what is hot in conveyancing · causes of property and conveyancing claims 2015/16 based on cost of...
TRANSCRIPT
What is hot in conveyancingPhillip Nolan
Risk Manager LPLC
Introduction
Communication let me down.
Spandau Ballet
Key point
• Good communication in conveyancing
includes:
– being transparent about costs
– presenting information in plain English
– identifying the clients preferred method of
communication
Key point
• Good communication in conveyancing
includes:
– giving good advice in a timely manner
– asking and inviting questions
– listening to what the client has to say
– using visual aids
Hot topics
• CGT withholding payments and real estate
• Cooling-off notice for purchase of land
CGT withholding payments and real estate
• Any vendor selling real estate worth $2million or
more will be subject to the withholding tax unless
they provide a clearance certificate to the
purchaser by settlement.
• Commencement – 1 July 2016
• Relevant Act – Tax and Superannuation Laws
Amendment (2015 Measures No. 6) Act 2015.
Amends schedule 2 of the Taxation Administration
Act 1953 (Cwlth)
Assets caught
• Taxable Australian real property (TARP)
• Indirect Australian real property interests (IRPI)
• Option or right to acquire the above
Examples of affected transactions
• Acquisitions directly from the owner of:
– freehold
– leasehold
– mining, quarrying or prospecting rights
• Acquisitions indirectly from companies,
partnerships, trusts including:
– company title interests
– transferor owns 10 per cent or more of the entity and
the entity is land rich
• Options or rights to acquire any of the above
LPLC bulletins
• 1 July new CGT withholding payments for real
property sales of $2M or more
• New CGT withholding payments for options,
company title interests and indirect Australian real
property transactions
• Practical examples
Cooling-off notice
• An estate agent is not an agent at law for the
purpose of being served a cooling-off notice for
the sale of land
• Relevant case – Tan v Russell [2016] VSC 93
• Relevant Act – See s.31 Sale of Land Act 1962 (Vic)
• Tip – Serve any cooling-off notice personally on the
vendor and a copy on the vendor’s representative
Property and conveyancing cost of claims 2015/16
Property andconveyancing - 19.5%
Other - 80.5%
Property and conveyancing number of claims
2015/16
Property andconveyancing - 25.5%
Other - 74.5%
Five main areas of property and conveyancing
claims 2015/16 based on cost of claims
Duty and CGT - 18%
No advice about land - 17%
Defective disclosure - 11%
GST - 6%
Caveats / check searches - 6%
Other - 42%
Causes of property and conveyancing claims
2015/16 based on cost of claims
Failure to manage legalissues - 38%
Poor communication - 30%
Poor engagementmanagement - 15%
Simple oversignts -7%
Lack of useable trail - 4%
Other - 4%
Tax quiz
• Who should notify the SRO of the acquisition by a
trust?
– client
– lawyer
– accountant
– lender/mortgagee
• Vote now
Land tax and trusts claim
In June 2009 a practitioner acted for a purchaser of
a house on the Bellarine Peninsula. The property was
marketed as a development site with the potential
for a ‘number of premium townhouses STCA’.
The individual purchaser nominated a company as
substitute purchaser.
The matter settled in September 2009.
In 2015 the SRO determined that the property was
subject to the land tax surcharge for trusts and
sought additional land tax of approx. $20,000.
Lessons
• Take time at the outset of a matter to talk about
any land tax issues with the client
• Carefully check all conveyancing documents for
any reference to a ‘trust’
• More information
– State Revenue Office - land tax and trusts
– LPLC publications:
• Land can be taxing LIJ 1 March 2014
• More land tax woes blog posted 12 December
2014
Lessons
• Inform foreign resident clients of the land tax
absentee owner surcharge. This will increase from
0.5 per cent to 1.5 per cent from 1 January 2017
Clients and communication
• What do clients want the most from their lawyer?
– Cheap legal services
– Better lines of communication
– Transparency
• Vote now
Poor communication - example of claim
A practitioner received a contract of sale via email from
a purchaser client.
