OUT WITH THE OLD, AND IN WITH THE NEW: Significant changes in store for the property industry

July, 2014

Professionals in the property industry are set to see substantial changes this financial year as a result of the passing of the Property Occupations Act 2014 (Qld), and the introduction of the Land Sales & Other Legislation Amendment Bill 2014 (Qld).

Property Occupations Act 2014

After much anticipation, the Property Occupations Act 2014 (Qld) (“the Act”) was passed on 7 May 2014. Although an exact commencement date is not yet known, the Act is expected to be in force within the next few months. The Act substantially simplifies the previous PAMDA contracting process for the sale of residential property and lots in a community title scheme. Below we outline some of the key provisions.

Definition of ‘Residential Property’

There is a new definition of what constitutes ‘residential property’. It is short and uncomplicated referring to property that is used or intended to be used for residential purposes. This should do away with the confusion and difficulties generated in the current definition.

The Contracting Process

The Act removes the requirement to attach a Form 30C Warning Statement and Form 14 Information Sheet. However, there is now a requirement for the contract to contain certain statements which are to be inserted directly above where a buyer signs the contract, including:

1. that the contract may be subject to a 5 business day cooling-off period;
2. a termination penalty of 0.25% of the purchase price applies if the buyer terminates during the cooling-off period; and
3. a recommendation that before signing, the buyer should seek an independent property valuation and independent legal advice about the contract and the buyer’s rights during the cooling-off period.

Termination

Failure by the seller or seller’s agent to comply with the new Act will now no longer enable a buyer to terminate the contract. However, non-compliance will constitute an offence. Under the Act, the seller or seller’s agent (depending on who gave the contract to the buyer) may be subject to a fine of up to $22,000.

Cooling-Off Period

There will still be a cooling-off period of 5 days under the Act, but it won’t apply to “sophisticated party transactions”, that is, where the buyer is:

1. the government or a statutory authority;
2. a listed public company or its subsidiary; or
3. buying 3 or more lots at the same time.

 

A buyer will now be able to waive or shorten the cooling-off period by giving a written notice to the seller, as opposed to providing a Form 32A Certificate.  

Options

The uncertainty surrounding options to purchase is clarified by the Act. The cooling-off period and requirement for advice will apply when an option agreement is entered into by the parties. It will not apply when the option is exercised by the purchaser, and the contract is entered into. However, if a third party exercises the option, the cooling-off period will still apply.

Auctions 

The cooling-off period will still not apply to normal auction contracts and auction contracts entered into before 5pm on the second clear business day after the property is passed in at auction, provided the buyer was a registered bidder at the auction.

Notice for vacant non-residential land
An agent is no longer required to give notice to prospective buyers of non-residential vacant land that the land is not currently zoned for residential purposes.

Property developer licences

Property developer licences have been abolished, though developers will still need to give a disclosure notice in an approved form.

Land Sales & Other Legislation Amendment Bill 2014 (“the Bill”)

The Land Sales & Other Legislation Amendment Bill 2014 was introduced to the Legislative Assembly on 3 June 2014. Should the Bill be passed, there will be a significant reduction in ‘red tape’ for developers. The Bill proposes to amend the Property Law Act 1974, the Body Corporate and Community Management Act 1997, the Land Sales Act 1984 and the Legal Profession Act 2007.

Impact on the Property Law Act 1974

Traditionally, sellers could only ask for 10% of the purchase price as a deposit for off the plan contracts. Any more than this would classify the contract as an instalment contract. Instalment contracts are particularly problematic for developers, as they give rise to a range of statutory protections for buyers including:

1. Prohibiting the developer from mortgaging the property without the buyer’s consent; section 73 of the Property Law Act 1974; and
2. Allowing a buyer to lodge a non-lapsing caveat over the property; section 74 of the Property Law Act 1974. This can complicate the development process, as developers may need to use the land as security to fund the project.

 

As a result of the Bill, developers can now ask for 20% of the purchase price as a deposit.

This amendment substantially favours developers by giving them more security when contracts are being entered into, as well as assisting them in their financing endeavours.

Impact on the Land Sales Act 1984

The disclosure provisions relating to the sale of proposed strata lots which were previously in the Land Sales Act are now contained in the BCCM Act.

The provisions concerning the offences relating to a contravention of seller disclosure requirements have been removed from the Land Sales Act, and have not been carried across to the BCCM Act. This amendment removes an arguably unnecessary provision, as these offences have been rarely prosecuted.

Impact on the Body Corporate and Community Management Act 1997 (“BCCM Act”)

Buyers will now have 21 days after receiving a further statement in which to terminate the contact. The further statement must be certified as correct by a surveyor, and can be given any time after lot details change. A developer now no longer has to wait for the survey plan to be registered in order to give a rectification statement, which is a welcomed change.

Developers can now nominate a 5 ½ year sunset date, which was previously 3 ½ years. This is particularly beneficial to developers if construction of the project is delayed. The amendment also removes the need to have a statutory regulation passed to extend the previously 3 ½ year sunset date.

Expression of interest holding deposits must now be paid directly to a law practice or real estate agent. This is a provision that developers will need to be aware of, given that the penalty for contravening the section is 200 penalty units or 1 year’s imprisonment. 

Impact on the Legal Profession Act 2007

The introduction of the Bill also has ramifications on the Legal Profession Act. Previously, a law practice was prevented from releasing deposit money if a buyer queried the funds. The Bill now enables a law practice to release the funds if it reasonably believes that a party is entitled to the deposit. The law practice must give 60 days notice to both buyer and seller stating how it intends to disburse the funds.

Conclusion

The passing of the Act and the introduction of the Bill is welcome news for all players in the property industry, as both represent more streamlined and efficient processes, and the removal of unnecessary red tape.

Mills Oakley is hosting a breakfast seminar on 22 July 2014 to discuss the practical implications for developers, real estate agents and prospective buyers and sellers as a result of the above. To attend the seminar, please click here.

Contact Mills Oakley

For more information on any of the points raised in this article, please contact:

Melbourne


James Price | Partner 
T: +61 3 9605 0824
E: jprice@millsoakley.com.au


Anthony Brearley | Partner
T: +61 3 9605 0810
E: abrearley@millsoakley.com.au


Tom Cantwell | Partner
T: +61 3 9605 0958
E: tcantwell@millsoakley.com.au

luke-westmore

Luke Westmore | Partner
T: +61 3 9605 0061
E: lwestmore@millsoakley.com.au

Brisbane

tony-butler

Tony Butler | Partner 
T: +61 7 3228 0432
E: tbutler@millsoakley.com.au

Sydney


lachlan-paterson

Lachlan Paterson | Partner
T: +61 2 8289 5895
E: lpaterson@millsoakley.com.au

Catherine Hallgath | Partner
T: +61 2 8289 5806
E: challgath@millsoakley.com.au

Tim L’Orange | Partner 
T: +61 2 8289 5816
E: tlorange@millsoakley.com.au

Canberra

adam-peppinck

Adam Peppinck | Partner
T: +61 2 6196 5203
E: apeppinck@millsoakley.com.au

Perth

andrew-logan

Andrew Logan | Partner
T: +61 8 6167 9802
E: alogan@millsoakley.com.au

patrick-thaung

Patrick Thaung | Partner
T: +61 8  6167 9803
E: pthaung@millsoakley.com.au

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