Unlike most other States, Victoria does not have a stand-alone piece of legislation governing land lease communities and caravan parks.

Instead, the Residential Tenancies Act 1997 (VIC) (RTA) provides the legislative framework for all residential tenancy arrangements in Victoria, including in caravan parks and land lease communities (called ‘residential parks’ in Victoria).

On 6 September 2018 the Victorian Parliament passed the Residential Tenancies Amendment Act 2018 making sweeping reforms to the RTA, a significant number of which directly impact owners and operators of caravan and residential parks in Victoria.

The detail and roll out of the reforms will occur progressively and the intention is it will be completed by 1 July 2020.

Next steps

A summary of just a few of the changes impacting operators of residential parks and caravan parks in Victoria is below. A full list can be accessed at https://engage.vic.gov.au/fairersaferhousing.

We will keep our clients and readers updated on the roll out and the details of the changes when they come into force.

If you are an owner/operator of a residential park in Victoria, you will need to consider how your operations and proforma standard form site agreement, park rules, disclosure material and home sale agreements may need to be amended to comply with the RTA as amendments are rolled out.

Please feel free to get in touch with us to discuss this.

Some of the key changes owners/operators should be aware of

1. New disclosure requirements—There will be a number of new disclosure obligations on park owners including a requirement to (before entering into a site agreement) disclose to prospective residents:

• more information about any exit fees / deferred management fees charged (details of the new disclosure requirements will be prescribed in regulations, but the expectation is they will be similar or the same as that required for retirement villages);

• if the park operator does not own the freehold of the park land, the nature of the interest held and any limitations on the park operator’s right to grant interests in the land to residents (e.g. if you own the park land in a trust structure and lease it to an operations entity, you will need to disclose that you cannot grant a site agreement for a term longer than the term of the head-lease to your operations entity (noting options in head-leases are discounted); and

• any current proposal to sell the park.

2. Prohibited terms—As is already the case in QLD, Regulations will be passed listing what the RTA will deem “prohibited terms” for site agreements. Once the Regulations are passed it will be an offence to include a “prohibited term” in a site agreement. Obviously, the devil will be in the detail here. Operators will need to be ready to change their proforma site agreements when the new Regulations come into force.

3. Rent increases—Rent under site agreements will not be able to be increased at intervals of less than 12 months. Site agreements will be able to specify rent increases are either by a fixed amount (according to a specified method of calculation (e.g. fixed %) or by a non-fixed amount (e.g. market review). If a fixed amount is used, the operator must give 28 days’ notice of the increase in the prescribed form. Fixed rent increases cannot be subject to rent review by Consumer Affairs Victoria. Non-fixed rent increases will be subject to rent review by Consumer Affairs Victoria.

4. Removal of termination right—Park operators will no longer be able to terminate periodic site agreements for ‘no specified reason’. Park operators will be able to issue a notice to vacate at the end of a specified period of occupancy under a residency right, or end of a fixed term site agreement.

5. Compulsory compensation—If a park is closed, the park operator (who owns the park) will have to pay compensation determined by VCAT to residents who own fixed dwellings in the park. The amount of compensation payable will cover reasonable relocation costs for the resident’s dwelling or compensation for loss of residency if the dwelling is not being relocated.

6. No commission where not effective cause of sale—A park operator who enters into an agreement to sell a moveable dwelling on behalf of a resident must not charge a commission for the sale unless the operator is the effective cause of the sale, and the buyer is not the operator or a related party of the operator.

7. New maintenance and repair obligations—There are a suite of new provisions placing specific maintenance and repair obligations on the park operator (in relation to communal facilities, sites and fixtures on sites owned by the park operator) and also on the site tenants in respect to their dwelling (including to rectify defects before the sale of dwelling where the site agreement will be transferred to the buyer).

8. Restriction on repair obligations in park rules—Park operators will be prohibited from making park rules that require park residents to undertake significant works on a dwelling other than for reasons of reasonable cleanliness, safety or good repair.

The standard REIQ contract in QLD includes various “seller warranties”. These are statements made by a seller to a buyer about a property. If these statements are wrong the buyer may be entitled to terminate the contract or claim against the seller for breach.

What is being warranted?

