“Don’t wait to buy real estate, buy real estate and wait.” – Robert G. Allen

However, sometimes the eagerness to enter the property game may not work out in your favour. Buying an off-the-plan property may seem like a secure and straightforward investment, but what happens when your expectations are not met? Namely, the troubles begin when your premise is littered with building defects and you aren’t sure whether to blame the builder, vendor, surveyor, or perhaps just pick up the hammer and fix it yourself!

Both statute and common laws do afford some form of comfort for you but it turns on each individual facts and circumstances.

Potential Actions Against the Builder

Usually, a property owner who suffers damage from defective building work can consider the following courses of action against the builder:

🔨 Breach of Contract

🔨 Tort of Negligence

🔨 Domestic Building Contracts Act 1995 (Vic)

🔨 Australian Consumer Law

🔨 Domestic Building Insurance

Breach of Contract

Maintaining a breach of contract claim is contingent upon whether a valid and enforceable agreement exists between you and the builder.

If your off-the-plan Contract with the vendor includes a phrase to the likes of “this contract is subject to and conditional upon the Vendor entering into a domestic Building Contract with a registered builder for the building works” then you are not privy to a contract with the builder and may limit your prospect of establishing a breach of contract as a cause of action.

Tort of Negligence

A claim in negligence may arise in circumstances where a builder has breached a duty of care by not satisfying the standard of care expected of a reasonable person in their position. As a result, this breach of duty of care has caused you to sustain economic loss. A negligence claim may provide compensation for loss where no contractual or statutory warranties are available. Moreover, the builder may be held accountable for the negligence of their subcontractors (e.g. tilers, plumbers etc).

Where the negligence claim for building matter pertains to pure economic loss, the Court places substantial emphasis on your vulnerability, the builder’s knowledge of the likely risk of harm and your reliance on the builder.

Domestic Building Contracts Act 1995 (Vic)

Another potential avenue in the absence of an enforceable contract between you and the builder may involve a claim for a breach of an implied warranty.

All domestic building contract contain implied warranties that “run with the property”. It is therefore possible to make a claim against the builder for breaching an implied warranty of the original building contract, despite the fact that you are not a party to it.
A list of the implied warranties that automatically apply to all domestic building work may be found in section 8 of the Domestic Building Contracts Act 1995 (Vic).

Australian Consumer Law

In accordance with the Australian Consumer Law, most building works provided by a builder is classified as a form of ‘service’ that carries automatic guarantees. Some of those guarantees include not ensuring that the building works are provided with due care and skill and that the final product, resulting from the rendered service, is reasonably fit for its intended purpose.

The remedies available under the Australian Consumer Law for a proven breach of consumer guarantees may include the following:

• The builder must remedy the failures within a reasonable time. If these remedies prove unsatisfactory, then you may be entitled to terminate relevant contracts or recover any reasonable cost incurred in the process of remedying the failures.
• Recovery of damages for any loss or damage suffered by you due to the builder’s failure to comply with the relevant consumer guarantees.

Domestic Building Insurance

If there is any concern of your builder disappearing or going insolvent, you may be able to turn to their domestic building insurance.

However, there is a limit to the rectification costs that can be covered.

Given the complexity of this field and the myriad of options available, it is highly necessary to secure competent legal advice with the focus of providing you with the most cost effective legal solution. At Nevile & Co we understand the importance of property as an investment for your future and that is why our services ensure that no screw is left loose. Contact us today at nevileco@nevile.com.au

Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.

The State Revenue Office (SRO) is particularly talented in raising funds for the State Government, however it also grants stamp duty concessions to those who are eligible.

If you purchase an off-the-plan property, and building works are yet to commence or conclude, you may be eligible for the Off-the-Plan Concession.

There are a number of requirements that will determine your eligibility:

1. The Contract of Sale must be for the sale of land and the building yet to be built on the land.
2. You must be eligible for either the first home buyer concession or the principal place of residence concession except for the “dutiable value” aspect of those concessions.

The residence requirement:

Fairly recently, the legislation was changed so that a purchaser must use the property as their principal place of residence within 12 months for a continuous period of 12 months from settlement.

The reason the off the plan concession is so attractive to purchasers is that is reduces the dutiable value considerably. It is often seen as the market value less the construction costs which the vendor will provide prior to settlement in order for the purchasers representative to calculate the applicable duty.

The key point is when the Contract of Sale was signed, so even if you purchase property by way of a nomination, you may still be entitled to the off the plan concession provided that you use the property as your principal place of residence within 12 months of settlement.

There are two methods for calculating the off the plan concession which the vendor will determine prior to settlement. This will be either the fixed percentage method, or the alternative method, both of which use information only available to the vendor.

