Real estate 5 Minute Fix 21: unfair contract terms; build to rent, PEXA, rent abatement withdrawal, developer regulation

The Real Estate Team 
07 Mar 2023
5 minutes

Commonwealth

(Cth) Unfair contract terms regime expanded to small businesses

Amendments to the Competition and Consumer Act 2010 (Cth) are set to expand existing consumer protections with respect to unfair contract terms to apply to small businesses having either up to 100 employees or having an annual turnover under $10 million from 10 November 2023.

This expansion should be carefully considered by any organisation that uses standard form contracts for the supply of goods and services, or for sale or grant of an interest in land.

If a standard form contract used by a business covered under this regime is determined to be unfair, a court may:

  • void, vary or refuse to enforce the offending clause or the whole contract;
  • prevent the same or substantially similar terms from being included in any future standard form small business contract; and/or
  • restrain the same or substantially similar term to be applied or relied upon across all the existing contracts.

(Cth) Updates to Security of Critical Infrastructure legislation

The Security of Critical Infrastructure Act 2018 (SOCI Act) has been updated to add obligations for 11 critical infrastructure sectors. Affected assets include those in the communications (including telecommunications, broadcasting and domain names), food and grocery, data storage or processing, higher education and research, financial services and markets (including critical banking, superannuation, insurance and financial market and infrastructure assets), water and sewerage, space technology, health care and medical, energy (including critical electricity, gas, energy market operator and liquid fuel assets), defence and transport (including critical port, freight infrastructure, freight services, public transport and aviation assets) industries.

The new requirements apply to those who own, operate or have a direct interest in critical infrastructure assets.

Obligations may include requirements to register assets on the Critical Asset Register, reporting cybersecurity incidents to the Australian Signals Directorate (ASD) within 12 hours, allowing ASD involvement in incidents and complying with directions in relation to management of cyber security incidents. Further obligations may arise as these are "switched on" via Ministerial Rules.

For further information, our interactive PDF will help you quickly grasp if you could have obligations under the new Act.

(Cth): ATO consultation explores emerging build to rent models

The Australian Taxation Office (ATO) is currently engaging in targeted consultation with members of the Property and Construction Stakeholder Relationship Forum, GST Stewardship Group and State Government representatives to explore emerging models of build-to-rent (BTR) developments in Australia. The aim of the consultation is for the ATO to understand opportunities to support the industry with its tax obligations.

BTR has attracted growing attention and interest from both industry and government, with incentives and concessions for BTR developments increasing. Consultation will conclude in March 2023.

All documents under Corporations Act 2001 (Cth) may be signed electronically under the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022

The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 amends the Corporations Act 2001 to allow all documents under the Act to be signed electronically, allow documents to be sent either in hard copy or electronically and provides that companies will not be required to issue documents to a member where contact details are known to be incorrect.

This Bill also amends the Australian Prudential Regulation Authority Act 1998, Australian Securities and Investments Commission Act 2001, Competition and Consumer Act 2010, National Consumer Credit Protection Act 2009 and Tax Agent Services Act 2009 to enable certain regulatory bodies to hold virtual hearings and examinations, and the Corporations Act 2001, Excise Act 1901 and Small Superannuation Accounts Act 1995 to enable electronic payment methodologies.

Australian Capital Territory

(ACT): Proposal for increased regulation of developers

In December 2022, the ACT Government released the Developer Regulation Discussion Paper in response to growing community concerns regarding the conduct of developers and an increasing number of building defects. The paper is designed to summarise the issues and potential options for improving the accountability of developers and providing consumers with greater information.

The four key areas being considered in the reform are:

  1. accountability and transparency
  2. ethical behaviours and work practices;
  3. project capability - financial and operational; and
  4. building quality and safety.

In each of these key areas there are potential options being considered prior to the introduction of formal regulation by the ACT Government. The seven potential options discussed in the paper are:

  1. a licensing scheme;
  2. a registration scheme;
  3. a disclosure scheme;
  4. improving the quality of documentation provided by developers;
  5. project trust accounts or bond schemes;
  6. bringing developers into the regulatory chain of accountability for building work; and / or
  7. amendments to the existing Building Regulatory System including a review of the statutory warranties and extension of statutory warranties to developers.

