FRANK ALVARO

Alvaro Edwards Solicitors

Information about conveyancing and real estate, my work, & other thoughts 

Telephone: 02 9601 7900   |   Address: Suite 1, 16 Norfolk Street, Liverpool NSW 2170

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17 January, 2010

Forcing strata owners to sell

There has been discussion in some circles for a while now about forcing minority owners of strata property to sell their units if, for example, three quarters of the owners in the particular strata plan want to do so. Here's an article by Paul Bibby in yesterday's Sydney Morning Herald that gives a good summary of the issue and at least the point of view of developers.

The example cited in the article is fairly typical "...one of the 16 owners - an 80-year-old woman who is refusing to leave because she has convinced herself that she'll die if she does - is refusing to sell, everyone is stuck there while the whole block gradually falls to the ground...".

Most of the points of view I've seen so far are from the perspective of developers and majority owners. I can quite understand their views; I know of an owner of a small shop in a small commercial strata complex. who just cannot sell his small strata shop to a very willing developer. There's about 7 or 8 owners. The site's old, the individual shops are tired looking though still all trading, but its crying out for development (read "bulldozed"!). There have been a number of approaches by developers in recent years but all proposals stalled due to the refusal of one shop owner who's very happy with his business and how things are.

Whilst at first glance the proposals appear reasonable, I haven't yet seen arguments from the minority point of view.

Take the example cited about the elderly woman. She has her home, presumably she fully owns it and is happy to remain there, and she has some fears if she's forced to move. No doubt she's also built up a network of friends, services and care professionals she relies upon in her day to day living. Perhaps she's not happy with offers made too. Why should she be forced to yield to the other owners and developers? If forced to sell, even if she gets a fair price, what's to say she can afford to purchase or move into another comparable property. The Property Council proposes measures to safeguard the rights of owners like her, but what about her right to stay put?

I guess another way of asking this is, how is the position of the unyielding strata owner different from the position of a home owner who refuses to sell their house on a suburban block to a major developer notwithstanding pressure from all their neighbours? As far as I'm aware, except in the case of a compulsory property acquisition by a public authority, there's no way to force a law abiding property owner to sell their property to a developer.

I'm not advocating no change, but it's only fair that all views are considered and fairly considered and dealt with.

It may not affect many of us but if the proposals succeed, what's to stop developers sometime in future moving legislate for the forced sale of your home or farm?

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09 January, 2010

Liverpool - in Sydney's south-west - again tops first home grants

The latest NSW Office of State Revenue data shows that again, the area (by postcode) receiving the most first home benefits in NSW (both in terms of total grants and total value of the grants) are made to buyers in Liverpool, in Sydney's south-west.

In the 12 month period to 30 November 2009, there were 1,345 first home grants received in the Liverpool area totalling over $19.9m. There were slightly more recipients of benefits under the NSW First Home Plus scheme, which includes stamp duty exemptions in addition to the grants. When the First Home Plus benefits are included, the total value of benefits to first home buyers in NSW totalled over $33.9m for the same period.

From when the grant scheme commenced on 1 July 2000 to 30 November 2009, Liverpool also tops the list, with 8,097 grants. This is significantly more than the area with the next highest recipients, Wentworthville, with 5,603.

I understand the national figures published by the ABS are scheduled to be published this month.

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31 December, 2009

It's that thing that sustains... Hope!

"...Another year over; And a new one just begun..."

Christmas 2009 in our house has now been and gone. In our case, the joy expressed its presence in many ways, including, of course, amongst our children and their cousins. It was especially a happy occasion to witness my now 12 year old to play along, without being asked, and maintain the enchanting attraction that is Santa Claus for his younger siblings and cousins. We even saw Rudolph's shining red nose high in the sky at 1.30am Christmas morning!

Now, facing the New Year, I've pondered about why and what it means. I mean, it's just another 1st of the month, really. Sure, there's the celebratory Champagne (or three!), resolutions for may others, and the real beginning of the summer holidays.

It’s a hard one! I suppose its really many things – mostly positive - the promises of new beginnings, the chance to recommit to old goals, the pledge to extend ourselves, to be thankful for the things we do have.

To some degree at least, the one explanation I think that captures all about what the New Year means, is Hope! Hope we can do better - financially, spiritually, emotionally, and materially - for ourselves, our friends, loved ones and our communities.

Wishing you a very Happy, success in your pursuits, and a safe New Year!

"...Let's hope it's a good one; Without any fear..."


30 December, 2009

NSW Stamp Duty Concession Extended!

Following lobbying by the building industry, the NSW government announced an extension of the concession available in NSW under the Housing Construction Acceleration Plan, to 30 June 2010. Before the extension, this benefit was due to end tomorrow, 31 December, 2009.

