FRANK ALVARO - Alvaro Edwards Solicitors

Selling through a real estate agent? Talk to other agents first!

2012-01-16T16:32:00.001+11:00

Most people who sell real estate do so using the services of a real estate agent. For many of us, the buying and selling of real estate property is something that we do very few times; for that and other reasons, the process can be daunting.

This post is not another on “how to sell your house” or “… how to sell without an agent…” article; you find plenty of those elsewhere.

I’m still consulted by seller clients who choose an agent at random and then don’t even consider speaking to more than one!

If you’re a seller, my advice simply is: speak to more than one agent! At least two, preferably a few more.

Some years ago a client couple retained an agent to sell their home, agreeing to the agent’s commission of 6%!! I asked why they hadn’t at least contacted another agent, if only to compare charges. Their reply was that “…but he was so nice to us”! At that time, other agents in that area were typically charging commission of around 2.5%.

More recently another seller client was quoted a commission charge of 4.1% plus GST!! Unlike the other one, this client did talk to other agents and in the end, the first agent reduced his commission to 2.2% inclusive of GST. The typical agents’ charge in this seller’s area is between 2 to 2.5% inclusive of GST.

Think about it. On a $500,000 sale, the commission difference, coming straight out of the sellers’ pocket can be around $11,000 or more!

Obviously these are not common cases. If you’re inexperienced or unsure, the best advice is that you first speak to your professional advisers. As an absolute minimum, talk to more than just one agent, shop around, compare charges and sale methods, ask questions. It’s only a small precaution when we’re talking of figures like $11,000.

First homebuyer? Stressed? Trust your solicitor.

2011-12-04T20:30:00.000+11:00

In recent weeks I’ve noticed a spike in first home buyer related inquires, sales and purchases, which appeared to have some connection with the stamp duty exemption benefit ending soon that I’ve referred to recently.

This article yesterday reports a surge in recent auction sales for the same reason, consistent with my office’s experience.

First home buyers range from the well prepared to the no so well prepared. The common trait though is stress, anxiety and sometime anger – not uncommon emotions in the home buying experience.

No wonder, as a fair proportion of this results from the different advices, sometimes contradictory, buyers receive from numerous others, including from real estate agents, from families and friends, and from finance brokers.

My advice: trust your own solicitor, above all others, that have some connection with your transaction. Your solicitor is the one person that always offers unbiased help, guidance and advice.

If you’re feeling the pressure during your home purchase roller-coaster-like ride, your solicitor is the only professional that’s retained by you specifically to guide you, advise you, especially to protect you and your interests. Remember that.

Tick, tock... the NSW first home buyer’s clock!

2011-11-05T15:18:00.003+11:00

Are you a first home buyer in NSW? If so, remember a major benefit ends at the end of 2011. That’s just 8 weeks away. After you factor in the usual Christmas/New Year closures or winding down of staff in the offices of many lawyers, real estate agents, mortgage brokers, conveyancers, property inspectors, and banks, not to mention your own holidays, there’s even much less time to act.

In addition to the Commonwealth’s $7,000 grant, in NSW since 2004, eligible first home buyers have been entitled to some additional very valuable stamp duty benefits under the First Home Plus Scheme.

These included exemption from paying any stamp duty on homes up to $500,000, and a sliding scale of discounts on stamp duty for homes from $500,000 to $600,000. Even for vacant land on which you intended to build a home, stamp duty exemptions applied to such land up to $300,000 and the concessions on land between $300,000.00 and $450,000.00.

On a $500,000 house, that’s a saving on nearly $18,000. Even for a $350,000 house, the saving is more than $11,240.

This about to change in a major way.

For contracts made from 1 January 2012 in NSW, all that will be replaced by the First Home – New Home Scheme.

Essentially, eligible first home buyers will only be entitled to the stamp duty exemption and concession benefits when buying a first home that is a new home, or a vacant block of land intended to be the site of a first home. The benefit will no longer be available when purchasing an existing home.