Standard seller warranties in the REIQ contract have the seller confirming things like ownership of the property, capacity to settle the contract and the absence of unsatisfied judgments, orders or writs affecting the property. For a residential contract it’s not normally required, but in some cases a buyer may want to introduce special conditions (in the form of additional warranties) to deal with particular risk issues associated with a property (i.e. council approvals for improvements).

On the other hand, some sellers may want to strip back the standard seller warranties where the sale is truly ‘as is, where is’. We can assist with special conditions if the particular deal requires it.

Breach of warranty – what next

The breach of seller warranties triggers specific rights under the standard REIQ contract. There may also be additional rights available to a buyer outside of the contract itself – for instance if a statutory obligation is also breached.

A buyer’s rights will depend on the warranty being breached as different remedies apply to different warranties. At one end of the scale the buyer will only be entitled to terminate the contract and walk away with his deposit (for example where an order had been made affecting the property, contrary to the seller’s warranty). At the other end of the scale the buyer may be entitled to sue the seller for compensation (for example where the seller is aware the property is contaminated).

For sellers it’s important to ensure the standard warranties are accurate for the property, otherwise they should be amended. For buyers it’s important to test the accuracy of the seller’s warranties (by undertaking searches) and be ready to take any necessary action. Of course, it’s not always about contractual rights and remedies.

There is often a practical solution to avoid disputes and contacts falling over. A good lawyer will explore all options and try to negotiate a positive outcome. 

Give us a call

If you are buying or selling a property in the near future and you want to discuss the issues raised in this article—please don’t hesitate to give any of our lawyers a call.

In QLD, the standard REIQ contract used for buying a residential property allows for a cooling off period of 5 business days.  This means that if you a sign a contract but no longer want to proceed with the purchase, you can cancel the contract during the cooling-off period.

Exceptions

It is important to note that the cooling off period does not apply to contracts:

• for a property sold at an auction;
• entered into within 2 business days of an unsuccessful auction; or
• where the buyer was a registered bidder at the auction.

When does it start & end?

The cooling off period starts on the day you receive from the seller or their agent a copy of the contract signed by both parties.  If you receive the contract on a non-business day (i.e. a Saturday, Sunday or a public holiday), the cooling off period will start on the next business day.

If the seller signs the contract before you, the period starts on the day you sign and communicate acceptance to the seller (i.e. acceptance can be communicated by providing the seller or their agent with a copy of the signed contract).

The cooling off period ends at 5:00 pm on the 5^th business day after it starts.

Termination & Penalties

You are entitled to terminate the contract anytime during the cooling off period.  However, be aware the seller will be entitled to retain 0.25% of the total purchase price and take this amount out of the deposit paid under the contract.

To terminate during the cooling-off period, you must:

• give written notice to the seller (and their agent); and
• deliver the notice before 5:00 pm on the final day of the cooling off period.

The seller will have 14 days after termination to refund the balance deposit to you (i.e. the deposit less the penalty of 0.25%).

Waiver of the cooling off period

You can choose to waive or shorten the cooling off period by giving written notice to the seller.  Note, if you waive the cooling off period on an unconditional contract (i.e. the contract is not conditional on finance or a satisfactory building and pest inspection), you will have no contractual right to terminate (short of unusual circumstances). 

Why waive?

You may want to waive the cooling off period to make your offer more competitive in a situation where there are a number of other buyers looking to buy the same property.  A waiver may give the seller a higher level of certainty that you are committed to the purchase.

Waiving the cooling off period is also common for a vacant land purchase where no building and pest inspection is required, and a buyer has already secured finance or is making a cash offer. 

Give us a call

If you are buying or selling a property in the near future and you want to discuss the issues raised in this article—please don’t hesitate to give any of our lawyers a call.

“E-conveyancing” refers to a conveyancing transaction where lawyers have elected to settle electronically, from computer desktop to desktop through the electronic platform provided by Property Exchange Australia Limited (PEXA).

It is now available in Victoria, New South Wales, Western Australia, South Australia and Queensland.

We love it at Amity, and here is why.