The scheme, originally announced as part of the government's economic stimulus plan, applies to contracts entered from 1 July 2009, is not for first home buyers; it's for eligible buyers of newly built homes up to $600,000.00. Eligible applicants are entitled to a 50% discount on stamp duty. Contracts now must be entered on or before 1 July 2010, and construction must be completed by 31 December 2011.

What could this mean to you? If you're not a first home buyer but you're thinking of building a new home in New South Wales, if you enter such a contract after 1 July 2009 and before 1 July 2010, you could save up to just over $11,000.00 in stamp duty.

There's more detailed information in an updated factsheet on the Office of State Revenue's website.

On a different note, the federal government's $7,000.00 grant to new home buyers as well as the grant of $3,000.00 to buyers of existing homes does however end on 31 December, 2009.

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05 December, 2009

More reasons to think about making a will

About a week ago, I began gathering some thoughts for my intended next post concerning making wills, especially given that anecdotally I've noticed an upward trend in matters I'm involved in. As it happens, day to day work took priority and then, when I happened to find 20 minutes to read last Wednesday's Sydney Morning Herald, I read a decent article by Lesley Parker on this very topic addressing many of the issues I too wanted to address.

Paker draws on various sources and comments on a range of matters, such as if you die without a will the law decides who gets what of your assets, which may not be what you intended. And, whether you like it or not, you do have a responsibility to provide for family. There's much more, of course, and it's definitely a worthwhile read.

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29 November, 2009

Buying or Selling? What about those fixtures?

Part of your solicitors' role in a conveyancing transaction is to try and minimise avoidable disputes arising in your sale or purchase of real estate property.

An area that has a high potential for dispute, and usually the most easily avoidable, concerns what is included or not included in the sale of a property.

The law defines that land also includes its "fixtures". So when selling your house, fixtures are automatically included.

Fixtures are "attached" to the land. Easily identifiable fixtures include, for example, any permanent buildings and improvements built onto the land. They also include things (or "chattels") permanently or securely attached to the land or to the building.

How "permanent" or "secure" is "permanent" or "secure"? Well, that's one area where disputes can arise. If a thing is attached so that it's hard to remove without causing damage, then it's most likely a fixture.

So, if your dishwasher is only 6 weeks old, but you've decided to sell the house. Is the dishwasher included? Well, it depends. If it's freestanding and its only connection is one power cord plugged into a standard power-point, a water supply hose and a waste water hose, arguably it's not a fixture and you can take it.

On the other hand if it's custom built into the kitchen's furniture and decor, and it's likely to cause some damage if it's removed, then it's probably a fixture and you can't take it.

You've sold the property, settlement morning arrives, and after completing their final inspection, the buyer complains to his solicitor about the missing dishwasher (or dryer, or whatever...). You always intended to take the dishwasher, and the buyer always assumed it was included; after all, it was part of the kitchen's attractions.

What happens now? Well, if it's a fixture, the contract usually provides that the seller has to either return it, or compensate the buyer. This can be very annoying if it means forking out another $1,200.00 the seller wasn't counting on. It's hardly worth jeopardising a $600,000.00 sale over a $1,200.00 dispute. On the other hand, if it isn't a fixture, the buyer is very annoyed to for the same reasons. Either way, it leaves a very sour taste.

How can this be avoided? Especially if a chattel could be either a fixture or not.

Simplest answer: make sure the sale contract actually states what is included or not included in the sale.

If you're selling, to be on the safe side and avoid a later hostile argument about inclusions, ask your solicitor to ensure that the contract makes it plainly clear that the dishwasher (or dryer, air-conditioner, the custom aviary, the wedding present bird-bath, mum's special curtains, sentimental light fitting, or whatever) is excluded from the sale.

If you're the buyer, don't assume all what you see is included in a property sale. If you have time, consult your lawyer to discuss your concern. Better still, if you're in a situation where you need to sign a contract right there, insist or negotiate that the particular item or chattel you want is written in the contract as an inclusion (usually on page 1 of the NSW standard contract).

Another way of saying this, is that regardless of whether a thing is a chattel or a fixture, the contract can simply state whether they're included in the sale or not, and that simply does away with any dispute about definitions.

The issue concerning chattels and fixtures applies to other land and property transactions too, such commercial & retail leases and sales. Indeed, an issue that appears to come up regularly concerns racking or shelving; often these are specialised and expensive - but they too have fallen into the debate of whether they're chattels or fixtures.

To avoid an avoidable dispute, maintain harmony, reduce unnecessary stress and angst, and help to make your sale or purchase a more pleasant experience, ask your solicitor to ensure the contract deals with these types of issues.

