The subtle skills of property law

A few months ago I took on a full time work experience position at a suburban general legal practice which may explain why my blog posts have been a little thin on the ground lately. Among the many things my firm specialises in, there is a great deal of conveyancing work that comes through the door. There are many legal practitioners who I’ve noticed tend to look down their noses at conveyancing but it’s turning out – at least for me – to be a rewarding field with a much steeper learning curve than most other areas I have gained experience in over the last five years.

I grant you that conveyancing is somewhat of a dying art and doesn’t prove very cost effective for a lot of firms these days, especially with e-conveyancing now making its way in to our practices and simplifying things a great deal. However, anyone who dares delve in to the areas of family law and succession planning need to be competent with this quite essential skill of conveyancing as it will almost always appear in a settlement negotiation in these areas of law.

This year alone there have been a good amount of some very positive changes proposed by various state governments around Australia when it comes to this area of law. I’ll mainly keep this post focused to Queensland as that is where I am based. I’ll soon be attending a seminar on the general changes to the 2014 contract for the sale of land on a nationwide level and I will have some updates after that. But for now, allow me to take a look at the changes coming in to place in my fair sunshine state.

In this post I wanted to take a look at the Land Sales Act (Qld) 1984 which in Queensland has been quite rigid in its regulation of how conveyancing practice has been run. There was a fair amount of obligation and red tape attached. The state government here in Queensland appears to be on quite a bent lately to reduce this red tape and streamline processes to make conveyancing easier for both law practices and especially the end consumer. The purchase of property is one of the most important and major transactions a person can go through. For the purposes of this post I will be staying quite specific with changes to buying “off the plan” or subdividing a piece of land. This won’t apply to everyone but for anyone who works in the area, these changes will make a considerable difference to the forms they send out to clients and exchange with other firms to complete a property transaction.

The changes that have been made to the Land Sales Act in Queensland are hardly an overnight move when you consider that this piece of legislation has been under review since 2010. The act was introduced in the 1980’s in the hopes of regulating “off the plan” sales of unregistered land in Queensland. The act also aimed to introduce minimum disclosure obligations on developers who were in the business of selling property off the plan and applied to both “off the plan” sales along with flat land subdivisions. The biggest change that seems to have come from these amendments is that the disclosure obligations that once resided under the domain of the Land Sales Act are now being moved under the governance of the Body Corporate and Community Management Act 1997 (Qld).

Before these amendments were passed by the Queensland state government, there was a danger that an “off the plan” contract could become an instalment contract. This was a concern as an instalment contract is where the buyer pays off the purchase price by gradual increments but would not obtain a transfer of the title in to the buyer’s name until the final payment was made. By its very nature, you can see why this style of contract is one that makes both buyer and their solicitor quite nervous especially since such an agreement could be entered in to unknowingly. An instalment contract could be the unintended consequence of a buyer being required to pay certain amounts under the terms of the contract prior to settlement in particular where the purchase price exceeds the market value. Another way this can happen is where a buyer is given a rebate of the purchase price before settlement. This arrangement is in danger of being interpreted as a reduction of the purchase price thereby causing the deposit paid to exceed 10% of the purchase price.

This act now amends this in terms of “off the plan” contracts so that a deposit can be paid of up to 20% of the purchase price without making the contract one by instalment. When a deposit is made forfeit due to a termination based on the buyer’s breach, the seller can retain a deposit of up to 20%. Under most case law, sellers could usually only retain 10% of the purchase price without the onus of proof falling on them to demonstrate damage above 10%. It should be noted however that this change to the 20% rule does not apply to any contracts that were entered in to before the bill commenced.

In another interesting development, we find that the Land Sales Act will now no longer apply to sales that arise from a subdivision or a reconfiguration of land in to 5 lots or less. At present it is possible for an exemption application to be made in Fair Trading with regards to a small subdivision. Where a seller grants the option to purchase and hands over the required disclosure information to the buyer, it is no longer mandated for the seller to again give over this disclosure material if a contract should then be entered in to. If a nominee buyer is used on the exercise of the option, then the required disclosure requirements must be again complied with.

Disclosure plan and statement requirements have also been modified under these new changes. Specifically a buyer’s termination right where there has been a substantial variation is no longer available. The termination right will now be aligned with the “material prejudice” approach that applies to the sale of proposed lots in a community title scheme. Once again this right has been moved to the Body Corporate & Community Management Act.

Perhaps the most important of these changes for anyone who needs to perform a conveyancing or related task is in how it has affected the Legal Profession Act 2007. This change is with regard to money held for a sale of a lot and can now be located in Division 2A of the LPA. When a buyer merely raised a dispute in relation to money held, this prevented the deposit holder from releasing the deposit.  Developers were forced under this to litigate in order to obtain deposit amounts. With these amendments, where deposit funds are being disputed, if a law firm reasonable believed one of the parties were entitled to the deposit funds, it can give a 60 day notice to the parties stating how it intends to disburse the money. Unless any of the parties commence proceedings or the parties agree to another disbursement of the funds within those 60 days, then the money is able to be distributed as stated by the legal practice in the issued notice. Most considerably under s262D(4) of the LPA, if a law firm was to distribute the funds after following this described procedure, it will not be able to be held liable for inappropriate disbursement of the money. However, this does not prevent a party perusing a claim against the recipient of a payment.

Property developers and legal practices alike will find something to be happy about in these legislative amendments. Disclosure obligations for developers have changed over to the Body Corporate and Community Management Act, and for a lot in subdivision, there is no longer the red tape of having to go through Fair Trading. This is just the start of a proposed new regime of red tape reduction and streamlining of processes in Queensland. I’m personally looking forward to seeing what comes next and remain optimistic that in making things less convoluted the lives of legal practitioners in our state are also more streamlined allowing us to bill clients more equitably and not have files spin out of control so that they reach a stage of no longer being cost effective for a legal practice to run.

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