What is hot in conveyancingPhillip Nolan

Risk Manager LPLC

Introduction

Communication let me down.

Spandau Ballet

Key point

• Good communication in conveyancing

includes:

– being transparent about costs

– presenting information in plain English

– identifying the clients preferred method of

communication

Key point

• Good communication in conveyancing

includes:

– giving good advice in a timely manner

– asking and inviting questions

– listening to what the client has to say

– using visual aids

Hot topics

• CGT withholding payments and real estate

• Cooling-off notice for purchase of land

CGT withholding payments and real estate

• Any vendor selling real estate worth $2million or

more will be subject to the withholding tax unless

they provide a clearance certificate to the

purchaser by settlement.

• Commencement – 1 July 2016

• Relevant Act – Tax and Superannuation Laws

Amendment (2015 Measures No. 6) Act 2015.

Amends schedule 2 of the Taxation Administration

Act 1953 (Cwlth)

Assets caught

• Taxable Australian real property (TARP)

• Indirect Australian real property interests (IRPI)

• Option or right to acquire the above

Examples of affected transactions

• Acquisitions directly from the owner of:

– freehold

– leasehold

– mining, quarrying or prospecting rights

• Acquisitions indirectly from companies,

partnerships, trusts including:

– company title interests

– transferor owns 10 per cent or more of the entity and

the entity is land rich

• Options or rights to acquire any of the above

LPLC bulletins

• 1 July new CGT withholding payments for real

property sales of $2M or more

• New CGT withholding payments for options,

company title interests and indirect Australian real

property transactions

• Practical examples

Cooling-off notice

• An estate agent is not an agent at law for the

purpose of being served a cooling-off notice for

the sale of land

• Relevant case – Tan v Russell [2016] VSC 93

• Relevant Act – See s.31 Sale of Land Act 1962 (Vic)

• Tip – Serve any cooling-off notice personally on the

vendor and a copy on the vendor’s representative

Property and conveyancing cost of claims 2015/16

Property andconveyancing - 19.5%

Other - 80.5%

Property and conveyancing number of claims

2015/16

Property andconveyancing - 25.5%

Other - 74.5%

Five main areas of property and conveyancing

claims 2015/16 based on cost of claims

Duty and CGT - 18%

No advice about land - 17%

Defective disclosure - 11%

GST - 6%

Caveats / check searches - 6%

Other - 42%

Causes of property and conveyancing claims

2015/16 based on cost of claims

Failure to manage legalissues - 38%

Poor communication - 30%

Poor engagementmanagement - 15%

Simple oversignts -7%

Lack of useable trail - 4%

Other - 4%

Tax quiz

• Who should notify the SRO of the acquisition by a

trust?

– client

– lawyer

– accountant

– lender/mortgagee

• Vote now

Land tax and trusts claim

In June 2009 a practitioner acted for a purchaser of

a house on the Bellarine Peninsula. The property was

marketed as a development site with the potential

for a ‘number of premium townhouses STCA’.

The individual purchaser nominated a company as

substitute purchaser.

The matter settled in September 2009.

In 2015 the SRO determined that the property was

subject to the land tax surcharge for trusts and

sought additional land tax of approx. $20,000.

Lessons

• Take time at the outset of a matter to talk about

any land tax issues with the client

• Carefully check all conveyancing documents for

any reference to a ‘trust’

• More information

– State Revenue Office - land tax and trusts

– LPLC publications:

• Land can be taxing LIJ 1 March 2014

• More land tax woes blog posted 12 December

2014

Lessons

• Inform foreign resident clients of the land tax

absentee owner surcharge. This will increase from

0.5 per cent to 1.5 per cent from 1 January 2017

Clients and communication

• What do clients want the most from their lawyer?

– Cheap legal services

– Better lines of communication

– Transparency

• Vote now

Poor communication - example of claim

A practitioner received a contract of sale via email from

a purchaser client.

The property was the rear unit on a two lot subdivision in a

Bayside suburb.