If you’re a first home buyer, or soon will be, consider not only the above, but also whether the clock ticking away, as well as the recent official interest rate reduction, could combine to add a little heat in this market over the next few weeks. If you're under a little under pressure, unsure about different advices you're getting from many people, think about seeing your solicitor.

Is your will "valid"? Or, does your will achieve what you want it to?

2011-10-04T12:44:00.003+11:00

A will is a document in which the will-maker (the “testator”) chooses who receives their belongings and assets after they die.

A will can also do other things, such as expressing wishes about cremation or burial, funeral arrangements, appointing guardians for children, and in some cases setting up simple or elaborate trusts. A will can also be used to appoint a guardian to look after children until they can look after themselves.

Sounds fairly straightforward? Here’s a link to A Test of Wills, an article well worth a read that appeared last week in the Sydney Morning Herald. It adequately summarises many issues about what can go wrong and some of the challenges. If a contested matter ends up in a courtroom, I'd suggest that the figures in the article are a little on the conservative side though.

In my many years of practice, I've acted in many deceased estate cases involving home-made wills and wills prepared from a Do-It-Yourself kits. Amongst these, I cannot recall a single instance where there wasn't some issue or problem resulting from the will not being properly prepared. Some were minor, and some were quite serious. In the most serious, the convoluted wording in the home made will, using a will kit, meant that a rural property was to go to a charity, while everything else pointed to a contrary intention.

The starting position for will makers is that a person who isn't suffering from mental incapacity, isn't unduly influenced, under duress or the victim of a fraud, is entitled to leave their estate to whoever they choose.

This position however is modified by family provision laws, where certain classes of people can apply to the court for orders that, despite an otherwise valid will where they "miss out", provision be made to them from the estate's assets. As a will maker, this may not be your desired result.

So, as the article suggests, get good professional advice and use a lawyer to draft your will.

If your finance isn't arranged & approved, don't bid, don't buy!!

2011-09-03T11:46:00.001+10:00

Buying real estate is a BIG deal for most of us, so don't screw it up!

Most solicitors and advisers will strenuously advise their clients buying a property to ensure their finance is unconditionally approved before committing to a purchase.

It's important to also realise that "indicative approval" or "pre-approval" for your home loan application is NOT the same thing.

Entering a purchase contract is the real thing. If you can't afford to complete your purchase, you may end up losing more than what you bargained for. The story in this article in today's Sydney Morning Herald is a simple but clear example of the possible consequences.

The buyer breached the contract they entered because they couldn't get the funds, borrowed or otherwise, to buy the property they bargained for. The seller subsequently sold the property to another buyer for significantly less than what the first buyer had contracted. The seller successfully sued the first buyer for the loss suffered resulting from the first buyer's breach of contract, being largely the difference between the price in the first contract and the lesser price in the second contract.

Take care!

Will Awareness Day - 19 August 2011

2011-08-19T08:43:00.003+10:00

The Law Society of NSW today launched Will Awareness Day. It is what it says!

Far too often I've been consulted regarding will and estate issues where there's a problem that could've easily been avoided or managed if only a will had been properly made, or even just made! For example, there are many will kits, both online and paper based, available for people to make their own wills. Usually they come with accurate and often very good instructions. Yet, of all the matters I've been consulted about in my career that involved a home made will, I've never seen a home made that didn't have some issue or concern, many times very serious ones.

Will Awareness Day is a great opportunity to learn just a little bit more about wills and estate planning matters. There are many free talks and programmes scheduled in many places in New South Wales; if you'd like to try to attend one, here's the list on the Law Society's website.

If you prefer, for now, to read some general information, here's an informative Law Society article Should I make a will? Also, here some links to some general information I've previously written about Wills and Estate Planning, and Deceased Estates, Probate and Estate Claims.

Do you have a will? Or, has it been a while since you made one? Just don't leave it for too long to do something about it.

Mortgage exit fees banned, but is the money saved like gold?