Depending on the option(s) adopted, the proposal has highlighted that any formal regulation is likely to affect a large portion of the ACT community including landowners and lessees, developers, financial institutions, estate agents, contractors (including builders and subcontracted trades) and professional teams (including but not limited to planning and economic consultants, architects, quantity surveyors, engineers, project managers, solicitors and accountants). Other affected parties may also include objectors, occupiers and public sector and government agencies (including planners).

Consultation with key stakeholders and industry focus areas concluded on 27 February 2023.

(ACT): Changes to mandatory terms of Unit Titles certificates

The Unit Titles (Management) Certificate Determination 2023 (ACT) commenced on 28 January 2023.

The determination prescribes the information which must be included in a unit title certificate and a unit title update certificate under sections 119(1)(a) and 119(1)(b) of the Unit Titles (Management) Act 2011 (ACT).

The new prescribed information is:

  • the name and contact details of each member of the corporation's executive committee;
  • the name and contact details of the corporation's manager;
  • specified information in relation to each insurance policy held by the corporation;
  • specified information in relation to the general and sinking fund;
  • whether the corporation has established a special purpose fund, and if so specified information regarding that fund;
  • whether the developer control period has expired;
  • whether the corporation has borrowed money and the details of those borrowings;
  • whether the corporation has installed sustainability infrastructure and if so, who owns it;
  • a summary of any current contracts for services contractors;
  • whether the corporation has applied to the ACT Planning and Land Authority for an extension of the Crown Lease;
  • the place where the corporation's records can be inspected, including the name and contact details of the relevant person to arrange inspection. The determination also clarifies what records may be inspected; and
  • copies of the minutes of meetings of the owners corporation and the executive committee, over the period of time specified in the determination.

The determination revokes and replaces the previous Unit Titles (Management) Certificate Determination 2021 (ACT).

(ACT): Consultation closes on new ACT Territory Plan and District Planning Strategies

Community engagement on the draft new Territory Plan (and draft district strategies) closed on 3 March 2023. The draft plan and district strategies will now undergo revision prior to official publication / further consultation.

Further information and a copy of the draft plan, design guides, technical specifications and district specifications can be found here.

New South Wales

(NSW) NSW Government shared Equity Home Buyer Helper scheme launched

On 24 January 2023, the NSW Government launched the Shared Equity Home Buyer Helper scheme, which aims to support eligible buyers such as single parents, singles aged 55 or over and first home buyers that are also key workers such as nurses, midwives, paramedics, teachers, early childhood educators and police officers. Caps on individual and household income apply, as well as thresholds for the price of property purchased, being $950,000 in Sydney and major regional centres.

Participants will need to occupy any property purchased under the scheme as their principal place of residence. There are caps on individual and household income and the price of property purchased.

The scheme allows for the government to contribute up to 40% for a new home and 30% for an established home in exchange for the equivalent interest in the property.

(NSW): Court recommends PEXA platform should be reviewed for lodgement of caveats

In Brose v Slade [2022] NSWSC 1785, the plaintiff sought to extend two caveats that had been lodged under section 74K of the Real Property Act 1900 (NSW). The plaintiffs had been required to lodge the caveats through PEXA.

When lodging the caveat in PEXA, the plaintiffs found that the only options for selection offered by PEXA were that the interest held was an "Estate in Fee Simple" and the claim category of "Beneficial Interest in Trust". The caveats had been lodged on that basis, however this was inaccurate, as the interest in the land held by the plaintiffs was an equitable interest in the land in the nature of a constructive trust. The defendants argued for the dismissal of the application.

The court granted the extension of one of the caveats upon consideration of the balance of convenience, and leave was granted for the plaintiffs to file a new caveat for the second matter. The court also referred the matter to the Minister for Customer Service and Digital Government, the Registrar General and PEXA for consideration.

(NSW) Incentive deed clause to repay tenant incentive upon early termination of lease found to be a penalty and not enforceable

In Alamdo Holdings Pty Ltd v Croc’s Franchising Pty Ltd (No 2) [2023] NSWSC 60, the court considered whether a landlord was able to terminate the lease and re-enter the Premises (a "prescribed action" under the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW)) where a tenant refused to provide adequate financial information repeatedly sought by the Landlord with regard to the tenant's request for a rent reduction in accordance with the Regulation, and did not pay any rent during this time. The Landlord was entitled to terminate the lease as it had satisfied the pre-conditions of clause 5 prior to exercising its right to terminate.