Traditional Conveyance

In a traditional conveyance where the seller has a mortgage and the buyer is taking out a mortgage to buy the property, a quick summary of the lead up to settlement is as follows:

• a transfer document is prepared and then circulated for signing by both the seller and buyer;
• the buyer pays stamp duty and the buyer’s lawyer arranges for the transfer to be stamped;
• the seller’s bank prepares and then signs mortgage release documents;
• the buyer’s bank arranges bank cheques for the agreed settlement amounts and prepares new mortgage documents for signing by the buyer and their guarantors;
• agents for the buyer, the seller, the buyer’s bank and the seller’s bank (i.e. a cast of thousands) then physically meet in a room, check the transfer documents, mortgage release documents, new mortgage documents and cheques are correct, then exchange those and agree settlement has occurred; and
• following settlement, the buyer’s bank collects the stamped transfer and mortgage release documents and then arranges for those to be lodged at the titles office with the new mortgage documents.

Fast forward to an E-Conveyance

The modern age of e-conveyancing is upon us and most of the above is no longer necessary. No more paper transfer or release documents, no requirement for buyers and sellers to sign transfer documents (their lawyers sign digitally), no need for bank cheques, no need to stamp a hard copy transfer document and no need for all parties to physically meet in a room to swap documents for cheques.

Utilising the PEXA Platform the buyer’s lawyer, the seller’s lawyer and representatives for the ingoing and outgoing bank each:

• log onto a secure electronic portal reserved for the settlement from their desktop;
• prepare and digitally sign the transfer, release and mortgage documents;
• enter in the appropriate information, figures and bank accounts (i.e. the same information which would be recorded in the paper transfer and release documents and the settlement statement); and
• follow a series of certifications to confirm they are satisfied.

When the last person has logged on and confirmed agreement with the information in the online portal, settlement occurs, the necessary information is electronically sent to the titles office and the settlement funds, registration fees and stamp duty (if not already paid) are electronically transferred to the appropriate accounts.

No more documents getting lost in the post, no more waiting for someone to descend a mountain to sign something, no more chasing bank officers to hurry up and arrange for someone in the bank to get documents prepared, signed and delivered to where they need to be for settlement. The platform creates a space where all participants can communicate thus removing the reliance on archaic processes.

E-Conveyancing is rapidly evolving 

Around the country e-Conveyancing is rapidly becoming the norm. With Victoria and Western Australia having already implemented compliance dates in 2018, and NSW following in July 2019 the conveyancing landscape is rapidly evolving.  Currently in QLD, it is voluntary to participate in an e-conveyance and all participants must agree.

e-conveyancing is only available to the banks, buyers and sellers who engage lawyers (in QLD) signed up to use e-conveyancing. Thus ensuring that only the appropriate professionals are accessing the platform.

Our view

We openly embrace e-conveyancing, and we are hoping that the uptake in QLD continues to gain momentum.

It is more efficient, it saves trees, it saves the cost of four agents attending a physical settlement, settlement funds are cleared and transferred electronically, meaning faster access to sale proceeds – no more clearance days on bank cheques, the buyers interest is registered on title faster than in paper, and further reduces the risk of title documents being lost after settlement. 

We are encouraging our clients to authorise us to use e-conveyancing for their property transactions.

If you have any queries about e-conveyancing and how it works, please don’t hesitate to contact us.

Introduction

You like the look and feel of a café / bar. But, before you commit to buy (i.e. go unconditional under a sale contract) take the time to check under the surface.

Obviously, you / your accountant will need to crunch the numbers to verify the income / costs are what the seller says they are.  

Here is a list of five other headline items you and your lawyer should consider when you are doing  due diligence on a café/bar business:

1. The Premises

Location is often key for a café/bar business. If you are not buying the freehold of the café/bar premises, your rights to continue operating from those premises after settlement will be via lease or licence granted by the owner of the premises.  

We will review the lease or licence and give you a report summarising the key commercial terms and any risk issues we recommend you need to deal with before settling via a change to a lease/licence. Make sure you are across / talk to us about any concerns you have with the lease / licence, particularly:

• the term of the lease/licence and any options to renew it;
• the financials, how much rent you pay and when, how the rent increases over the lease and what you pay for in addition to rent (e.g. utilities and landlord outgoings);
• what security you are required to give the landlord (e.g. cash bond or bank guarantee);
• your maintenance responsibilities – both during the term of the lease and at the end of the lease (it can be very expensive to rip out the fit out at the end of a lease); and
• your rights to transfer the lease or sublet (so you can sell the business during the term of the lease/licence if you choose to do so).

It is almost always a good idea to meet the landlord before you commit to buy so you can tell them about what you want to do with the premises and gauge your ability to work with them in the future.

