10 Jun 2021

Real estate: 5 Minute Fix 14: e-conveyancing, put options, electronic execution

By THE REAL ESTATE TEAM

Get your 5 Minute Fix of real estate news. This issue: further moves towards e-conveyancing in WA; Victoria permanently allows electronic execution of deeds, has duty changes on the horizon and hands down decisions providing guidance for covenants on title, retail leasing and land tax; the Queensland COVID-19 signing and witnessing allowances for deeds are extended to 30 September and possible changes to rooming and residential tenancy laws are contemplated; in NSW cooling-off periods are determined to apply to a put option for residential land and in the ACT the Affordable Housing Land Tax exemption has been extended.

WA: New Bill introduced into WA Parliament moves the Transfer of Land Act 1983 (WA) towards e-conveyancing

On 26 May 2021 the Transfer of Land Amendment Bill 2021 was introduced into the Western Australian Legislative Assembly. The Bill aims to streamline conveyancing in WA, with particular focus on electronic conveyancing.

The Bill recognises that Duplicate Certificate of Titles are less frequently relied on by banks and registered proprietors for recognition or security of their interest. This move away from Duplicate Certificate of Title has been accelerated by the increase use of electronic conveyancing which takes place without a Duplicate Certificate of Title. The Bill reflects this growing trend and removes Duplicate Certificate of Titles.

The Bill also provides:

  • electronic service of many types of notices will be considered sufficient notice under the Transfer of Land Act; and
  • the definition of counterparts is modified so that the counterparts do not have to be the same document. This takes into account that it may not be possible for all information to be the same on both counterparts.

The Bill still must be passed by the Legislative Council, and given Royal Assent. The Legislative Council is sitting throughout June and August. 

Victoria: Reforms to permanently allow for electronic execution of deeds commenced 26 April 2021

The Justice Legislation Amendment (System Enhancements and Other Matters) Act 2021 (Vic) came into effect on 26 April 2021.

The Act makes a number of amendments to the Electronic Transactions (Victoria) Act 2000 (Vic) to continue certain processes for remote witnessing and the signing of certain documents which were implemented in Victoria during the early stages of the COVID-19 pandemic by the COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2020 (Vic).

Notable changes include:

  • deeds can be created in electronic form, and signed, sealed and delivered in electronic communication;
  • when the presence of a witness is required, the witness may appear by audio visual link, and they do not need to be located within the jurisdiction of Victoria. However a witness appearing by audio visual link must meet satisfy a number of other requirements (eg. they still have to watch the party sign the document);
  • other parties cannot refuse to consent to the method of signing a document, just because the party has elected to use that method;
  • not all signatures are required to appear in one document (i.e. there can be a number of different counterparts); and
  • a mortgage may be in electronic form.

The Act also introduced a number of other reforms, including to the Oaths and Affirmations Act 2018 (Vic), the Wills Act 1997 (Vic) and the Powers of Attorney Act 2014 (Vic).

Victoria: Significant duty changes to be introduced

The Victorian budget was delivered on 20 May 2021 and included a number of significant measures set out in the State Taxation and Mental Health Acts Amendment Bill 2021 (Duties Amendment Bill) including:

  • the introduction of a premium "general" rate of stamp duty of 6.5% (increased from 5.5%) for:
    • the "dutiable value" of "dutiable transactions" above $2 million; and
    • relevant acquisitions in "landholders" (which, in broad terms, are certain acquisitions of shares / units in companies / unit trusts which hold relevant Victorian landholdings with a market value of $1 million or more) if the market value of those landholdings is $2 million or more; and
  • an increase to the general land tax rate for relevant landholdings with a taxable value between $1.8 million to $3 million (from 1.3% to 1.55%), and relevant landholdings with a taxable value of $3 million and above (from 2.25% to 2.55%).

Any "dutiable transaction" or acquisition of an interest in a "landholder" that occurs on or after 1 July 2021 under an agreement or arrangement entered into on or before 30 June 2021 will not be subject to the new premium general rate of stamp duty referred to above.