In order to calculate the concession, the transferor or vendor must:

1. Determine the percentage of construction completed as at the date of the contract of sale.
2. Select a method of calculating the concession and identify the relevant figures.
3. Provide all these details to the SRO when they complete the Digital Duties Form.

The off the plan concession is applied for prior to settlement through your lawyer or conveyancer and is calculated through the duties online forms and claimed via PEXA workspace where settlement occurs electronically.

For more information or assistance in applying for the Off the Plan Concession, please contact our property team at nevileco@nevile.com.au 

Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.

The Owners Corporations Act 2006 (Vic) (“Act”) regulates the management, functions and powers of owners corporations (OCs) in Victoria. It also provides for mechanisms of dispute resolution in relation to the OCs and its members. Developers, as initial owners, need to comply with their obligations under the Act. This article will explain in general terms the obligations which developers have, what are the new obligations under the Amendment to the current Act (“Amendment”), and the restrictions that apply to developers.

General Obligations

In the case that a developer controls the majority of the owners corporations (OCs), the developer must act honestly, in good faith, and in the best interests of the OCs (s 68). For example, if the developer commandeers common property for its own benefit and excludes other lot owners’ use of it will be contrary to acting in good faith.

The developer must also act with due care and diligence, fairness, and take all reasonable steps to enforce domestic building contracts that affect the OCs (s 68). In the event of the developer’s failure to do so, the OCs may pass a special resolution to authorise legal proceedings against the developer under the implied warranties of those building contracts. In the alternative, lot owners, as individuals, can apply to the Victorian Civil and Administrative Tribunal (VCAT) to “enforce” obligations of the developer.

New Disclosure Obligations under the Amendment to the Act

There are some key changes that imposes increased obligations on developers as initial owners of the OCs under the amendment to the Act.

At the first meeting of the OCs, the developer must provide the following documents (s 34 Amendment; s 67 Act):

• the building maintenance manual,
• the asset register,
• copies of any warranties, or details of any warranties if copies are not available, and
• copies of any specifications, certificates, permits, reports, notices or orders in relation to the plan of subdivision.

The developer must also disclose, at the first meeting of the OCs, the following information (s 35 Amendment; new s 67A Act):

• any relationship with the OC manager,
• any immediate or future financial transactions that will or will foreseeably arise out of the relationship, and
• any possible or specific benefits which the developer will receive from it.

Other New Obligations

Maintenance fund

An OC with more than 50 lots (tier one or tier two OC) is required to prepare and approve a maintenance plan for the property for which it is responsible (s 19 Amendment; s 36 Act). The maintenance plan must be provided at the first meeting of the OC (s 67), and adequate fees to the funding of the maintenance plan must be paid into a maintenance fund in the name of the OC (s 42).

Plan of subdivision

In the course of preparing a plan of subdivision, a developer is now required to specify how lot liability and lot entitlement be allocated, and to engage a licensed surveyor to set out the initial allocation of lot liability and lot entitlement in the plan (unless the owners corporation is a two-lot subdivision, or services only owners corporation) (s 87 Amendment; new s 27 EA Subdivision Act 1988 (Vic)).

Insurance

If the plan of subdivision has separate buildings, and one or more buildings is or are multi-level development and has its own OC which is or are multi-level development, the OC must obtain reinstatement and replacement insurance and public liability (s 30 Amendment; s 61(3) Act) and separate valuations of its buildings (s 33 Amendment; s 65 Act).

Restrictions

The developer cannot:

• appoint themselves as an OC manager unless the OCs relate to retirement village land,

• appoint an associate (s 68(5)), such as a spouse or employee who is ‘close’ to them, as an OC manager,
• vote on resolutions of the OC that relate to defect of the building on the plan of subdivision,
• propose an unreasonable or unsustainable annual budget of the OC,
• designate what would normally be common properties or services as a private lot, and
• receive any payment from the OC manager in relation to contract of appointment of the OC manager.

Further, the appointment of the OC manager prior to the first meeting of the OC expires at that first meeting (s 67B(1)), and the OC manager must not be appointed for a period of more than three years (s 119(1D)).

Contact us today to learn more about your OC responsibilities! nevileco@nevile.com.au

DISCLAIMER The contents of this newsletter are of a general nature and cannot be relied upon as legal advice. However, if you need legal advice please do not hesitate to contact any one of our lawyers.

Do you own a shop, an apartment, flat, unit or townhouse? Chances are you are already a member of an Owners Corporation.

On 1 December 2021, major changes were introduced to the law governing Owners Corporation. This may have a direct impact on you, both financially and legally.