2. Plant and Equipment 

Your sale contract should include a detailed list of the plant and equipment you are buying (tables, chairs, fridges, ovens, glasses, crockery, computers, wall paintings etc) .

Make sure you:

• take a close look at the list. Does it include everything you need to run the café/bar? If it doesn’t you need to factor in the cost of buying what’s not on the list;
• take the list of plant and equipment with you when you inspect the premises and make sure its accurate and on the day of settlement, check everything is still there; and
• ask the seller for a depreciation schedule.

We will check if any of the equipment is under a lease or hire purchase arrangement (and if it is, what are the terms of the lease/agreement and whether you want to take them on).

3. Licenses and Permits

If you are serving alcohol, the premises will need a liquor licence. If you are serving food it will also need a food licence. The type of liquor and food licence required will depend on what, how, where and when you are serving the liquor / food.

Other permits may also be required for things like signage or outdoor seating.

We will discuss with you what you need, how you get them and the time frames and costs for doing so.

In the case of the liquor and food licences, it is key to get your applications lodged with the appropriate authority as soon as possible after the contract is signed to avoid delays to settlement. We can help with this.

4. Employees

Good employees are gold! Often it is easier to take on some or even all of the seller’s employees to assist with a smooth transition and successful continuation of the business.

But, you don’t want to be obliged to take on the seller’s employees if you don’t want to.

We will discuss this with you and liability for any entitlements (sick, annual and long service leave) due to the seller’s employees and prepare / amend the sale contract accordingly.

After you go unconditional under the sale contract, try to interview the seller’s employees before settling so you are in a position to make an informed judgement about keeping people on. It is often surprising what they reveal about the business.

5. Goodwill and IP

Goodwill is the established reputation of the café/bar business.

It is made up of the café/bar’s name, brand, its customer base and the good relations with those customers and with its employees. It is any reason why the business attracts customers and revenue.

 You should do your research the reputation of the business, why people go there and how they find out about it – talk to everyone you can who knows the café/bar, including the seller’s employees.

We will discuss with you what IP rights are listed in the sale contract (e.g. business names, domain names, website URLs, trademarks and contact numbers) and make sure we add any that you/we discover is missing so all relevant IP rights get transferred to you on settlement .

We will also try and get a restraint of trade clause in the sale contract preventing the seller from operating a competing business in the local area for a period of time after settlement. 

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“I have worked with Matt and Amity Law for several years. Matt is a pragmatic, client focused lawyer who understands our business and achieves the legal outcomes we need in the timeframes our business requires”

Anthony Doolin
Director, Smithfield Property Group

“Adam is our ‘go-to’ lawyer in the residential land lease and commercial property space. He is easy to work with and his knowledge of the industry and the law across multiple jurisdictions makes him a very effective lawyer.”

Brett Robinson
Orianna Resort Group

There is no easy answer to this question. It depends on when the damage occurred, how it was caused and how serious it is.

A buyers rights are determined by the sale contract. This article runs through what they are and includes some tips on what you should do to mitigate the risk of being out of pocket because your new home is damaged before you settle.

Buyer’s right to inspect

In QLD, the contract used (almost universally) for the sale of homes is the REIQ / QLD law society approved contract for houses and residential land (REIQ contract).

The REIQ contract gives a buyer the right (after giving reasonable notice to the seller or their agent) to enter the property before settlement to conduct a pre-settlement inspection.

Do a pre-settlement inspection

Buyer’s should do a pre-settlement inspection to check (amongst other things):

• no fixtures or chattels they are buying under the contract have been removed;
• the property has not been damaged since they last inspected it (i.e. after the contract was signed); and
• there are no anticipated issues with the seller giving vacant possession on the settlement date (e.g. the seller has not removed its property and/or any tenant’s property).

When should you inspect?

We recommend buyers arrange (with the seller’s agent) to inspect the property as close as possible to the day of settlement or even on the morning of settlement. 

Who is responsible for the damage?

In short – it depends on the type of damage and how and when it occurred.

The overarching position under the standard REIQ contract is—the property is at the buyer’s risk from 5:00 pm on the first business day after the contract is signed.

This means, if the damage occurs after this time, it is the buyer’s problem except in limited circumstances. 

When is the seller responsible?

Only for damage caused by the seller’s failure to take reasonable care of the property between the date the contract was signed and settlement.

