Real Estate 5 Minute Fix 18: electronic execution; land tax rent relief, new REIQ commercial contracts, agent licensing, NSW COVID-19 regulation

New framework for real estate agent licensing

The ACT Government has passed the Fair Trading and Other Justice Legislation Amendment Act 2022, which introduces a new regime for the licensing of real estate agents in the ACT.

The new framework, which commenced on 1 June, is part of a national response to improve training requirements in the real estate industry and involves the creation of two separate classes of agent licences, introduces specific licences for land auctioneers, imposes additional training and qualification requirements on real estate agents, and creates a number of strict liability offences in relation to the conduct of agents.

Transition provisions will be in place until 30 June 2025 so that existing agents can transition to the new licence categories and undertake any additional required training.

Changes to retirement village meeting rules come into effect

Changes to the ACT aged care legislation implemented under the Fair Trading and Other Justice Legislation Amendment Act 2022 (ACT) came into effect on 11 May.

The Act makes minor amendments to the Retirement Villages Act 2012 and Retirement Villages Rules 2013 to clarify uncertainties relating to meeting procedures, including election of the meeting chair and the conduct of written ballots in the meetings of residents.

Suburban Land Agency releases its Build to Rent market sounding listening

On 9 May 2022 the Suburban Land Agency published its Build to Rent market sounding listening report summarising feedback from market sectors on its proposed Build to Rent release sites. The report provides details regarding the preferred site characteristics, dwelling mix, communal spaces timeframes, rental parameters, and accessibility requirements for Build to Rent in the ACT.

Changes to existing transfer duty, land tax and first homeowners grant regimes

On 11 May 2022, the NSW Parliament passed the State Revenue and Funds Legislation Amendment (Miscellaneous) Bill 2022 (NSW). This Bill proposes changes to the Duties Act 1997 (NSW), the Land Tax Act 1956 (NSW) and the First Home Owner Grant (New Homes) Act 2000 (NSW).

Duties Act 1997 (NSW)

The proposed amendments to this Act include:

Declarations of trust: The Duties Act 1997 (NSW) has been amended to clarify that duty is charged on the making of a statement that purports to be a declaration of trust but merely has the effect of acknowledging that identified property is held in trust.

Changes in beneficial ownership: Duty is payable in relation to transactions that result in a change in beneficial ownership of dutiable property, unless it is an excluded transaction (as defined by the Act).

Land Tax Act 1956 (NSW)

The Bill amends this Act to introduce a surcharge land tax exemption for principal places of residence. To be eligible for an exemption, a person must use and occupy the land for a continuous period of 200 days. This now must not include any period during which a person is physically absent from Australia unless this requirement is waived by the Chief Commissioner.

First Home Owner Grant (New Homes) Act 2000 (NSW)

The Bill also amends eligibility caps to clarify that, if the grant relates to the building of a home, the value of the property is calculated on completion of the relevant contract.

AusNet included as prescribed authority under Conveyancing Act 1919

The Conveyancing (General) Amendment (AusNet Transmission Group Pty Ltd) Regulation 2022 (NSW) has amended the Conveyancing (General) Regulation 2018 (NSW) to include AusNet Transmission Group Pty Ltd (ACN 079 798 173) as a prescribed authority that can receive an easement in gross under section 88A(1) of the Conveyancing Act 1919 (NSW).

AusNet owns and operates three regulated electricity and gas networks and is predominantly based in Victoria. Its network is 93% based in regional and rural areas and helps to connect power to New South Wales, South Australia and Tasmania.

NSW COVID-19 Regulations – Landlord failure to negotiate in good faith bars it from taking any prescribed action

In Darzi Group Pty Ltd v Nolde Pty Ltd (No 2) [2022] NSWSC 643, the NSW Supreme Court held that a landlord is unable to take any “prescribed action” as defined in the Retail and Other Commercial Leases (COVID-19 Regulation) 2020 (NSW) against a tenant in respect of a shortfall in rent due to the landlord’s failure to renegotiate in good faith.

This judgment follows the principal judgment from 2021, Darzi Group Pty Ltd v Nolde Pty Ltd [2021] NSWSC 774, in which the court also held that the landlord at that time was not entitled to take a prescribed action against the tenant.

In the previous judgment, it was held that the landlord had terminated the renegotiation of the rent payable for the months of April and May 2020 by issuing a section 129 notice under the Conveyancing Act 1919 (NSW) to the tenant in July 2020. The Regulation was subsequently repealed before any attempt to renegotiate the rent had commenced.

On 18 August 2021, the landlord sought to renegotiate the rent payable in relation to April and May 2020. The tenant offered to pay 50% of the shortfall in rent in instalments, but the landlord rejected this offer and requested further financial documentation from the tenant.