The land information certificate in the section 32

statement disclosed an improved value of approximately

$1.5m.

On the same day the practitioner sent an email in reply

stating:

• there is no active body corporate

• the boundary of the property is shown on the planning

certificate

Lessons

• Resist the temptation to give off-the-cuff advice

• When asked to advise generally immediately

respond by clarifying your retainer

• Use a precedent first letter to purchasers and/or a

checklist

• Audit files to ensure staff are:

– using the precedents

– not copying from other files

• Ensure your precedents are updated regularly

Exercise – error spotting

You act for the purchaser of 38 Little Lonsdale Street

Melbourne.

The purchaser has provided you with a section 32

statement which they received on 23 July 2017.

Prior to signing the contract the purchaser wishes to

obtain your advice on the section 32 statement.

After a preliminary review you realise that the section

32 contains a number of defects.

Action

• Refer to the section 32 statement in your materials.

List three mistakes in the section 32 statement:

1.

2.

3.

• How would you communicate the errors in the

section 32 statement to your client?

Due diligence and section 32 statements

• Property websites checklist and comments

• Key Risk Checklist: Purchase of land – Questions for

the Purchaser

Conclusion

“…….don’t let me be misunderstood……”

Animals

Joint tenants

John and Mary Smith

John dies

Mary Smith

Tenants in Common

John Smith

Mary Smith

Mary Smith

John’s estate Beneficiaries in John’s will

John dies

Purchase of Land: Questions for the Purchaser

Last updated: July 2016 (105313) Page 1 of 5

Responses required without delay

Circle yes or no as applicable.

Provide the additional information as indicated.

If you do not know the answer or are unable to provide the additional

information please insert the words “Not known”.

Please sign where indicated at the foot of the final page and forward this

completed list and all necessary information to the sender.

No. Question Answer

Title

1. Who is to be registered on the title(s) to the

land?

If more than one person how do you want to

be recorded as owners?

Joint proprietors – on death property goes

automatically to other joint proprietor(s)

Tenants in common – on death share in

property forms part of deceased’s estate

If they are not named in the contract we will

need to do a nomination. Nomination must

occur without delay to avoid double duty.

Proof of identity is required in accordance

with the Model Participation Rules issued by

ARNECC for anyone who is to be registered

on title.

[Please also sign and return the attached

client authorisation form if the sale will be

conducted electronically.]

Insert details:

……………………………………………………...

ABN:………………………share…………………

……………………………………………………….

ABN:………………………share…………………

If tenants in common please advise the share

to be held by each person. Consider issues

such as:

amount paid in cash by each person

liability for repayment of any debt /

expenses

contributions by third parties ie parents

entitlement to equity

amount to be paid on sale

2. Is any person to be registered on the title(s) in

their capacity as an executor, trustee,

guardian or administrator?

Yes/No

If yes – provide details

3. Is any person to be registered on the title(s)

related and/or associated with the vendor,

including any subsidiary or holding

company?

Yes/No

If yes – provide details.

Last updated: July 2016 Page 2 of 5

About you

4. Is anyone to be named in the contract

and/or to be registered on the title(s) a

foreign person / resident?

A foreign person includes an individual not

ordinarily resident in Australia and a foreign

company for the purposes of the Foreign

Acquisitions and Takeovers Act 1975 (Cwlth)

A foreign resident means a person who is not

a resident of Australia for the purposes of the

Income Tax Assessment Act 1936 (Cwlth)

Yes/No

If yes, you may be required to obtain prior

approval from a state and/or federal

government to buy the land and when you

sell the land certain withholding obligations

apply.

5. Provide the date of birth of each person to

be registered on the title(s).

We are required by law to provide this

information to various government agencies.

Name:

………/…………./…………DOB

Name:

………/…………./…………DOB

6. For a corporate purchaser, who is authorised

to give instructions, sign the

contract/vendor's statement/transfer?

Insert name(s):

7. Are you the selling agent or the agent’s

employee or relative?

