The Property Occupations Act 2014 (POA) and Land Sales & Other Legislation Amendment Act 2014 which are arguably the biggest changes in the property industry for years both commenced on 1 December 2014 following . The reduction in red tape brought into effect with the commencement of these Acts has been anxiously anticipated by a wide range of stakeholders in this industry from large scale property developers to people buying or selling a family home.
The previous legislation in effect, the Property Agents and Motor Dealers Act 2000 (Qld) (PAMDA), which imposed a number of prescriptive requirements on sellers of residential real estate, has now been repealed and replaced in its entirety by the POA while the Land Sales & Other Legislation Amendment Act 2014 introduced changes to the Land Sales Act 1984 and the Body Corporate and Community Management Act 1997 which, in particular, affect the disclosure requirements for off-the-plan property developments.
Property Occupations Act 2014 (Qld)
Summary of the key features of the Property Occupations Act
- Clarification of the definition of residential property;
- Removal of the requirement to attach a warning statement and a body corporate information sheet to a contract. Instead a seller must include a written statement, immediately above and on the same page where the buyer signs;
- Cooling off period will continue to apply in the same manner as prior to the introduction of the POA except that buyer will be able to waive or shorten the cooling-off period by written notice to the seller without requiring the involvement of a lawyer;
- Removal of capped commissions and the requirement for agents’ to disclose the commission they are receiving from the seller to the buyer
Definition of Residential Property
The previous definition of residential property in PAMDA was lengthy and complicated resulting in a number of disputes and litigations surrounding this seemingly simple issue. The POA deals with this by simplifying the definition as follows:
“Residential property is real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.”
This will provide parties more certainty as to whether the POA applies to a particular transaction.
Removal of Warning Statements
From the commencement of the POA on 1 December 2014 it was no longer necessary to attach a Warning Statement or a Form 14 Information Sheet to a contract. Instead a Seller need only include a statement written directly above where the buyer signs the contract which reads:
“The contract may be subject to a 5 business day statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.”
In addition, unlike PAMDA, where a seller fails to comply with this requirement the buyer will not have a termination right. The Seller, or seller’s agent will however be considered to have committed an offence under the POA and may be liable to a fine.
Cooling Off Period
The POA maintains the statutory five business day cooling-off period however it will not apply to a contract where:
- the buyer is a government or statutory body, a listed public company or its subsidiary;
- the buyer is purchasing three or more lots at the same time (whether or not in the same contract); or
- the property was sold at auction or the contract was entered into before 5:00PM on the second clear business day after the property was passed at auction, with a registered bidder for the auction.
If the buyer chooses to waive or shorten the cooling off period, they only have to give written notice to the seller without the involvement of a lawyer which was previously required under PAMDA.
PAMDA previously capped the amount which may be recovered as commission by a real estate agent to 5% of the first $18,000.00 and 2.5% of any amount thereafter and made it an offence for a real estate agent attempts to recover or retain commission or an amount for expenses which is greater than the amount allowed under the Act
The commencement of the POA deregulated the charging of commission, removing the maximum commission cap. The intention behind this change is to encourage more negotiation with agents and allowing people to choose their agent based on the amount of commission they charge and the other services they provide.
Although the POA removes the commission cap it must not be more than the actual sale price of the property and is to be disclosed, including other fees and charges, to the seller in an approved form detailing how much it is to be and when it will be payable.
Real Estate Licencing
The POA removes the requirement for a licensee to display the real estate licence in their place of business, nor display a sign with their name and status as a licensee however it will still be required to display the licence at the site of an auction and show a licence to any client who requests to see it. In addition, the introduction of the POA cuts down pre-existing nine categories of licence to just three:
In order to hold an auction of real property or goods directly related to real property the auctioneer must hold a full auctioneer licence. The POA means that trainee auctioneers will no longer be able to hold a real property auction as this will not be considered a valid category of registration. This will not however be a problem for people wishing to become and auctioneer as it will no longer be necessary to undergo a training period before applying for a licence.
Real estate agent licence
Under the new legislation, corporations will become eligible to obtain a real estate agent licence if it can be satisfied that the person in charge of the real estate business is also a real estate agent.
Property developers and their employees will no longer need to hold a licence, they will still however be required to make certain disclosures to the client prior to entering into a contract.
Resident letting agent licence
This licence will allow the holder the let and collect rents for lots in a building complex and will allow residential letting agents to:
- manage more than one building complex;
- reside on site;
- make a licence application without being required to provide evidence of body corporate approval.