Fair wear and tear or damage caused by something outside the seller’s control (e.g. a storm, a flood or fire not wilfully caused by the seller’s negligence) is the buyer’s problem.

Do I have to settle if damage occurs?

In most circumstances—yes. The exceptions are:

• the seller agrees to postpone settlement;
• there is a specific special condition in the contract which expressly gives the buyer a right to elect not to settle in circumstances specified in the special condition (e.g. the seller must have the property cleaned by a professional cleaner prior to settlement); or
• the damage was caused by the seller after the contract was signed: and
  • the damage was deliberate or caused by the seller failing to take reasonable care of the property; and
  • the damage is bad enough to make the property unfit for occupation.

Under the REIQ contract you may be able to claim compensation from the seller for minor damage, but you can’t refuse to settle or demand compensation be paid prior to settlement or demand any off-set from the purchase price you pay under the contract on settlement.

How do I mitigate the risk of damage?

We recommend (as a minimum) you do the following:

• talk to us before you sign a contract so we can deal with any particular concerns you may have by drafting an appropriate special condition to include in the contract;
• as mentioned above, carry out a pre-settlement inspection;
• let us know straight away if your inspection reveals the property has been damaged or the seller has made any changes to the property so we can advise you on whether you are entitled to terminate the contract and/or could claim compensation from the seller; and
• as soon as you sign the contract, take out insurance by contacting an insurance broker or home insurance company directly.

Give us a call

If you are buying a home in the near future and you want to discuss the issues raised in this article—please don’t hesitate to give any of our lawyers a call.

Introduction

Most motel businesses are leasehold. The right for the motelier to operate from the motel is granted by the owner of the motel (landlord) to the motel business owner (as tenant) under a lease.

Most motel leases are granted for an initial term, with an option for the motelier (as tenant) to exercise an option to take the lease for one or more additional terms. An initial term of 5 to 10 years with three options for additional 5 year terms is typical (i.e. a total of 20 to 25 years including options).

It is critical for moteliers to understand when and how their lease options can be exercised. The last thing a motelier wants is to loose their business because they (or their on-site manager) simply forgot to exercise the lease option or the notice exercising the option was not given in accordance with the strict requirements of the lease.

We have had clients come to us on more than one occasion with this problem. Landlords will not always simply agree to waive the requirements of the lease. Someone else may be offering the landlord more rent or may just suit the landlord to end the tenancy.

Don’t get caught out.

Tips for exercising your option correctly

To avoid the real risk a failure to exercise a lease option correctly leads to the loss of a motel business, our tips are listed below. Please give us a call if you are concerned or want to discuss any aspect of your lease:

• Read the lease—almost all commercial leases will have strict requirements about when and how a lease option can be exercised by the tenant. If the lease is not clear, discuss it with your lawyer.

• Diarise the dates—Most leases will say an option can be exercised no earlier than 12 months before the end of the term and not later than three months before the end of the term. If you don’t send the notice between these dates, the landlord may be entitled to refuse to grant you a new lease. Diarise the dates and have someone else do the same so you don’t miss them. Part of our service to our clients to take the responsibility of diarising these dates. Ask your lawyer to do so if they don’t already.

• Don’t leave it until the last minute—Even if you intend to sell the business, you are better off exercising the option as soon as you are entitled to do so. Buyers and their banks will likely require you to do so in any event.

• Give the notice by a method allowed under the lease—Don’t do it over the phone. Follow the terms of the lease. If the lease says all notices must be sent by post to the PO Box address of the landlord specified in the lease, send the notice exercising the option by that method as well as by email to the landlord’s property manager (or whoever you typically communicate with when dealing with the landlord). Don’t just send an email unless the lease allows notices to be given by email and specifies the email address to which the email must be sent.

• Who signs the notice—If the lease says all notices must be formally signed by the tenant entity, make sure this occurs. If you are not sure what is required give your lawyer a quick call.

• The notice should be unequivocal and unconditional—Don’t send a notice saying you intend to exercise the option. Say you hereby give notice you exercise the option for the additional lease term staring on X and ending on Y and ask the landlord to acknowledge receipt and provide the new lease for you to sign.

• Follow up for acknowledgment of receipt—If the landlord does not acknowledge receipt of the notice, follow up and ask for written acknowledgement the lease option has been exercised. If the landlord blanks you (and this does occur) call your lawyer.