Some key changes

Five Tier System

Depending on the size and nature of the Owners Corporation (OC), the new 5-tier system prescribes different requirements for committees, financial reporting and maintenance plans.

Tier       Definition

1          More than 100 occupiable lots (and not a services only OC)

2          51 to 100 occupiable lots (and not a services only OC)

3          10 to 50 occupiable lots (and not a services only OC)

4          3 to 9 occupiable lots (and not a services only OC)

5          2 lot subdivision or a services only OC

If your OC falls within Tier 1, 2 or 3, they must elect a committee at the annual general meeting. You should inquire as to who those committee members are as they are representing your interests. If you have intention to be a committee member, please do not hesitate to call us to discuss as there are now expanded duties expected of a committee member.

If you are a potential member or existing member of a Tier 1 and 2 OC, we recommend you obtain a copy of the OC financial statements and maintenance plan (if already available). The financial statement will reflect the current financial health of the OC while the maintenance plan provides an insight in relation to the anticipated capital expenses for the 10 next years which you may ultimately be partially liable for. This may influence your decision to buy or sell your property in the near future.

If you are a member of a Tier 5 OC, then we have good news for you. Your OC is exempted from complying with a broad range of obligations including, but not limited to, appointment of OC manager, establishment of committee, issuance of Fee Notices, obtaining insurances and accounts auditing.

Expanded powers of OC

Your OC now has additional power to levy an additional annual fee on you if

• Your OC has incurred additional costs arising from your use of your lot; and
• An annual fee set based on your lot liability is insufficient to account for those additional costs

Furthermore, your OC can also levy an additional fee on you for

• An excess amount, or increased premium, resulting from or attributable to an insurance claim (if the claim was caused by a culpable or wilful act or negligence caused by you, your lessee or your guest); and
• Damage caused to the common property by you or your lessee, if
• The damage is not covered by insurance; or
• The cost of the damage is less than the excess amount; or
• The claim solely relates to your lot

While OC has always possessed the power to make rules for the purpose of the control, management, administration, use or enjoyment of the common property or of a lot, you and your guest* will now be jointly and severally liable for satisfying any penalty or compensation payable as a consequence of your guest’s breach if a copy of the rules was not provided to your guest prior to the breach.

As such, it is more important than ever that you screen your lessee or guest before permitting access to your lot, as any misadventure on their part may be attributed to you, resulting in financial implication.

On the bright side, your OC now has additional power to look after your interests including disposal of goods abandoned on the common property and retaining of funds from the sale of disposed items to cover its costs, provided certain procedural steps are followed.

How Nevile & Co can assist you as a client:

The amendments to the OC Act and Regulation are to assist OC to operate more efficiently and ethically to prevent exploitation of lot owners while at the same time, imposing additional obligations on lot owners for the protection of OC. If you are experiencing difficulties with your OC or just want to know more about OC, please email our Lawyer, Mr Alvin Lim at alvin.lim@nevile.com.au.

Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.

*Guests include anyone that you invite on the property but does not include a contractor or a tradesperson engaged by the occupier of a lot

On the 15^th of June 2022, the Victorian State Revenue Office (SRO) confirmed changes to the duty payable arising from Late Settlement Interest. These will come into effect on the 1^st of July 2022.

Why is duty paid on late settlement interest?

The 2020 case of 1043 Melton Highway Pty Ltd confirmed that late settlement interest is part of the consideration which ‘moves’ the transfer of the land. Therefore, the SRO states that it is a component that forms part of the dutiable value of the land and duty is payable as a result.

When is duty payable on late settlement interest?

For contracts of sale entered into after 1 July 2022, duty will be payable on late settlement interest amounts of $5,000.00 or more.

A transaction will therefore need to be re-lodged for reassessment  within 30 days of settlement if:

• The contract of sale or arrangement was entered into on or after 1 July 2022, and
• The late settlement interest is $5,000.00 or more.

Note, late settlement interest will not form part of the dutiable value of the land for the purpose of determining eligibility for the:

• Principal place of residence concession;
• First home buyer duty exemption, concession or reduction;
• Off-the-plan concession;
• Pensioner concession;
• Young farmer exemption or concession; or
• First Home Owner Grant.

How is duty paid on late settlement interest?

The SRO must be notified by email and the transaction must be re-lodged within 30 days of settlement.

The following details must be provided:

• contact details;
• the bundle/transaction ID of the original lodgment;
• the dutiable value of the original lodgment; and
• the amount of Late Settlement Interest.

Looking for assistance with your property transactions? Look no further! Contact Nevile & Co. today to find out how we can be of assistance.

The information contained on this page is general in nature and does not take into account your personal situation. It is not intended to be relied upon as, nor is it a substitute for specific legal advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.