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14 November, 2009

Sellers and Their Agents

Once a decision is made to sell real estate property, in my experience I find that almost all my seller clients have already consulted and signed up with their preferred real estate agent.

There are still occasions however where I'm asked by clients to review or explain their agency agreement before they sign up.


In these cases, over the years, apart from explaining the nature and effect of what are usually "exclusive" agency agreements, I've found that the advice I consistently emphasise includes asking my clients to consider:

  • The exclusive agency period. It can be varied!
  • The commission rate. Its usually negotiable.
  • Make sure that the seller is a aware of ALL the potential costs
  • Will the agent provide an "early release" guarantee?
More on these points below.

Exclusive agency period. In my view these should never exceed 90 days, but ideally ought to be no more than 60 days. I've been told by clients many times that when they've tried to reduce this period, the agent often protests that they need a decent time-frame to enable their marketing to work. Fair point, but I've also been advised by real estate agents that 60 days, even 30 days in some cases, is more than adequate to not only mount an effective campaign, but also to demonstrate to a seller the agent's genuine commitment.

Under an exclusive agency agreement, a seller is tied to their agent for at least that agency period. This means the seller can't really sack that agent in that time. Generally, that agent is entitled to commission if the property is sold during the agency period, regardless of whether the agent introduced the eventual buyer. If a seller is unhappy with that agent and attempts to "sack" that first agent and appoints another agent, the seller is under a serious risk of having to pay a full commission to two agents!


A shorter agency period gives a seller some flexibility. If they're unhappy with the agent's performance, at least it's a shorter wait to the end of the agency period after which another agent can be considered.


On the other hand, no matter what the length of the agency period, there's nothing stopping a seller entering a new agreement or agency period if they're happy with their agent's performance.


The commission rate - it's actually negotiable! I've commented on this previously. Speak to a number of agents before deciding who to engage. If anything, at least a seller can compare commission rates as well as other factors.


Check for other charges not so prominently disclosed. Make sure that the seller is a aware of ALL the potential costs. As well as commission, to determine whether it's inclusive of GST, and if other charges are additional, such as advertising costs. I've found most agency agreements don't include additional advertising costs but some do; it's something to factor in when making an informed decision.


Is an early release guarantee available? There are agents who subscribe to the Jenman system. One of its features is that no matter how long the agency agreement period, the seller has the right to cancel the agency agreement at any time.


A client of mine recently cancelled a 90 day agency agreement only days after making that agreement. Due to an inadvertent, and what would normally be considered a relatively very minor, error by one the agent's staff, the seller cancelled his agency agreement. The agent rectified the concern immediately, apologised of course, and asked the seller to take at least a day to reconsider. The next day, the seller confirmed his decision. To the agent's credit, the agent in this case honoured his guarantee and released the seller from the agreement, and lost an opportunity to earn quite a handsome commission. Ouch! That must've hurt! But full credit that agent - I'd suggest very few agents in that position would've agreed to such a release.


So, another consideration I'll now be consciously drawing to my clients' attention to if I'm asked to advise on agency agreements, is that they take into account whether a potential agent will provide a similar guarantee.

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07 June, 2009

Cooling-off rights on real estate sale contracts benefit purchasers, not sellers

For quite some time now, purchasers of residential real estate property in NSW have the benefit of statutory cooling off rights for a minimum of 5 business days.

I'll get to the main point of this post now:

Sellers, please note that these cooling-off rights are SOLELY for the benefit of buyers, not the seller!

I recently had a situation where a vendor client authorised her agent to exchange contracts in the sale of her house. Nothing unusual there. Within a few days of entering the contract, after I routinely asked about where she next intended to live, she told me that if she couldn't quickly find a rental property, she intended to rescind the contract. She explained how the agent had told her "...something about a cooling-off period". She gave herself a sense of reassurance when she contacted the agent to again confirm the existence of the cooling-off period, but it seems that she and the agent were at cross-purposes, notwithstanding my client telling him she intended to withdraw from the contract if she couldn't find suitable rental accommodation.

She was almost panicky when I explained to her that what she had (mis)understood wasn't the case at all; this is when she first was told explicitly that the cooling-off option could only be exercised by the buyer, not her. In the end all turned out okay but it could've easily not done so for her.


The current scheme of cooling-off rights provided to purchasers in NSW is an anti-gazumping measure. It follows a number of previous legislative attempts to tackle the problem of gazumping.

What is gazumping? It's probably easier to explain it by describing how it typically occurs, but first some background.

In NSW, there is a law inherited from England called the statute of frauds. For our purposes, the statute of frauds requires that certain kinds of contracts must be made in writing and signed for the contract to be legally binding. This covers contracts transferring or creating an interest in land. In NSW we find this requirement in section 54A of the Conveyancing Act.