The parties had also signed an incentive deed under which the Landlord had paid the Tenant $250,000 towards the fitout of the Premises. As a term of the incentive deed, in the event that the lease terminated before the end of the Term, the Tenant was to repay a portion of the incentive to the Landlord, calculated as the lease incentive ($250,000) multiplied by the days remaining in the term, which was then divided by the total number of days in the term.

This clause was found to be a penalty and not enforceable against the tenant, as it put the landlord into a better position than it would have been had the lease run its course and went further than necessary to protect the landlord's interests.

(NSW): Surcharge purchaser duty and surcharge land tax exemptions removed for certain nations

Current NSW surcharge provisions with respect to purchaser duty and land tax have been determined to be inconsistent with international tax treaties entered by the Federal Government with NZ, Finland, Germany and South Africa.

Individuals who are citizens of those nations purchasing residential land or property (in their own capacity) are exempt from surcharge purchaser duty and surcharge land tax, effective immediately.

Those who paid surcharge purchaser duty or surcharge land tax on or after 1 July 2021 may be eligible for a refund.

The liability for non-individuals (corporations, trusts and partnerships) for surcharges that have arisen due to the entity's affiliation with these nations may also be affected.

Revenue NSW representatives are proactively contacting customers with respect to transactions considered eligible for the refund.

(NSW): Landlord's withdrawal of rental abatement during COVID-19 pandemic amounts to unconscionable conduct under retail leasing legislation

In Shams v 357 Thornleigh Place [2022] NSWCATD 177, the NSW Civil and Administrative Tribunal found that a landlord of a retail lease in a shopping centre had engaged in unconscionable conduct in contravention of section 62B(1) of the Retail Leases Act 1994 (NSW) (RLA) by:

  • purporting to withdraw a rent rebate previously offered prior to the COVID-19 pandemic by the Landlord's leasing manager;
  • refusing to engage in good faith negotiations with respect to rent abatement due to the impact of construction works, shop closures in the shopping centre and the COVID-19 Pandemic; and
  • purporting to terminate the lease and re-entering the premises without following due procedure as set out in the Lease and the Conveyancing Act 1919 (NSW).

NCAT noted that a finding that a landlord has acted unconscionably under section 62B(3) is not limited to the consideration of the matters set out in section 62B(3)(a) to (k).

Queensland

(Qld): PEXA mandate takes effect in Queensland

Until recently the use of eConveyancing platforms (Platform) (such as PEXA) has been voluntary in Queensland, but from 20 February 2023, it has become mandatory for certain property transactions to be conducted electronically.

Here, we take a quick look at what the mandate means and some practical considerations coming from the mandate.

When does the mandate apply?

Unless an exemption applies, a "required instrument" will need to be prepared, lodged and deposited using a Platform. A "required instrument" includes most forms of transfers, mortgages and releases but instruments may be exempt from the mandate for various reasons, including where:

  • the Platform or Titles Registry does not have the functionality to accept the instrument;
  • the instrument is being prepared or lodged with another instrument that cannot be accepted by the Platform or Titles Registry; and
  • where the transaction involves certain transfer duty exemptions or lodgement fees exemptions.

Practical considerations

Some practical issues that may arise include:

  • Self-represented parties – self-represented individuals are exempt from the mandate, but all other self-represented entities are subject to the mandate. In-house legal teams who handle their own property transactions will either need to ensure they have subscribed to a Platform or will need to engage a representative on their behalf who is already a subscriber;
  • Government and Council entities – for our government clients, generally most transactions involving the State (or a Department) will be exempt from the mandate. However, Councils and the Federal Government are generally subject to the mandate like any other entity; and
  • Verifications of Identity and Client Authorisations – clients should expect to see an increase in the requirements for identity and authority verification procedures.

We expect the electronic lodgement mandate to be expanded in coming years and we will keep you up to date with any developments.

(Qld): Property Law Bill introduced to Parliament

Queensland has moved one step closer to revamping its property law regime. The Property Law Bill 2022 was introduced to Parliament on 23 February 2023. If passed, the Bill will replace the nearly 50-year-old Property Law Act 1974 (Qld) with a new property law regime intended to modernise property law in Queensland.

The Bill will repeal outdated clauses and incorporate contemporary language and provisions to closely align with commercial practices.