The property was the rear unit on a two lot subdivision in a
Bayside suburb.
The land information certificate in the section 32
statement disclosed an improved value of approximately
$1.5m.
On the same day the practitioner sent an email in reply
stating:
• there is no active body corporate
• the boundary of the property is shown on the planning
certificate
Lessons
• Resist the temptation to give off-the-cuff advice
• When asked to advise generally immediately
respond by clarifying your retainer
• Use a precedent first letter to purchasers and/or a
checklist
• Audit files to ensure staff are:
– using the precedents
– not copying from other files
• Ensure your precedents are updated regularly
Exercise – error spotting
You act for the purchaser of 38 Little Lonsdale Street
Melbourne.
The purchaser has provided you with a section 32
statement which they received on 23 July 2017.
Prior to signing the contract the purchaser wishes to
obtain your advice on the section 32 statement.
After a preliminary review you realise that the section
32 contains a number of defects.
Action
• Refer to the section 32 statement in your materials.
List three mistakes in the section 32 statement:
1.
2.
3.
• How would you communicate the errors in the
section 32 statement to your client?
Due diligence and section 32 statements
• Property websites checklist and comments
• Key Risk Checklist: Purchase of land – Questions for
the Purchaser
Conclusion
“…….don’t let me be misunderstood……”
Animals
Joint tenants
John and Mary Smith
John dies
Mary Smith
Tenants in Common
John Smith
Mary Smith
Mary Smith
John’s estate Beneficiaries in John’s will
John dies
Purchase of Land: Questions for the Purchaser
Last updated: July 2016 (105313) Page 1 of 5
Responses required without delay
Circle yes or no as applicable.
Provide the additional information as indicated.
If you do not know the answer or are unable to provide the additional
information please insert the words “Not known”.
Please sign where indicated at the foot of the final page and forward this
completed list and all necessary information to the sender.
No. Question Answer
Title
1. Who is to be registered on the title(s) to the
land?
If more than one person how do you want to
be recorded as owners?
Joint proprietors – on death property goes
automatically to other joint proprietor(s)
Tenants in common – on death share in
property forms part of deceased’s estate
If they are not named in the contract we will
need to do a nomination. Nomination must
occur without delay to avoid double duty.
Proof of identity is required in accordance
with the Model Participation Rules issued by
ARNECC for anyone who is to be registered
on title.
[Please also sign and return the attached
client authorisation form if the sale will be
conducted electronically.]
Insert details:
……………………………………………………...
ABN:………………………share…………………
……………………………………………………….
ABN:………………………share…………………
If tenants in common please advise the share
to be held by each person. Consider issues
such as:
amount paid in cash by each person
liability for repayment of any debt /
expenses
contributions by third parties ie parents
entitlement to equity
amount to be paid on sale
2. Is any person to be registered on the title(s) in
their capacity as an executor, trustee,
guardian or administrator?
Yes/No
If yes – provide details
3. Is any person to be registered on the title(s)
related and/or associated with the vendor,
including any subsidiary or holding
company?
Yes/No
If yes – provide details.
Last updated: July 2016 Page 2 of 5
About you
4. Is anyone to be named in the contract
and/or to be registered on the title(s) a
foreign person / resident?
A foreign person includes an individual not
ordinarily resident in Australia and a foreign
company for the purposes of the Foreign
Acquisitions and Takeovers Act 1975 (Cwlth)
A foreign resident means a person who is not
a resident of Australia for the purposes of the
Income Tax Assessment Act 1936 (Cwlth)
Yes/No
If yes, you may be required to obtain prior
approval from a state and/or federal
government to buy the land and when you
sell the land certain withholding obligations
apply.
5. Provide the date of birth of each person to
be registered on the title(s).
We are required by law to provide this
information to various government agencies.
Name:
………/…………./…………DOB
Name:
………/…………./…………DOB
6. For a corporate purchaser, who is authorised
to give instructions, sign the
contract/vendor's statement/transfer?