2011-07-26T12:01:00.004+10:00

Without getting involved into related issues that are more political than practical, though announced what seems like an eternity ago, as from 1 July 2011, exit fees are banned on new Australian home loan mortgages.

Some important provisos apply here. Firstly, the ban only applies to new mortgages, although some deals have emerged: some lenders have removed such fees on existing loans, others are offering to pay exit fees payable to your current lender if you switch your home loan to the new lender.

But… (there’s nearly always a “but”!)

There are other fees that continue to apply, which borrowers still have to be aware of – these don’t form part of the banned exit fees. Two main ones include:

“Break Costs”. These usually apply when fixed rate loans for a fixed term is paid off before that term expires – more here on fixed rates and break costs
Early repayment penalties and fees – more often called “deferred application fee”, “deferred establishment fee” or similar. Many lenders attract customers with claims of no application fees or no fees upfront. The loan agreement then provides that if you don’t pay off your loan for, say, at least 4 years, that fee is waived. Amounts vary, they can be as high as $4,000.00 or more, or even equivalent to 3 months’ interest! Remember, most homeowners “pay off” their mortgages each time they sell and purchase, and many times this happens within this time frame.

A sort of alternative twist of the old saying: Beware! all that glistens is not always gold!

Franchisor in trouble again! Or, why you should speak to as many franchisees as you can before buying into one!

2011-07-21T14:50:00.001+10:00

Why are they still at it? Last Tuesday, the Federal Court fined Australian franchisor Allfones $45,000 after finding it guilty of contempt of court by reason of its breach of an undertaking given to the Court in 2008. Here's the Court's judgment. Here's the ACCC's press release.

I've previously noted aspects of this saga here and here.

Eventually, and as a consequence, the company's chief executive's contract was terminated and he was escorted out of the company's headquarters, as reported here, earlier this year.

What does it take to send the message once and for all? If fines totaling $3 million hasn't done it, will a $45,000 fine do?

Back to to the present case, the judge said 3 contempts were serious, and that the conduct engaged in by Allfones' senior personnel, contrary to the undertakings, was deliberate!

With this history, I wonder why would one want to be their franchisee?

I almost always advise prospective new franchisees, as part of their assessment of an intended purchase, to speak to as many as possible of current and past franchisees of the franchise system they're contemplating - the feedback they get is often more telling about the system and support, than the documents and sales spin.

Big retailer franchisees should've known better - fines are a reminder to small businesses too - be aware of your consumer laws obligations

2011-06-09T23:30:00.000+10:00

Like many suburban law practices, I have my fair share of small to medium sized business clients. A subject that regularly comes up are many of the obligations of business owners under various competition and consumer laws. The ones most referred to are under the Commonwealth's Competition and Consumer Act (previously called the Trade Practices Act).

Many are aware of the extent of these laws. Take wholesale for instance. Generally, a supplier of goods to a retailer can't tell a retailer the price the retailer must sell the item for - it's anti-competitive. That's why on many goods or catalouges you often a phrase "recommended retail price". Then there are laws about false and misleading advertising, collusion, exclusive dealing, and the list goes on.

Part of a lawyer's role in certain cases is, I feel, not only to provide advice, but also to educate. Many clients appreciate it and hopefully I've done my bit to help them avoid potential trouble!

What does surprise me is when bigger players should've known better - usually because they're far more experienced and have the resources to keep their operators and franchisees informed and in line. This week we learn from a ACCC report that 6 West Australian Harvey Norman franchisees were fined for engaging in a bait-and-switch practice. It's where one advertises a great deal on a product, you get there, and because they originally held only a very small number of the items, you're told something like "sorry, we've sold out" and then they try to sell you another, often higher priced, item. In this WA case, it's reported these particular franchisees didn't even stock the advertised products (cameras) in the first place!

Competition laws apply to big AND small businesses. The penalties are substantial. If you're unsure how certain practices in your business stack up, I suggest you play it safe and get advice sooner rather than later.

Selling a property in or near Liverpool soon? Consider this offer about a contribution to a worthwhile charity!