While it was not included as part of the Duties Amendment Bill, the Victorian Government also announced that it plans to introduce legislation under which landowners will face a windfall gains tax of up to 50% that will be applied to planning decisions to rezone land. These measures are set to apply from 1 July 2022, with the total value uplift from a rezoning decision expected to be taxed at 50% for windfalls above $500,000 and the tax phasing in from $100,000.  Land the subject of the Growth Areas Infrastructure Contribution will not be affected.

For a more detailed summary of the above mentioned and other proposed changes (including applicable exemptions), please click here.

Victoria: Covenants do not impose restrictions where no benefitting land is readily identifiable

The decision in Re Ferraro [2021] VSC 166 concerned an application for a declaration that the covenants affecting certain land were invalid due to any benefiting land not being readily identifiable.  The application was brought under section 84(2) of the Property Law Act 1958 after a proposed development was refused by the local council on account of the covenants over the land.

The court scrutinised the wording of two covenants, the Lot 106 Covenant and the Lot 105 Covenant.  Both covenants prohibited the construction of any shop or terrace of dwelling houses and required that any such construction would have to be approved by a third party and to certain specifications.  The covenants were worded in substantially the same way, with the Lot 105 Covenant referring to the third party and their "heirs executors and administrators" and the Lot 106 referring to both the covenant's beneficiaries and their "transferees".

For both covenants, the question was whether there was any land capable of being identified as benefiting from them.

Having regard to the wording of each covenant, the Court found that there was no land capable of being identified as benefitting from the covenants. Particularly, the Court relied on the lack of certainty as to who the 'transferees' of the third party were. While it was possible to speculate and form a view over which land the covenanting parties may have intended to have benefit of the two covenants, it was not easily ascertainable from what appeared on the Register of Titles.

The Court also heard and determined the application on an ex parte basis, by reason that no land could be identified as benefitting from the covenants and therefore there was no relevant landowner to notify.

Ultimately, this meant that the relevant land was no longer affected by the restrictions contained in the covenants and the landowners were not prevented from developing the land in a manner which was contrary to the restrictions.

Key takeaway

An owner of land affected by a covenant that does not readily identify benefitting land should seek advice as to the enforceability of that covenant. It may be that the owner can seek and obtain an ex parte declaration as to the invalidity of the covenant.

Victoria: A head lease is not automatically considered a retail lease even where all the sub-leases are retail leases

In Izett St Pty Ltd v Applgold Pty Ltd [2021] VCAT 174, the Victorian Civil and Administrative Tribunal considered whether a head lease could be a retail lease for the purposes of the Retail Leases Act 2003 (Vic) on the basis that sub-leases granted by the head lessee were all retail leases.

The tenant leased a three-storey commercial building from the landlord, parts of which it subsequently sub-leased to various subtenants. All of the sub-leases were retail leases.

The Tribunal was required to decide whether the head lease was a lease of "retail premises", for the purposes of section 4 of the Retail Leases Act 2003 (Vic).  The Tribunal found that the services provided by subtenants, even if retail, were irrelevant to determining whether the head lease was a retail lease. The act of subletting the premises was considered to be the relevant service provided by the tenant, which was not the provision of a service in the sense required by the Retail Leases Act 2003 (Vic).

Key takeaway

The mere existence of sub-leases governed by the Retail Leases Act 2003 (Vic) will not automatically characterise a head lease as being a retail lease. Services provided by a head landlord to a head tenant must be carefully considered in order to determine whether a head lease is subject to the Retail Leases Act 2003 (Vic). 

Victoria: Land Tax and Primary Production Land

In Prestige Land Property Pty Ltd v Commissioner of State Revenue [2021] VCAT 515, the Commissioner of State Revenue assessed land tax on the Applicant's land. The Applicant contended that the land should be exempt from land tax on the basis that it was being:

  • used primarily for primary production by way of cultivation for the purpose of selling the cultivated produce; or
  • being prepared for use primarily for primary production within 12 months of the preparation commencing.

A prospective tenant of the property had sprayed weeds on the property. The Applicant claimed this work was preparatory to the land being used for primary production purposes. The land was in fact later leased by the prospective tenant and (within 12 months of the weeds being sprayed), used for primary production purposes.  However, the Tribunal held that, at the time of spraying the weeds, the prospective tenant's intention was to determine if the land could be used for the purposes of cultivation, and not to prepare the land for primary production purposes that would definitely ensue.