Insert name(s):
7. Are you the selling agent or the agent’s
employee or relative?
Yes/No
If yes, refer to section 55 and 55A of the Estate
Agents Act 1980 (Vic) for the process to be
followed.
Insurance, tax, duty and wills
8. Have you arranged insurance for the land?
Yes/No
Please discuss any insurance requirements
with your insurer / broker. Some purchasers
take out their own insurance prior to
settlement to ensure adequate insurance is in
place.
You should be aware that the vendor may not
have adequate insurance cover or any
insurance at all.
9. Will you be applying for:
first home owners grant
reduction in duty payable for any
reason. For example, pension
concession, transfer to spouse.
Yes/No
Yes/No
Last updated: July 2016 Page 3 of 5
10. Have you considered the tax consequences,
such as GST, GAIC, land tax, CGT, and stamp
duty of your purchase?
If no, do you require us to advise you on any
tax issues?
Yes/No
Yes/No
We recommend you also discuss any issues
with your accountant.
11. Have you considered the effect the
purchase will have on your will?
Yes/No
Finance
12. Have you paid the full deposit?
Please inform us if you paid by bank
guarantee / deposit bond.
If yes, was the deposit more than 10 per cent
of the price?
Yes/No
Yes/No
13. Are you purchasing subject to finance being
approved?
If yes:
you need to keep us informed of your
progress every two days and must notify
us before the approval date about
whether finance has been approved to
enable us to notify the vendor to end the
contract.
the vendor may ask for evidence of your
inability to obtain finance should you wish
to withdraw from the contract.
Yes/No
14. Are you obtaining a loan to pay for some of
the purchase price?
For any funds you are providing at settlement
we recommend you authorise your lender to
draw on your account(s) to deduct funds for
settlement.
Yes/No
If yes, provide the name of your finance
broker / lender.
15. Have you notified your finance broker /
lender of your purchase?
If yes, have you provided them with a copy of
the contract of sale and section 32
statement?
Yes/No
Yes/No
16. Is any person who is not to be registered on
the title(s) providing funds to assist with your
purchase of the land?
Yes/No
If yes, provide details.
Last updated: July 2016 Page 4 of 5
About the land
17. What is the location on the plan of subdivision
of the land?
Note: car spaces may be subject to a
congestion levy.
See attached copy plan of subdivision.
Highlight each part including the land,
apartment/unit, any car space(s), storage
lot(s) or other areas included in the sale.
18. What is your intended use of the land?
For example a dwelling or shop.
Is this the same as the current use?
Insert details:
Yes/No
19. Do you intend on:
leasing the property
residing in the property
Note: if you are buying subject to a lease this
lease may continue after settlement.
Do you require our advice about any lease
matters?
If you reside at the property is this your
principal place of residence?
Yes/No
Yes/No
Yes/No
Yes/No
If yes, land tax may be payable from
settlement for the principal place of residence
you currently reside in if you are not selling
that property.
20. Do you believe any of the information in the
section 32 statement is incorrect?
Yes/No
If yes, provide details:
21. Are boundary fences in reasonable
condition?
Note – if you are concerned about the
boundary locations we recommend you
obtain a land survey.
Yes/No
If no - once the contract is signed you will be
responsible at your cost for any necessary
fencing works.
22. Is there a pool or spa at the property?
If yes – are barriers in place?
Yes/No
Yes/No
23. Do you have any reason to believe that the
vendor has done any renovation works in the
last 7 years?
For example renovated a bathroom.
Yes/No
Last updated: July 2016 Page 5 of 5
Settlement
24. Where would you like correspondence sent
after settlement?
The property or insert other address:
Any questions
25. Please attach a list of any questions you have
about your purchase.
Information available from Consumer Affairs
Victoria (CAV)
26. You can find information published by CAV
about buying real estate, owners
corporations, renting and retirement villages
here.
………………………………………………………………………………………
Signed by or on behalf of the purchaser(s)
Plan of subdivision showing the lots to be attached
Client authorisation form to be completed and attached