Real estate: 5 Minute Fix 17: COVID-19 measures; exemption approval for foreign Australian-based developers; land tax; off the plan; Property Market Review

By the Real Estate team 
17 Mar 2022
Get your 5 Minute Fix of real estate news. In this issue: COVID-19 measures; exemption approval for foreign Australian-based developers; land tax; off the plan; Property Market Review.

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ACT: Extension of the residential tenancy transitional period in respond to COVID-19

On 2 September 2021 the ACT Government issued the Residential Tenancies (COVID-19 Emergency Response) Declaration 2021 (No 3), which was effective from 12 August 2021.

The declaration introduced a moratorium on evictions and a transitional period for impacted households. The moratorium commenced on 2 September 2021 and operated for 12 weeks. The initial 12 week transitional period has been extended under Notifiable Instrument NI2022-70 by a further 12 weeks, such that the period will now end on 11 May 2022.

Impacted households must pay rent as per the ordinary course during the transitional period, however, they cannot be evicted for any outstanding rent arising between 2 September 2021 and 11 May 2022 during the transitional period.

Sunset and delay event clauses in off the plan contracts now restricted

In our December 2021 edition of the 5 Minute Fix we reported on the proposed amendment to the Civil Law (Sale of Residential Property) Act 2003 (ACT) to limit the use of sunset clauses and delay event clauses in residential off-the-plan contracts for sale.

This Act was notified on 10 December 2021 and is taken to have commenced on 9 November 2021.


NSW: Amendment to the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (NSW)

The Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2022 commences on 14 March 2022 and provides for the following key changes:

  • the "prescribed period" for which the Regulation applies now expires on 30 June 2022;
  • a landlord is no longer required to mediate before taking a prescribed action, where the prescribed breach occurs after 13 March 2022;
  • the removal of the section prohibiting rent payable under an impacted lease from being increased; and
  • the amendment to the definition of impacted lessee to:
    • include a tenant that qualifies for the 2021 JobSaver Payment and the 2022 Small Business Sport Program; and
    • reduce the maximum turnover threshold to $5 million.

NSW: Clarification of exemption approval for foreign Australian-based developers

The Commissioner has issued practice note CPN 023 clarifying the evidence required to be provided by a foreign Australian-based developer to apply for an upfront exemption from surcharge purchaser duty and surcharge land tax that is to apply from the next land tax year.

NSW: Court's ruling on the purchaser's ability to rescind "off the plan" contract due to variations in the strata plan

The New South Wales Supreme Court in Jin Yi Construction Pty Ltd v Romeciti Eastwood Pty Ltd [2022] NSWSC 56 declared that the purchaser validly rescinded an "off the plan" contract and for the deposit to be refunded in response to variations in the strata plan from the draft plan that was disclosed when the purchaser signed the contract.

The contract was for a commercial strata title unit and was entered into on 26 September 2017.

The variation in question was the inclusion of a new storage space which reduced the commercial area of the lot by 6.5%.

On completion of the building the vendor issued the occupation certificate to the purchaser and called for settlement.

The purchaser exercised its right under special condition 36.3 to rescind the contract and sought the return of the deposit. The vendor disputed the validity of the rescission and issued a notice to complete on the purchaser.

The purchaser sought a declaration from the Court that the rescission under special condition 36.3 was valid and that it was entitled to rescind the contract under the rule in Flight v Booth because the lot the subject of the contract was substantially different to that which was being provided at settlement.

The Court ruled in favour of the purchaser and declared that the contract was validly rescinded as a consequence of the lot being materially different from that which was contracted for.

This case highlights the importance of issuing accurate "off the plan" contracts and, once issued, minimising material or substantial changes to the development to minimise the potential for buyers to avoid the contract.


Budget 2021-2022 update outlines proposed land tax changes for interstate asset holders

The Queensland Treasurer has indicated in his 2021-2022 budget update that the State Government will seek to reform the current land tax system to take into account a landowner's total national taxable land value when determining the appropriate tax rate to apply to the Queensland proportion of the value of the individual or entity's landholdings.  

Currently Queensland land tax rates are based on landholdings in Queensland.  Under the proposal landowners with significant holdings in other States may be required to pay higher rates of land tax.

The existing exemptions will continue to apply, including principal place of residence and primary production landholdings.

These reforms are currently only a proposal and commencement will be subject to the State Government passing the appropriate legislative amendments.