The result was that the land was liable for land tax and the Commissioner's decision to deny the Applicant a land tax exemption was upheld.

Queensland: COVID-19 signing and witnessing allowances for deeds extended to 30 September 2021

On 23 April 2021, the COVID-19 Emergency Response and Other Legislation Amendment Act 2021 (Qld) extended the application of the Justice (COVID-19 Emergency Response - Documents and Oaths) Regulation 2020 to 30 September 2021.

The Regulation was introduced in July 2020 in response to the COVID-19 pandemic and permits deeds to be:

  • made in the form of an electronic document;
  • electronically signed, in each case without the consent from the counterparty to the deed;
  • signed in separate counterparts by company officers, and those counterparts do not need to include the signature of any other company officer who is to sign the deed; and
  • signed by an individual without a witness.

It is unclear at this point in time if the Regulations will be further extended past September 2021.

It is important to note whilst the execution of deeds electronically or in separate counterparts by officers for a company is permitted under the Regulation, execution in that way does not comply with section 127 of the Corporations Act (Cth) and accordingly a party cannot rely on the assumptions contained in section 129 of the Corporations Act (Cth).

Queensland: Proposed changes to the Residential Tenancies and Rooming Accommodation Act

The Residential Tenancies and Rooming Accommodation (Tenants’ Rights) and Other Legislation Amendment Bill 2021 was introduced to Parliament on 26 May 2021.

The Bill seeks to:

  • remove the "no grounds" and "for sale contract" eviction rights;
  • introduce a process to enable tenancies to be ended where the lessor intends to occupy the premises or make major renovations to the premises;
  • limit rent increases during a lease term to once every 24 months and to cap increases to CPI;
  • provide tenants with the right to keep pets, unless the lessor secures an order from QCAT refusing the pet on reasonable grounds; and
  • allow tenants to make minor modifications to the premises without consent.

The Bill is proposed to apply to both rooming and residential tenancy agreements including those entered into prior to the Bill being passed.

The Bill has not yet been assented to and is currently with the Committee for debate.

NSW: Supreme Court holds statutory cooling-off period applies to a put option for residential land

On 22 March 2021 the New South Wales Supreme Court handed down the judgement of BP7 Pty Ltd v Gavancorp Pty Ltd [2021] NSWSC 265. The Plaintiff sought declaratory relief in relation to the contracts for the sale of 14 strata lots. Each of the contracts arose as a result of the exercise by one or more of the Defendant's put options granted to it by the Plaintiff.

The Plaintiff submitted it rescinded each of the contracts on 11 March 2020 under section 66U of the Conveyancing Act 1919 (NSW), which provides for a cooling-off period. However, section 66T(d) of the Act states there is no cooling-off period when the contracts are made in consequence of the exercise of an option to purchase.

The Court considered two questions:

  • Did the Plaintiff validly rescind the sale contracts?
  • Is the Plaintiff entitled to a refund of the moneys?

The Court held that a cooling-off period applied in relation to the contracts for sale that arose upon the exercise of the put options, and was not excluded under section 66T(d). Therefore, the Plaintiff was entitled to rescind the sale contracts, and to the moneys.

For a full review of this case and an analysis of how the case may be applied in other jurisdiction see our article here.

ACT: The Affordable Housing Land Tax exemption has been extended

In March 2019 the ACT Government introduced the Affordable Housing Land Tax exemption scheme. Under the exemption, an eligible property owner can reduce their land tax completely.

The ACT Government has now announced the exemption will be extended indefinitely, with its application increased from 125 to 250 properties.

A property owner will be eligible for the scheme if the following requirements are satisfied:

  • they have entered into an agreement with a registered community housing provider to make their property available for tenants, for the purpose of community housing;
  • the property must be rented at a rate that is less than 75% of the current market rent;
  • the property must be rented to tenants whose combined gross income is less than $100,000 per annum or the household composition income limits (whichever is greater).

The exemption is administered by the ACT Revenue Office and the Environment Planning and Sustainable Development Directorate.

Further information on how to apply for the exemption can be found on the ACT Revenue Office website.

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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.