Land Sales & Other Legislation Amendment Act 2014
This act amends the following legislation:
- Land Sales Act 1984 (the LSA);
- Body Corporate and Community Management Act 1997 (the BCCM);
- Legal Profession Act 2006; and
- Property Law Act 1974,
and some other related legislation.
Generally, the effect of the amendments is to:
- remove ambiguous or archaic language;
- ensure all strata provisions are placed in the BCCM;
- increase the maximum deposit that may be paid under ‘off the plan’ contracts to 20%, without triggering the instalment contract provisions under the Property Law Act.
Amendments to the BCCM
The disclosure requirements for the sale of off-the-plan units which were previously in the LSA, are now included in the BCCM and vary these requirements to include requirements:
- to give a disclosure plan (prepared by a surveyor effectively a draft survey plan) including prescribed information applicable to standard format lots and building or volumetric format lots. Some details for building/volumetric lots that must be included are lot number, total lot area, the floor level of the lot and the proposed orientation of the lot by reference to north.
- that any further statement which rectifies inaccuracies in a building/volumetric or standard format lot plan must be certified as correct by a surveyor. This means the former procedure relating to ‘rectification statements’, which could only be given after the strata plan was registered, no longer applies. Developers will particularly welcome this change.
- to hold money in an appropriate trust account. They significantly provide that any amount paid under any instrument (whether legally binding or not) relating to the sale or purchase of a proposed lot must be paid directly to either a law practice, real estate agent or the Public Trustee. A specific example is given of such instruments as an option to purchase and an expression of interest (EOI). Importantly monies paid under an EOI must be paid as mentioned above. That is, it would not seem sufficient to allow the seller to initially receive the EOI holding deposit and then transfer it to an agent or law practice.
- for further statements to be given at least 21 days before the contract is settled. There is no longer the requirement that they be given within 14 days after a seller becomes aware of any inaccuracies.
The amendments also clarify the position with regards to the disclosures required in respect of an option. In this regard a new section 212B provides that the disclosure requirements of section 213 need only be complied with once in respect of an option (i.e. not when the subsequent contract is entered into) unless the eventual buyer is not the same as the buyer under the option. Where a new buyer is nominated for the exercise of the option, the nominee must be given a new disclosure statement.
There are also amendments which allow sellers to nominate a five-and-a-half year sunset date for settlement. If they fail to do that, settlement must occur within three-and-a-half years after the contract is entered into. This change removes the cumbersome process to have a statutory regulation passed to extend the three-and-a-half year sunset date.
Amendments to the LSA
This Act has been amended in a number of ways including:
- removing the provisions dealing with the sale of proposed strata lots to the BCCM.
- updating definitions to provide greater clarity. In particular, the definition of buyer and seller is now used consistently throughout the amended Act.
- making the requirements for disclosure plans consistent with those in the amended BCCM. In particular, a further statement correcting differences must be given at least 21 days before the contract is settled. There is also an obligation to include a plain English explanation of the general effect of the differences (s13(2)(b)). An example is given of the need to refer to a change of depth of fill from that originally disclosed.
- Duplicating the BCCM amendments with regards to the way in which monies paid, including bank guarantees, relating to a sale transaction are dealt with.
Amendments to Property Law Act 1974
The danger of a contract becoming an instalment contract has long been a real concern for sellers. This issue arose when the ‘deposit’ exceeded 10 per cent of the purchase price. The Act has now been amended, in respect of ‘off-the-plan’ contracts, so that a deposit can be up to 20 per cent of the purchase price without making the contract an instalment contract. Where that deposit is forfeited due to a termination of the contract based on the buyer’s breach, the seller can retain a deposit of up to 20 per cent.
What these amendments mean
- Deposits of up to 20% can be requested for off-the-plan contracts.
- Community Titles Scheme disclosure requirements are now all contained in the BCCM.
- EOI holding deposits must be paid directly into the trust account of an agent or law practice.
- A contract can provide for a sunset date of 5 and ½ years after the contract date applies without the need for a regulation to that effect.
- Disclosure plan requirements have been clarified.
The above information is a summary of some of the key features of the new legislation however the legislation should be considered having regard to the individual circumstances of each situation.
For more information about how the new legislation will affect the sale of property in Queensland please contact the Rostron Carlyle’s Property and Commercial Team.