QLD: Update to the REIQ residential contracts

On 20 January 2022, the REIQ released a new version of the:

  • Contract for Houses and Residential Land (17th ed); and
  • Contract for Residential Lots in a Community Title Scheme (13th ed).

Key changes to the REIQ Contracts include:

  • the inclusion of a settlement extension regime which permits either party to extend the Settlement Date by up to 5 Business Days without requiring the other parties agreement;
  • a requirement for the Seller to have compliant smoke alarms installed, failing which the Buyer can withhold 0.15% of the Purchase Price at Settlement; and
  • the amendment to the definition of "Business Day" to exclude a date where both the Sydney and Melbourne offices of the Reserve Bank of Australia are closed

A detailed Insights article on the changes will be published shortly.

QLD: Housing Legislation Amendment Act 2021: remaining provisions proclaimed to commence on 1 October 2022

The Housing Legislation Amendment Act 2021 passed in October 2021 provided for a phased introduction of changes to the Residential Tenancies and Rooming Accommodation Act 2008 (RTRA).

The reforms were introduced with the intent of improving safety, security and certainty for the Queensland rental market and amended the RTRA to provide for:

  • early termination options for people experiencing domestic and family violence;
  • a framework for parties to negotiate renting with pets;
  • changes to the grounds under which a party may end a tenancy; and
  • the inclusions of minimum housing standards.

The provisions enabling early termination for persons experience domestic and family violence commenced on 20 October 2021.

The balance provisions have now been proclaimed to come into effect on 1 October 2022, excluding the minimum housing standard which will apply to new leases entered into from 1 September 2023 and all tenancies from 1 September 2024. In the interim, strengthened repair and maintenance obligations will commence from 1 October 2022.


VIC: Proposed Social and Affordable Housing Contribution canned

On 18 February 2022, the Victorian Government announced a proposed Social and Affordable Housing Contribution that all developers would need to pay. The amount of the contribution was to be equal to 1.75% of the as-if-complete project value, on all new developments with 3 or more dwellings and all new subdivisions with three or more lots.

The proposal drew criticism from industry groups, including the Urban Development Institute of Australia and the Property Council of Australia, who expressed concern that the cost of the proposed tax would be passed on to new homebuyers. It was suggested by the Property Council of Australia that the new tax would have resulted in an increase in the median house price equivalent to a 38.8% rise in stamp duty. In defence of its proposal, the Government claimed the tax formed part of a wider agreement with the development industry, which also included reform to expedite planning approval processes.

On 1 March 2022, the Victorian Treasurer announced that the proposed tax would not proceed.

VIC: Commercial Tenancy Relief Scheme ends 15 March 2022

The Commercial Tenancy Relief Scheme Regulations 2022 were introduced on 1 February 2022, with retrospective effect from 16 January 2022 and replaced the revoked Commercial Tenancy Relief Scheme Regulations 2021 (Vic).

The latest regulations had the effect of:

  • extending the scheme and the deferral of rent to 15 March 2022 (unless agreed otherwise);
  • limiting the eligibility to:
    • "small entities", being non-profit bodies or entities carrying on a business with an annual turnover of less than $10 million in the financial year ending 30 June 2021 (or annual turnover which is likely to be less than $10 million for the financial year ending 2022, if the tenant did not carry on a business for the whole of the financial year ending 30 June 2021).

      This differs to the previous relief schemes, which applied to a SME entity if its annual turnover for the relevant year was less, or was likely to be less than, $50 million;
    • tenants with a fall in turnover of at least 30% because of COVID-19 (or at least 15% for most registered charities); and
    • tenants who made a rent relief request in accordance with the scheme's requirements.

From 16 March 2022, tenants will lose the protections provided by the regulations.  Consequentially, they may be exposed to rent increases and may be required to pay back rent deferred under the current or previous relief schemes.

VIC: Draft ruling on amended land tax exemptions for charities

The State Revenue Office has issued a draft revenue ruling for land tax exemptions for charitable institutions.

The ruling is intended to reflect the amended section 74 of the Land Tax Act 2005 which applies from the 2022 land tax year onwards.  The amended section 74 of the Land Tax Act 2005 provides that:

  • in order for vacant land owned by a charitable institution to be exempt from land tax, the Commissioner must be satisfied that the land will be used and occupied by a charitable institution exclusively for charitable purposes within the next 2 years (or a longer period approved by the Commissioner) of the tax year to which the Commissioner's determination applies; and

  • occupied land will be exempt from land tax if it is:
    • used and occupied by a charitable institution exclusively for charitable purposes; or
    • owned by a charitable institution, leased for outdoor sporting, outdoor recreational, outdoor cultural or similar outdoor activities, and available for use for one or more of those activities by members of the public.

