to give you what you think you might be entitled to in a property settlement. Another example might be if you purchased most of your furniture together, you might each take turns picking an item of furniture to keep – that way you can take into account sentimental value as well as monetary value.
How can we formalise an agreement about property?
Consent orders
While it is not compulsory to formalise your agreement about property, it is recommended that you formalise your agreement about property by obtaining consent orders from the Family Court. Having court orders can assist you in dealing with organisations such as banks and can help prevent the people involved from making claims against each other’s property in the future. For more information on consent orders and how to obtain consent orders through the Family Court, see the Family Court of WA Consent Orders Kit, available from the Family Court of WA website or by calling the court registry on (08) 9224 8222 or 1800 199 228 (country areas free call) and requesting that a copy of the Kit be sent to you.
You should get legal advice about your particular circumstances prior to signing any final agreement. 
Binding financial agreements
A binding financial agreement is like a contract between the parties that can deal with how property will be divided if a relationship breaks down. Binding financial agreements may also allow for spousal maintenance to be paid if a relationship ends. The agreement can be made before, during or after a marriage or de facto relationship. Binding financial agreements can only be set aside in very limited circumstances. If you are thinking about making a binding financial agreement you should get legal advice.
How does the Family Court decide who should get what?
For information about how the Family Court decides, see How does the Family Court deal with a property case. You do not necessarily need to follow the approach taken by the Family Court to determine your own private property settlement, but as the process was designed to try to come up with a fair outcome, you may wish to use it as a guide.
Are there any time limits?
Yes. If you were married you have 12 months from the date your divorce becomes final to commence property settlement proceedings in the Family Court. You can get a property settlement before you are divorced.
Although you can work out a property settlement almost any time after separation (as the time limitation period does not start until your divorce is finalised), it is recommended to sort out arrangements as soon as possible. This is because asset values can change over time and valuations are best done close to when the parties separate.
Is superannuation included in property?
Superannuation may be included in a property settlement for people who were married. It is possible for superannuation to be:
<ul>
<li>split and transferred from one person to the other (called a "splitting order") </li>
<li>given to the one person when the other person retires and receives their superannuation payment (called a "flagging order") </li>
<li>used as an "offset" meaning if one person keeps their superannuation the other person will receive more out of the other available property </li>
<li>included in a financial agreement </li>
<li>valued as property</li>
</ul>
I am worried my former partner will get rid of assets, what can I do?
If you are worried your former partner may get rid of assets before you can finalise a property settlement you can ask the court for an injunction to stop the other person from selling or dealing with the property.
An injunction is an order from the court preventing anyone from selling or transferring assets that may be property of a marriage. 
Seek legal advice if you have concerns about the other person disposing of property. 
Can I get spousal maintenance?
Spousal maintenance is only given if one person can financially maintain the other person and the other person cannot maintain themselves because of age, mental or physical incapacity, because they have a child under 18 in their care or any other adequate reason. The court will consider a range of things when deciding on whether to grant spousal maintenance. You should get legal advice if you want to apply for spousal maintenance.
For more information from Legal Aid WA, <a href="https://www.legalaid.wa.gov.au/Pages/Default.aspx" target="_blank">click here</a>.
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Property 101: WA's property dividing laws for married couples

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The NSW government will amend underquoting laws to cover not only employees of real estate agencies but their representatives, independent contractors, subsidiaries or any related entities who act for them.
The amendments will widen the net to prevent illegal underquoting after Sydney agency BresicWhitney escaped allegations after a loophole deemed that two of its agents were not "employees" as required under the current act.
The changes were introduced in the NSW Parliament today.
In 2015, the NSW Fair Trading took BresicWhitney to court alleging it "falsely understated the likely selling price of residential property to consumers" through its two agents Nic Krasnostein and Walter Burfitt-Williams.
BresicWhitney's defence that they were not employed by BresicWhitney but by a subsidiary company, BWEA Employees Pty Ltd, <a href="/expert-insights/53886-no-appeal-in-bresicwhitney-underquoting-case" target="_blank">was accepted by the courts</a>.
The <a href="/news/53753-bresicwhitney-underquoting-loophole-to-trigger-legislative-amendments" target="_blank">Magistrate accepted this defence</a> and all charges were dismissed due to a legal technicality based on a statutory interpretation of ‘employee’ in the Act and the fact that there is no deeming provision in the Act for vicarious criminal liability.
"These changes will close a corporate loophole that has allowed agents to escape liability under the Act, and will provide consumers with additional protection," Minister for Innovation and Better Regulation Victor Dominello said.
"Underquoting is illegal, misleads prospective buyers and undermines the property market."
“These changes will close a corporate loophole that has allowed agents to escape liability under the Act, and will provide consumers with additional protection.”
Since the new underquoting laws came into effect in January, the practice of price baiting including the use of inducements such as "offers above" and "offers over" had declined, the government suggested.
But illegal off-market open for inspections without contracts have been on the rise. 
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Property 101: BresicWhitney underquoting law to come to NSW Parliament this week

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Some 54 percent of pet owners polled for a recent survey considered landlords and property managers should be compelled to allow tenants with pets.
The PETstock Pet Parent Survey interviewed more than 905 pet owners from around Australia and found more than half of all pet owners believe laws must be changed to force landlords to allow pets in rental properties, with most saying it took a long time to find somewhere they could live with their animals.
PETstock chief executive of cer Shane Young said only 1.5 percent strongly disagreed with the need to change the law.
“In Victoria, there are no laws that directly cover pets in tenancies or residencies, but landlords often include a clause in the lease banning them,” he said.
"However this may soon change with the Victorian Government currently reviewing tenancy laws, including the law around pets. Any change to the law in Victoria may set a precedent for other states to follow.
"For many people, pets were part of the family and it was heartbreaking to have to give them up if they couldn’t find suitable rental accommodation.
“Given that an incredible 83 percent of respondents agreed or strongly agreed that they treated their pets as their children, these figures are not surprising.
“When they are looking for a place to live it can be really hard for pet parents to  find a place where the owners will allow them to keep their pet.”
"The Pet Parent Survey found that 70 percent of owners took a lot of time and effort to  find pet-friendly rental accommodation. Of those who were renting homes with their pets, 84 percent said the landlord allowed it, while 4 percent said their landlord didn’t know. Just over 10 per cent said the landlord wouldn’t usually allow pets but had made an exception in this case."
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