Yes/No

If yes, refer to section 55 and 55A of the Estate

Agents Act 1980 (Vic) for the process to be

followed.

Insurance, tax, duty and wills

8. Have you arranged insurance for the land?

Yes/No

Please discuss any insurance requirements

with your insurer / broker. Some purchasers

take out their own insurance prior to

settlement to ensure adequate insurance is in

place.

You should be aware that the vendor may not

have adequate insurance cover or any

insurance at all.

9. Will you be applying for:

first home owners grant

reduction in duty payable for any

reason. For example, pension

concession, transfer to spouse.

Yes/No

Yes/No

Last updated: July 2016 Page 3 of 5

10. Have you considered the tax consequences,

such as GST, GAIC, land tax, CGT, and stamp

duty of your purchase?

If no, do you require us to advise you on any

tax issues?

Yes/No

Yes/No

We recommend you also discuss any issues

with your accountant.

11. Have you considered the effect the

purchase will have on your will?

Yes/No

Finance

12. Have you paid the full deposit?

Please inform us if you paid by bank

guarantee / deposit bond.

If yes, was the deposit more than 10 per cent

of the price?

Yes/No

Yes/No

13. Are you purchasing subject to finance being

approved?

If yes:

you need to keep us informed of your

progress every two days and must notify

us before the approval date about

whether finance has been approved to

enable us to notify the vendor to end the

contract.

the vendor may ask for evidence of your

inability to obtain finance should you wish

to withdraw from the contract.

Yes/No

14. Are you obtaining a loan to pay for some of

the purchase price?

For any funds you are providing at settlement

we recommend you authorise your lender to

draw on your account(s) to deduct funds for

settlement.

Yes/No

If yes, provide the name of your finance

broker / lender.

15. Have you notified your finance broker /

lender of your purchase?

If yes, have you provided them with a copy of

the contract of sale and section 32

statement?

Yes/No

Yes/No

16. Is any person who is not to be registered on

the title(s) providing funds to assist with your

purchase of the land?

Yes/No

If yes, provide details.

Last updated: July 2016 Page 4 of 5

About the land

17. What is the location on the plan of subdivision

of the land?

Note: car spaces may be subject to a

congestion levy.

See attached copy plan of subdivision.

Highlight each part including the land,

apartment/unit, any car space(s), storage

lot(s) or other areas included in the sale.

18. What is your intended use of the land?

For example a dwelling or shop.

Is this the same as the current use?

Insert details:

Yes/No

19. Do you intend on:

leasing the property

residing in the property

Note: if you are buying subject to a lease this

lease may continue after settlement.

Do you require our advice about any lease

matters?

If you reside at the property is this your

principal place of residence?

Yes/No

Yes/No

Yes/No

Yes/No

If yes, land tax may be payable from

settlement for the principal place of residence

you currently reside in if you are not selling

that property.

20. Do you believe any of the information in the

section 32 statement is incorrect?

Yes/No

If yes, provide details:

21. Are boundary fences in reasonable

condition?

Note – if you are concerned about the

boundary locations we recommend you

obtain a land survey.

Yes/No

If no - once the contract is signed you will be

responsible at your cost for any necessary

fencing works.

22. Is there a pool or spa at the property?

If yes – are barriers in place?

Yes/No

Yes/No

23. Do you have any reason to believe that the

vendor has done any renovation works in the

last 7 years?

For example renovated a bathroom.

Yes/No

Last updated: July 2016 Page 5 of 5

Settlement

24. Where would you like correspondence sent

after settlement?

The property or insert other address:

Any questions

25. Please attach a list of any questions you have

about your purchase.

Information available from Consumer Affairs

Victoria (CAV)

26. You can find information published by CAV

about buying real estate, owners

corporations, renting and retirement villages

here.

………………………………………………………………………………………

Signed by or on behalf of the purchaser(s)

Plan of subdivision showing the lots to be attached

Client authorisation form to be completed and attached