The existing rulings LTA-004 and LTA-005 will continue to apply for the 2021 and previous land tax years.

VIC: Victorian Government commissions Property Market Review

The Minister for Consumer Affairs, Gaming and Liquor Regulation has commissioned an expert panel review of the property market, which opened for consultation on 18 February 2022. Overarching concerns giving rise to the review include housing affordability, property price increases driven by COVID-19, record low interest rates and upfront costs for buyers entering the property market.

The panel is currently seeking community input on whether current consumer laws on underquoting, off-the-plan sales and estate agent conduct provide adequate support to Victorian consumers.

The review remains open for submissions until 1 April 2022, with the final report to be provided to Government on 30 April 2022.

Western Australia

WA: Sympli joins the electronic lodgment space in WA

In January 2022 Sympli Australia Pty Ltd was approved to lodge discharges of mortgages, mortgages and withdrawals of caveats via the Electronic Lodgment Network.

The Registrar of Titles has confirmed that Sympli Australia Pty Ltd has successfully lodged their first discharge of mortgage (for ANZ) electronically and will be working with select financial institutions and practitioners as part of their early access program.

Priest invokes Canon Law in an application for extension of caveat

In Rowe v The Roman Catholic Archbishop of Perth [2022] WASCA 28, Catholic priest Fr Rowe sought orders from the Supreme Court of Western Australia to help protect his rights in the Church of St Anne.

Fr Rowe lodged a caveat against the Church with the Land Registry in Western Australia asserting that he, and the St Anne's Community, had rights to the Church after incurring expenses from performing repairs. When the rights were challenged by the Roman Catholic Archbishop of Perth, Fr Rowe presented a claim of estoppel under Canon Law. The assertion was that Fr Rowe and the St Anne's Community would hold the property in the same manner as a parish under the laws of the Roman Catholic Church. The Court ultimately found that there was no basis for the claim in Canon Law and held that there was no serious question to the tried.

On Appeal, Fr Rowe contended that the Court erred in finding that rights conferred by Canon Law could not form part of a claim for equitable relief, however the appeal was dismissed.

The importance of a recognisable interest behind every caveat

In M2 Assets Pty Ltd as trustee for The M2 Assets Trust v Turco [2022] WASC 65 the Supreme Court of Western Australia decided to remove a caveat after Mr Turco failed to demonstrate a satisfactory estate or interest in the property.

M2 Assets was the mortgagee of the property and took possession after Howtree Holdings, the registered proprietor, went into receivership. M2 Assets entered into a periodic tenancy agreement with Howtree Holdings former director Mr Turco. Mr Turco then lodged a caveat against the property which subsequently prevented M2 assets from completing a sale of the property. M2 Assets sought an order from the Court to remove the caveat lodged against the property.

Mr Turco had to satisfy the Court that he had a basis to claim a proprietary interest or estate in the land in order to prevent the caveat's removal under section 138(2) of the Transfer of Land Act (WA). Mr Turco claimed he had outstanding equity in the land arising from the proceeds of sale. The Court determined that such a claim is not a caveatable interest and made orders to remove the caveat.

Court finds a charge over land securing performance of non-monetary contractual obligations is a caveatable interest.

In Coco C'Bay Association (Inc) v Paddison [2022] WASC 5, Coco C'Bay Association (Coco) sought an order to extend a caveat it lodged over Paddison's property pursuant to section 138C(2) of the Transfer of Land Act (WA).

Upon purchasing the property from Coco, Paddison agreed in a buyer's covenant deed to becoming members of Coco for as long as Paddison retained ownership of the property and agreed to various financial and non-monetary obligations. The deed also included a right for Coco to lodge an absolute caveat on the property as chargee.

Paddison contended that Coco's charge over non-monetary contractual obligations did not amount to a caveatable interest. The Court disagreed, holding that an equitable charge over land can secure both pecuniary and non-pecuniary contractual obligations such as those imposed in the buyer's covenant deed. On this basis the Supreme Court of Western Australia held that the absolute caveat could be extended.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.