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06 Dec 2018

Real estate: 5 Minute Fix 04

By THE REAL ESTATE TEAM

Get your 5 Minute Fix of real estate news. This issue: new protections for off-the-plan sellers in NSW; build-to-rent development exemptions in Vic; WA's new strata and community titles regime; WA's new foreign purchaser transfer duty surcharge; new obligations under WA's biodiversity regime, FIRB update; cladding update; NSW Retail Leasing Code of Practice; how the new Modern Slavery laws could affect you.

WA's new leasehold strata and community titles regimes

WA's Strata Titles Amendment Bill and Community Titles Bill have passed. Strata legislation continues with some important changes (eg. scheme termination options and a new form of land ownership in Western Australia ‒ Leasehold Strata). Leasehold Strata will resemble a freehold strata scheme, including its similar governance model, but for a fixed period.

Under the new Community Titles regime (separate and mutually exclusive to Strata), a single parcel of freehold land can be subdivided to create multiple tiers of schemes in the one community scheme, each with its own community corporation. For example, a single community can now have a retail shopping complex, leisure facility and residential apartments with clear administration, management structure and voting rights. This form of tenure already applies elsewhere in Australia and overseas.

These changes demonstrate a policy shift in WA towards higher mixed use density with greater flexibility and clearer rights for owners, developers, investors, residents and tenants. For more information about the key issues to be covered in the Regulations (yet to be drafted), see: WA's new strata regime: close, but no cigar just yet.

Update: WA foreign purchaser transfer duty surcharge from 1 January 2019

In our June 5 Minute Fix, we mentioned the WA budget proposal to introduce a foreign purchaser duty surcharge on certain residential properties to 7%. This proposal has now passed and from 1 January 2019, foreign persons acquiring residential property in Western Australia may pay an additional 7% transfer duty.

Note the broad definition of "residential property" which is subject to the surcharge, being land that is:

  • capable of being, or intended to be, used solely or dominantly for residential purposes; or
  • vacant or substantially vacant and zoned solely for residential purposes under an applicable planning scheme.

For more information about how the surcharge will work, including the affected "foreign persons" and land which is not considered to be "residential property", see: Buyers beware: Western Australia will levy a Foreign Purchaser stamp duty surcharge from 1 January 2019.

Update: new disclosure requirements for off-the-plan sellers in NSW

The Conveyancing Legislation Amendment Act 2018 has now passed but is awaiting final announcement for commencement. On commencement the Act provides further protection to off-the-plan purchasers.

The new vendor/developer requirements include:

  • a vendor disclosure regime that requires developers to provide purchasers with a copy of the proposed plan, proposed by-laws and a schedule of finishes before contracts are signed;
  • vendors must provide purchaser with a copy of the final plan at least 21 days before settlement;
  • developers will have to notify purchasers of changes made during construction and purchasers will have the right to rescind the contract or claim compensation if they will be materially impacted by a change;
  • the cooling-off period for off-the-plan contracts will be extended to 10 business days and deposits will be required to be held in a controlled account; and
  • existing legislation will be expanded to clarify that the Supreme Court can award damages where the vendor terminates under a 'sunset clause'.

For more details on these provisions see:

Build-to-rent developer exemptions for land tax surcharge and duty in Victoria

Exemptions from paying the absentee owner land tax surcharge and the foreign purchaser additional duty may now be available to absentee/foreign landowners carrying out build-to-rent developments in Victoria.

Updated Treasurer's Guidelines issued in relation to the Land Tax Act 2005 on 1 October 2018 in respect of the 2019 land tax year onwards have clarified that an exemption from the absentee owner land tax surcharge may be granted where an absentee corporation or absentee trust is Australian-based, exhibits good corporate behaviour and makes a significant contribution to the Victorian economy and community. The Treasurer's Guidelines state that "a build-to rent development may be considered to make a significant contribution to the [Victorian] economy and community while the development is being undertaken" as it will engage local labour and utilise local materials and services.

Note that upon completion of the build-to-rent development "the absentee corporation or absentee trust will be considered a passive investor (i.e. essentially a landlord) and no longer significantly contributing to the economy and community with respect to that development", and the exemption will cease to apply.

Updated Treasurer's Guidelines issued in relation to the Duties Act 2000 on 1 October 2018 clarify that for relevant acquisitions of residential property in Victoria occurring on or after 1 October 2018, the exemption from paying foreign purchaser additional duty on the basis that the commercial activities of a foreign corporation or foreign trust will significantly add to the residential housing stock in Victoria includes build-to rent-developments. The requirement to add 50 or more houses within a 12 month period remains unchanged.