The tenant argued that, at the time the Regulation was repealed, there was no renegotiation occurring, and the landlord could not retrospectively remedy its refusal to renegotiate the Lease by commencing negotiations in August 2021. The landlord argued that the negotiation had not terminated and that the principal judgment represented the court’s “tentative findings” in the matter, rather than the final decision.

The court held that, if the landlord objected to the conclusions made by the primary judgment, its proper avenue to address this was by way of appeal. It could not argue in this case that the court had erred in finding that the renegotiation was terminated, as this would create an inconsistency with the primary judgment. The landlord was therefore unable to take any "prescribed action" in respect of the failure to pay full rent.

Electronic execution of documents made permanent in Queensland

The Justice and Other Legislation Amendment Act 2021 (Qld) came into effect on 30 April 2022, superseding the Justice Legislation (COVID-19 Emergency Response—Documents and Oaths) Regulation 2020 which introduced temporary measures to enable electronic execution and witnessing of certain documents.

The Property Law Act 1974 has now been permanently amended to allow:

• electronic documents to take effect as a deed;
• electronic signing of deeds by companies and individuals; and
• execution of counterparts and split execution of deeds;

and to remove the requirement to witness an individual's execution of a deed.

These amendments do not apply to general powers of attorney or attorneys given under a deed by individuals, which are required to continue to be signed in physical form in front of a witness.

In addition, the amendment has clarified that where a mortgage is lodged electronically, the mortgagee may retain an original signed or electronic signed original of the mortgagor-signed mortgage, provided it complies with section 11 of the Property Law Act 1974.

Voluntary mediation for small business lease disputes in Queensland

The Small Business Commissioner Act 2022 (SBC Act) commenced on 3 May 2022 and establishes a voluntary mediation process for small business lease disputes and small business franchise disputes to be administered by the Small Business Commissioner.

Where both parties agree, they can undertake mediation under the SBC Act where the dispute or lease is:

• a small business franchise dispute, being a dispute about a franchise agreement to which the Franchising Code of Conduct set out in the Competition and Consumer (Industry Codes — Franchising) Regulation 2014 (Cth), in respect of a small business; or
• a small business lease, being a lease under which the leased premises are to be wholly or predominantly used for carrying on a small business, other than a retail shop lease under the Retail Shop Leases Act 1994.

New REIQ commercial contracts on the horizon

The Queensland Law Society and Real Estate Institute of Queensland are in the process of updating the Contract for Commercial Land and Buildings and the Contract for Commercial Lots in a Community Titles Scheme.

It is expected that the amendments will largely reflect the changes made to the residential versions of the contracts earlier this year, and the updated commercial contracts are due to be released shortly.

New retail leasing regime for Tasmania

Introduced into Parliament on 31 May, the Retail Leases Bill 2022 proposes to repeal and replace the Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998, which have long governed retail leasing in Tasmania.

If passed, the Retail Leases Bill 2022 will initially apply only to retail leases which do not fall within the described exemptions, and which are entered into after the date of the Bill's proclamation. It will bring all retail leases within the scope of the new law within five years of that date.

Among other things, the Retail Leases Bill 2022:

• imposes an obligation on the Landlord to give prospective tenants a standard Retail Leases Guide and mandatory pre-lease disclosures;
• regulates when and how rent is payable and reviewed;
• provides for alternative dispute resolution;
• provides for compensation for misleading, deceptive or unconscionable conduct; and
• contains additional provisions relating to shopping-centre retail leases, including but not limited to provisions requiring core-trading hours to be specified, advertising and marketing requirements and a prohibition against termination for inadequate sales.

You can access the Bill here.

Further Land Tax relief for Tasmanian landowners

The Tasmanian Government has enacted the Land Tax Rating Amendment Act 2022 with the following changes to take effect from 1 July 2022:

• the tax-free threshold will be increased from $49,999 to $99,999;
• the upper tax threshold will be increased from $399,999 to $499,999; and
• the rate applied to the $100,000 to $499,999 band will be decreased from 0.55% to 0.45%.

The Government expects that these changes, along with the changes made in 2021, will contribute about $220 million by way of tax relief for property owners in Tasmania over the next four years.

Foreign Investor Land Tax Surcharge introduced in Tasmania

A new foreign investor land tax surcharge (FILTS) will take effect in Tasmania on 1 July 2022 following the passage of the Land Tax Amendment (Foreign Investors) Act 2022 and the Land Tax Rating Amendment (Foreign Investors) Act 2022.