When a buyer of a residential property has an oral (or "verbal") agreement with a seller (or the seller's agent) to buy a property at a certain price but the seller, despite this agreement, decides to sell the property to someone else, most often for a higher amount, the first buyer is said to have been "gazumped".

When a buyer is gazumped in these circumstances, neither the seller or their agent is legally liable to that buyer despite there being a breach of the oral agreement. That buyer loses whatever money spent on building inspections, solicitor costs and any bank fees. If the buyer paid a deposit to the agent however, that deposit is refundable in full.

For there to be a binding legal contract, the contract must be in writing, signed by the parties and, in NSW, duplicate copies of the contract are exchanged between the two parties, either by the agent or the parties' solicitors.

If the agent conducts the exchange, then in almost every case the buyer has the benefit of the cooling-off rights. If the buyer exercises those rights and properly rescinds the contract, the buyer forfeits to the seller an amount equal to 0.25% of the purchase price.

Returning to the making of contracts involving land, it is an area of law where the quote (attributed to the famous Hollywood movie producer, Samuel Goldwyn) holds true, that "a verbal contract isn't worth the paper it is written on"!

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18 May, 2009

Proposed legislative attack on "The Castle"???

Barely just over 6 weeks ago, the High Court decided that Parramatta City Council cannot compulsorily acquire land owned by the claimants, R & R Fazzolari Pty Ltd and Mac's Pty Ltd without their approval. Before this decision, the claimants successfully challenged the Council in the Land and Environment Court of NSW. On appeal, Council succeeded in the NSW Court of Appeal

Many in the media at the time likened this battle over the intended compulsory land acquisition by Council as akin to the small guy versus the big guys theme in 1997 "The Castle" movie.

Parramatta City Council proposed to develop a block within its CBD in a Public Private Partnership between Council and 2 developer companies. Council agreed with the developer to compulsorily acquire the claimants' land, then re-sell it to the developer to enable the development to proceed.

The Local Government Act provides that if land is being acquired for the purpose of re-sale, it can't be compulsorily acquired without the owner's approval. Council argued the acquisition was primarily to implement its "Civic Place" project, and not for the purpose of re-selling. The High Court rejected that argument.

It has recently been reported in the Sydney Morning Herald, here and here, that there's now legislation before the NSW Parliament proposing to give councils the right to compulsorily buy private land and transfer it to developers for resale for profit.

The Herald's article reports that Mr Fazzolari, one of the original claimants, to have said "If this happens, no one is safe ... this is not about public purpose - this is about money".

I think it couldn't have been better said!

Go here for more information I've previously posted about compulsory land acquisition in NSW.

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09 May, 2009

Even when your home loan is approved, remain vigilant!

Home buyers are typically advised to ensure their loan is approved before entering the contract, or before their contract becomes unconditional. Many home buyers in NSW sign their purchase contracts at the real estate agent's office. This normally entitles the buyer to a statutory minimum 5 day cooling off period. In this period, buyers normally arrange and finalise their home loan approval, see their lawyer, and arrange for property inspections.

I don't normally see my clients take notes, not that I mind, but most don't. A colleague recently told me a story of purchaser client was informed of their unconditional loan approval. The purchase contract then becomes unconditional. All was proceeding well until the lawyer contacted the bank to check on some documents. The bank advised their client's loan was declined! Not surprisingly, this caused a bit of a stir, panic on the client's part, and lots of stress.

The client was initially advised to obtain written confirmation of their unconditional loan approval. They didn't... they said they trusted their broker and the bank, as they had been so nice to them!!!

The saving grace, amongst the flurry of telephone calls and correspondence, was this buyer/borrower kept notes of her conversations. Using the information from those notes, the lawyer ascertained that after approval was granted, the loan application proceeded within the bank to the next level where it was declined at that second stage. At this point, the bank referred to an old (by about 3 years or so) valuation for the same property, not the valuation obtained a few weeks beforehand. Yes... the bank had made a mistake!

The moral of the story? Making notes certainly assisted this borrower's lawyer to pin down some sort of breakdown that occurred in the bank's internal process and have the bank re-confirm the loan approval.

What I think this story stresses too, is the importance for a home loan borrower to ensure that their verbal unconditional loan approval, for the amount applied for, is confirmed in writing by the lender to the borrower (NOT to the broker).

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Recent posts:

Forcing strata owners to sell Liverpool - in Sydney's south-west - again tops fi... It's that thing that sustains... Hope! NSW Stamp Duty Concession Extended! More reasons to think about making a will Buying or Selling? What about those fixtures? Sellers and Their Agents Cooling-off rights on real estate sale contracts b... Proposed legislative attack on "The Castle"??? Even when your home loan is approved, remain vigil...

 

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