New obligations and fines under WA's biodiversity conservation regime

The new Biodiversity Conservation Act 2016 (WA) and its Regulations come into effect on 1 January 2019. Some of the key changes that may affect landowners include:

  • significant new fines of up to $500,000 for individuals and $2.5 million for corporations for taking, possessing or disturbing threatened fauna, or taking threatened flora;
  • an obligation to report an occurrence of threatened species or threatened ecological communities if found in the course of field work; and
  • a range of new licences will be available to authorise dealing with flora and fauna which may only be granted to an individual, not a company, and which are not transferable.

For more information on the changes and the recommended steps to prepare for 1 January 2019, see: The Biodiversity Conservation Act 2016 (WA) is coming into force: what you need to know.

FIRB update: "Open and transparent sale" requirements for foreign purchasers clarified

FIRB has updated Guidance Notes GN 17 and GN 21 to clarify the "open and transparent sale" requirement for the sale of agricultural land to a foreign investor.

The "open and transparent sale" requirement now only applies:

  • to acquisitions of freehold interests, and leasehold interests with freehold characteristics, of agricultural land;
  • where the agricultural land is intended to be used for a primary production business, or residential development.

For more information on what lies outside of the scope of the "open and transparent sale" requirement, see: "Open and transparent sale" requirement for purchases of agricultural land by foreign investors clarified.

Update: Amendments to Queensland building cladding regulations

As a result of feedback received from the Queensland Building and Construction Commission (QBCC) and industry stakeholders, the Building Regulation 2006 has been amended to:

  • clarify that if one co-owner has complied with provisions within Part 4A (combustible cladding regulations), then it is taken that all owners have complied (for circumstances where there are one or more owners);
  • allow for existing agent agreements to be accepted as proof of agency for meeting obligations under Part 4A; and
  • provide for the QBCC to issue a notice directing the building owner to complete Part 2 of the cladding checklist (which includes building industry professional statement responses) if it is suspected the information provided in Part 1 (comprising initial building information) was misleading.

Further details can be found in our recent publication on the building cladding developments in Victoria, NSW and Queensland.

FIRB threshold changes ahead in light of Trans-Pacific Partnership (TPP-11) free trade agreement

Australia ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) on 31 October 2018. Canada, Japan, Mexico, New Zealand and Singapore have also ratified the TPP-11. Brunei Darussalam, Chile, Malaysia, Peru and Vietnam are yet to ratify the TPP-11.

The Foreign Acquisitions and Takeovers Regulation 2015 (Cth) will be amended to increase the target value thresholds above which proposed investments into Australia by non-government investors of TPP-11 parties are subject to review under Australia’s foreign investment framework.

Unless an exemption applies, from the date the TPP-11 comes into force (being 30 December 2018), the thresholds for TPP-11 countries which have ratified the TPP-11 will increase from A$261 million to A$1,134 million (indexed) for all actions in developed commercial land. The thresholds will be indexed again on 1 January 2019.

NSW Building Cladding register – time is running!

The Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2018 (NSW) commenced on 22 October 2018. This Regulation requires owners of residential apartment buildings, hotels, motels, boarding houses, student accommodation, aged care facilities, hospitals or buildings used for public assembly (eg. theatres, cinemas, schools and churches) to register those buildings online with the NSW Government if they have external combustible cladding made up of metal composite panels (including products that consist of aluminium, zine or copper), or insulated cladding systems (including those comprising polystyrene, polyurethane or polyisocyanurate). These categories of cladding products include the products banned on 15 August 2018 by the Building Product Use Ban.

For buildings occupied before 22 October 2018, registration must occur by 22 February 2019. In all other cases where the regulation applies, registration must occur within four months after the building is first occupied. The register can be accessed at www.claddingregistration.nsw.gov.au

NSW Retail Leasing Code of Practice from 1 January 2019

A voluntary Retail Industry Code of Practice — The Reporting of Sales and Occupancy Costs has been formulated by industry stakeholders to provide NSW retailers with access to information on sales and occupancy costs.

The Code commences 1 January 2019 but parties have until 1 July 2019 to implement changes to achieve compliance with the Code.

The Code may be adopted in other Australian jurisdictions.

How the Modern Slavery law could affect you

On 29 November 2018, the Australian Modern Slavery Act passed all stages of the Australian Parliament. The legislation is likely to be in force in early 2019.

Large Australian entities (including companies, partnerships, trusts, universities and charities), those entities carrying on business in Australia (irrespective of where they are incorporated), and Commonwealth corporations and companies, with annual consolidated revenue exceeding $100 million are now required to disclose how their operations and supply chain may contribute to modern slavery and explain what they are doing to address those risks.

For further details on your reporting obligations under the new modern slavery law, click here.

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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.