The surcharge will apply to residential land that is:

• acquired by a foreign person on or after 1 July 2022; or
• owned by a company or trust that becomes a foreign entity on or after 1 July 2022.

It will also apply to an interest in land that was acquired by a foreign person prior to 1 July 2022 if that person acquires a further interest in the same land after 1 July 2022.

Certain land will not attract the FILTS including:

• residential land that is the principal residence of the foreign person;
• commercial establishments whose primary purpose is to offer short-term accommodation or lodging to persons for consideration;
• hostels or boarding houses;
• premises that are primarily used to provide residential accommodation by or on behalf of a school, TasTAFE or a higher education institution;
• residential care services; and
• retirement villages.

The surcharge is 2% of the assessed land value and is in addition to any other amount of land tax payable under the Land Tax Act 2000. It may apply even where no land tax is payable under the Land Tax Rating Act 2000.

Tasmanian-based foreign developers may apply to the Commissioner to reassess any foreign investor land tax payable if they have:

• been issued with occupancy permits, in the relevant financial year, for at least 50 relevant dwellings; and
• paid foreign investor land tax in respect of the land on which one or more of those dwellings are situated.

Universities to be exempt from some windfall gains tax following legislative changes

The State Taxation and Treasury Legislation Amendment Bill 2022 (Vic) was recently introduced into Parliament to give effect to the 2022-2023 budget measures and otherwise tighten certain taxation and treasury laws.

Under the the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic), from 1 July 2023, a landowner will become liable to pay windfall gains tax (WGT) on the “taxable value uplift” of land in certain circumstances where the land is re-zoned. You can find more information on Victoria’s WGT regime generally here.

Part 8 of the State Taxation and Treasury Legislation Amendment Bill 2022 (Vic) provides for an exemption from WGT for land owned by a university that is re-zoned by a WGT event, provided that:

• the university is a charity; and
• the Commissioner of State Revenue is satisfied that any revenue from the land will be used to further the university’s charitable purposes.

This exemption is not intended to apply where a university adds the revenue to surplus funds for a use to be determined at a later date. There must be a clear link or connection between the intended use of the revenue from the land and the university’s charitable objects.

Given the potential for substantial costs associated with any WGT liability, any universities seeking to take advantage of increased property values arising from re-zonings should consider the application of the WGT and seek advice on their eligibility for this exemption.

Failure to obtain FIRB approval attracts penalty for investor

An investor who failed to obtain Foreign Investment Review Board (FIRB) approval in respect of Melbourne property purchases has been penalised to the tune of $250,000.

The foreign investor purchased four properties in outer Melbourne (they already owned two established properties) and failed to seek and obtain FIRB permission (for both the new and existing properties) in breach of the Foreign Acquisitions and Takeover Act 1975.

The case highlights the importance of foreign investors seeking professional advice prior to acquiring any interest in Australian land.

Beware! Court finds failure to disclose a neighbour’s disruptive conduct to Buyer to be in breach of cl 10.2(c) of the General Conditions for the Sale of Land

In Thillagaratnam v Doan [2022] WASC 185, the Supreme Court of Western Australia found that the failure by the Seller of a strata titled apartment to inform the Buyer of a neighbour’s constant disruptive conduct to be in breach of clause 10.2(c) of the Joint Form of General Conditions for the Sale of Land (General Conditions).

The Buyer (the plaintiff) purchased a ground-floor strata titled apartment from the Sellers. The Sellers did not disclose to the Buyer, either in the sale contract or before the sale contract was entered into, that the neighbour who lived immediately above the property had regularly engaged in disruptive conduct, including banging the floor of his apartment with a hammer, playing loud music from speakers, and yelling and shouting verbal abuse.

The sale contract incorporated clause 10.2(c) of the General Conditions, which is a warranty by the Sellers that they were not aware ‘of anything which [would] materially affect the Buyer’s use of enjoyment of the Strata Lot or of the common property comprised in the Strata Scheme’.

The Court found that the Sellers were aware of the neighbour’s conduct, and they were aware from their own experience that such conduct would materially affect the Buyer’s use or enjoyment of the property.

Justice Curthoys ruled that clause 10.2(c) of the General Conditions was a warranty given by the Seller to the Buyer, and it was therefore a contractually binding promise going to the root of the contract. As the Sellers had breached this clause, the Buyer was entitled to damages and to terminate the sale contract.

The Court further held that on the facts, the Seller’s failure to disclose their knowledge of the neighbour’s conduct constituted fraudulent misrepresentation.

This decision is a reminder for sellers of all property classes to carefully consider the scope of warranties in the sale contract, and more generally whether the withholding of information from a buyer can amount to misrepresentation.