2011-05-12T14:23:00.000+10:00

Macquarie Real Estate is a local real estate agent located in Casula, near Liverpool NSW. Yesterday its principal, Joe Romeo, informed me of the following offer he’s making.

Any property listed with his agency before 30 June 2011 that results from a referral from such as what I’m doing here in this blog, when that property is sold (even if it’s after 30 June 2011) he’ll donate 20% of his commission to a charity nominated by us. You need to mention to them how you heard about the offer when you sign up.

If you take up this offer, sell the property through them, and mention you heard about it here, I’d be more than happy to discuss with you and come to an agreement about a worthwhile charity you’d like me to direct to have Joe’s donation sent to.

What’s the catch? Apart from the agent getting a listing (and most sellers list the property they’re selling with an agent anyway) there isn’t one! I don’t receive any payment, gift, commission or special favour (and I never have). There’s no condition about which solicitor you use either.

Have a think about it. Better still, if you’d like to ask me about Joe and his team, give me a call.

Lender’s mortgage insurance premiums - One way to “make” some money back!

2011-05-10T23:24:00.000+10:00

While the typical average Australian home loan term is around 25 to 30 years, the average length of a home loan is reported to be 5 years, some say even as low as 3½ years. If these figures are averages, there must be many loans that are discharged much sooner. In my experience, it’s becoming rarer for a home buyer to live in the one home for lengthy period of 20 years or more. Australians buy and sell their homes for a variety of reasons: to improve their lot; so called sea changes and tree changes; moving to where the jobs are; moving out when jobs are gone….

So, the issue is, while home loans are typically designed for the long term, most often borrowers barely last the distance. Many borrowers are also required to pay their lender’s mortgage insurance premiums. This insurance covers the lender, not the borrower, but it’s the borrower who pays the insurance bill. I’ve seen such premiums as high as $18,000, but typically are around the $4,000 to $8,000 mark.

The premiums are a once only payment, providing cover for the term of the loan… remember, terms that are assumed to be for 20 to 30 years! But many of these loans are discharged within 5 years.

So, what happens for that part of the premium covering the term of the loan that’s no longer there? Nothing, unless you do something about it!

Have you ever sold a car and then obtained a part refund of your insurance premium when you cancelled your insurance cover? It’s a comparable situation.

Many lenders don’t tell you, but in most cases you can do something similar regarding lender’s mortgage insurance premiums you’ve paid if you pay off your home loan early. The earlier it’s paid off (for example, you’ve sold the property) the greater the chance of a significant refund of part of the previously paid premium.

The refund amount varies, and many factors can affect it. For example, whether the borrower has defaulted, how many (or how few) years of the loan have passed, but it can be up to 40 to 50% of the original premium!

It’s the mortgage insurer that ought to be approached, rather than the lender, but if you’re about to borrow and a lender’s mortgage insurance premium is payable, it would be very prudent to clarify with your lender their policy on refunding mortgage insurance premiums. Be prepared to be firm and press for an answer. Many lender’s staff and some brokers aren’t even aware of this, so they may need encouraging to find out more for you.

A little will power now, can save rather a lot later...

2011-04-16T21:53:00.001+10:00

If you want to leave someone out of a will, the costs later may be very much higher than expected.

I regularly advise and prepare wills for clients – nothing unusual about that for a suburban law office. Many times my advice includes that in making their will, they consider its effect on those left behind, particularly their loved ones, after they’re “gone”. That might include thinking about the bigger picture rather than concentrating too much on getting back at someone. This can be difficult for clients, especially when some emotion is involved and we can’t access a crystal ball that works!

For a long time we’ve all had rights and freedoms to deal with our property as we see fit for that day we’re no longer here. But those rights and freedoms need to be exercised with other laws in mind that allow certain people who feel they’ve missed out from a share, or a bigger share of an estate, to ask the court to effectively adjust the will’s distribution of a deceased person’s estate.