If passed some of the more significant amendments include:

  • A Seller disclosure regime: this would expand this requirement from only off-the-plan contracts to most sales of property in Queensland. This amendment reflects practices in other states as well as expectations from property buyers in an increasingly competitive market and will place the onus on the Seller to provide further information and certificates about the property; and
  • Releases of certain Tenants on Lease Assignment: the Bill provides that a tenant and any guarantor of the tenant’s obligations will be released from liability under any lease following an assignment by the tenant, and a subsequent assignment to a third tenant. The release relates to any breach by the subsequent (ie. third) tenant. This will provide protections to tenants where they are removed from lease dealings and landlords will need to be increasingly satisfied with any assignee's strength of covenant including by potentially seeking increased security.

(Qld): Changes will pave the way termination of Body Corporate schemes

The Queensland Government has announced proposed changes to the relevant body corporate legislation to make it easier for a Body Corporate to terminate a scheme in certain circumstances.

Currently schemes may only be terminated if the body corporate by resolution without dissent decides to terminate the scheme, ie. all owners must consent and there cannot be a single owner objecting to the termination.

The changes proposed following the October 2022 Housing Summit seek to amend this requirement so that only 75% of lot owners need to support the proposal where it is more financially viable for the scheme to be terminated than maintained/ remediated.

This reform is aimed at streamlining the requirements to sell or redevelop community titles schemes past their useful building life and will assist in unlocking land for further redevelopment.

Other changes proposed including updated rules for smoking within common property and strong steps to ensure that Body Corporates don't ban pets within schemes. Draft legislation has yet to be released.

Western Australia

(WA): Landgate releases consultation paper on proposal to introduce electronic execution of documents

Landgate, Western Australia's statutory land information authority, has this year released a consultation paper on the electronic execution of various documents which are currently required to be "wet" signed, which has resulted in Western Australia falling behind other Australian jurisdictions in allowing electronic execution of documents concerning land.

Landgate is currently taking submissions on a number of questions, including:

  • whether the requirements for leases, easements, restrictive covenants, applications, memorials and notifications be reviewed so as to allow electronic creation;
  • what form of electronic or digital signature is appropriate for digital execution;
  • whether electronic signatures should have witnessing or attestation requirements; and
  • whether a verification of identity (VOI) regime could replace the need for witnessing for all Western Australian land registry documents.

Landgate has also proposed a number of amendments to the Electronic Transactions Regulations 2012 (WA), the Property Law Act 1969 (WA) and the Transfer of Land Act 1893 (WA) to allow:

  • electronic execution of deeds;
  • electronic execution of powers of attorney; and
  • electronic execution of statutory declarations produced in support of Western Australian land registry documents.

Feedback submissions are open until 17 May 2023 and can be made by email to [email protected].

(WA) The Land and Public Works Legislation Bill 2022 has now passed the Legislative Assembly, paving the way to further important changes

The Land and Public Works Legislation Bill 2022 was passed by the Legislative Assembly on 23 February 2023. The Bill proposes key changes to the Land and Administration Act 1997 (WA) (LAA), and the Public Works Act 1902 (WA).

Notably, in relation to the LAA, the Bill proposes a number of key changes to modernise the LAA and further unlock the economic potential of Crown land assets in Western Australia, some of which are summarised below:

  1. the grant of diversification leases, a new form of non-exclusive land tenure over Crown land, which will provide opportunities for holders of pastoral leases over Crown land, together with native title parties, mining companies and others to use the land for a more diversified range of clean energy related uses (which will co-exist with the existing pastoral or mining uses);
  2. changes to allow pastoral lessees to extend the term of pastoral leases, together which changes to the manner in which pastoral lease rent is to be determined. Due to what is described as "historical reasons" in the Explanatory Memorandum for the Bill, those with shorter pastoral leases are currently under the LAA, unable to extend the lease to the maximum 50-year term permitted under the LAA. Sections 105A and 105B of the LAA propose to enable shorter pastoral leases to be extended, which is intended to create certainty for pastoral lessees and assist in generating long-term sustainable outcomes, and incentivise investment in the land to avoid degradation;
  3. a new consultation process with management bodies of managed reserves. Specifically, where a managed reserve (including a Class A reserve), is to be amended, cancelled or its purpose or classification changed, the Minister must first consult with the relevant management body and allow the management body to make submissions, prior to any proposed action taking place; and
  4. additional rights granted to the Minister in relation to surrender of leases, including the right for the Minister to direct the Registrar of Titles to remove expired registered leases (and encumbrances in respect of these leases) from certificates of title of Crown Land, in accordance with the LAA.

The next Legislative Assembly sitting date will occur on 14 March 2023. The full proposed amendments to the LAA can be accessed here.

Disclaimer
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.