For example, clients with modest to substantial estates may make little or no provision for one of their children. Reasons can include estrangement, perceived drug issues, assumed wealth, even not getting a Christmas card! My advice to the will maker in these cases is to inform of some consequences they may not have considered… such as exposing the estate to possible unintended but costly litigation.

An article in today’s Sydney Morning Herald describes a situation that I’ve encountered, unfortunately, many times – the risk of very high legal costs because the will maker, for whatever reason, didn’t make a gift to someone who probably expected a fair provision.

If you want to leave someone out of a will, the legal costs payable by your estate later may be very much higher than expected.

Each individual’s situation is different but if this sounds too familiar to your situation, a little prevention now, such as making a gift in a will that you may not have originally intended or wanted, can be a small cost now to help reduce the risk of much, much higher costs later. Does this sound like you? Have a chat with your solicitor about it!

Quality practice, better service...

2011-04-07T10:33:00.001+10:00

Alvaro Edwards Solicitors is a quality endorsed legal practice. But don't just take our word for it!

SAI Global just completed its second Triennial Recertification Audit of Alvaro Edwards Solicitors' quality management system. I'm proud to announce that with the support of all management and staff, we have again achieved quality standards recertification to Legal Best Practice ISO 9001/LAW 9000 - a certified standard we first attained in 2005 and continuously maintained since. Our licence number is LAW20005; Alvaro Edwards Solicitors is one of the earliest law firms to achieve this standard in NSW.

The recent audit report states:

The firm continues to maintain and regularly update the quality management system and supporting procedures to reflect preferred best practice in the provision of quality services to its clients.

The quality system benefits the way we run our business but importantly, it translates into a commitment to better serving our clients.

The process is an ongoing one, and our journey doesn't end with the recent audit. I'm always conscious of the need to continually improving our processes and serving our clients.

The SAI Global certification process provides an outside independent auditing and certification structure for quality systems to ensure compliance with international quality standards.

The prospect of cheap beer sure did taste good...

2011-03-24T23:40:00.002+11:00

Recently it was milk, and now its beer! It appears that the country's two giant supermarket chains were about to start a price war on beer by selling cases for less than the wholesale cost. This seems to me be a variation of the old "loss leader" practice where a retailer deliberately makes a loss on a product in the expectation the great deal will attract customers and once in the retailer's store, the customer is likely to spend more on other goods.

In the case of the looming beer price war, it seems it's might be no more. Foster's has refused to supply these supermarket giants. While cheap price beer is a tasty prospect, I guess Foster's sees such gross discounting as likely to cheapen its brand image.

But hang on. Under our trade practices laws, a supplier can't withhold or threaten to withhold supplying goods if the retailer refuses to sell at a particular price. This is an offence known as resale price maintenance.

But there's more. In certain limited cases, this practice is actually allowed. Just after the provisions prohibiting resale price maintenance in the Competition and Consumer Act (previously, the Trade Practices Act) it provides certain exceptions in cases where "…goods obtained... from the supplier at less than their cost…"

And that's the catch!

Buying off the plan on again?

2010-09-18T21:46:00.000+10:00

A headline in Sydney’s major broadsheet newspaper today succinctly declares “Off-the-plan unit sales run hot”.

If you’re considering taking advantage of buying a property “off the plan, It’s probably timely to take a deep breath, not get caught up in any hype, and just recall some of the pitfalls that can and do occur.

One claimed benefit of buying off the plan is that some consider it a good opportunity to purchase at a price that is more likely to be considered a bargain when the property is eventually developed and the purchase completed. The time from contract date to completion often won’t take place for several months, if not a year, or two, or three!

So what are what are some potential issues?

The completion date – how does the contract define it. More importantly, what obligations, if any, are on the developer to comply, and how can it be extended. What rights does the buyer have to get of a deal that keeps getting delayed? Can you as buyer get stuck with a deal that’s gone sour and delayed by years?

Do you know exactly what you’re getting? Really, do you? Is the quality of appliances comparable to those in the brochure or display unit? What about dimensions? What scope is there for variations between the dimensions in the contract and what ends up built? Can you end up being stuck buying a butter box rather than the penthouse you expected? Are the tennis courts and swimming pool part of a later stage, one that may take years to develop, if ever?

Don’t forget your deposit bond. These have expiry dates. A buyer can unintentionally be in breach if the bond expires, because of continued delays.

Then, of course, there are building defects - how are these defined; what obligations are on the developer and the buyer?

Lots of questions, but few answers I’m afraid. These are all real issues that do arise, and often in off the plan purchases. Sure, they can arise in any property purchase, but buying off the plan is something akin to buying vapourware.

Just make sure you’re not rushed into signing anything, seek legal advice on the contract, and keep a cool head. Yes, there can be advantages and savings, but just know there are risks to balance too.

Forcing strata owners to sell

2010-01-17T14:17:00.000+11:00

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?

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

2010-01-09T19:14:00.006+11:00

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.

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

2009-12-31T13:41:00.000+11:00

"...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..."

NSW Stamp Duty Concession Extended!

2009-12-30T21:06:00.004+11:00

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.

More reasons to think about making a will

2009-12-05T16:22:00.005+11:00

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.

Buying or Selling? What about those fixtures?

2009-11-29T12:21:00.007+11:00

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.

Sellers and Their Agents

2009-11-14T13:20:00.023+11:00

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.

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

2009-06-07T13:45:00.007+10:00

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"!

Proposed legislative attack on "The Castle"???

2009-05-18T19:58:00.007+10:00

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.

Even when your home loan is approved, remain vigilant!

2009-05-09T14:24:00.004+10:00

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).

Our Quality Journey

2009-05-01T17:34:00.009+10:00

Visitors to my Alvaro Edwards Solicitors site will notice the Quality Endorsed Practice logo on almost every page. See this page on Quality Endorsed Legal Practice for more information on what this means and how it also benefits my clients.

This post, however, is to proudly announce that SAI Global just completed its annual audit of my practice and again, recommend the continuation of our Legal Best Practice certification under the ISO9001/LAW9000 standard!

Repeating what I've stated previously, this is another incentive for my team's continuing commitment to providing quality management systems for the provision of legal services to my clients.

Damages awarded for breach of exclusive territory provision in franchise agreement

2009-03-21T18:43:00.002+11:00

Franchise business systems are popular for many reasons. Many retail based franchise systems provide a degree of security, a form of limited "monopoly" or exclusivity, if you like, by granting exclusive territory rights to the franchisee for the duration of the franchise relationship. There are varied forms of such rights, but if that right is breached by the franchisor, what exactly can a franchisee recover from such a breach?

A decision of a single judge of the Federal Court (Haviv Holdings v Howards Storage World) handed down just a few days ago provides some answers.

This court decision also shows that:

The court will grant relief, even where the breach appears to be relatively minor on its face. A breach is a breach!
If loss is suffered caused by a breach of contract, difficulties calculating that loss will not of itself defeat a claim.
The court will, when assessing damages that are said to flow from future losses, apply certain discounts to the calculated gross loss.
Importantly, the court found that in calculating the damages, it would look at losses suffered up to the end of the last option period, even though those options may have not been exercised by the franchisee.
Breach by franchisors of exclusive contract territory rights granted to franchisees is something that is take lightly - check the wording of the exclusive territory provisions in your franchise agreement!

Howards Storage World (HCW) is a specialty retailer of household storage items. In 2002 HCW entered a franchise agreement with Haviv allowing Haviv to operate a HCW store at Burwood (a Sydney suburb). That agreement granted to Haviv an exclusive franchise territory, being the area within a 5 km (or 5,000 metres) radius of the Burwood store.

In 2004 HCW granted a HCW franchise to someone else to operate a HCW store in the Rhodes shopping centre. The Rhodes store, indeed the whole Rhodes shopping centre, was between 4,837 and 4,843 metres from the HCW Burwood store; in round figures, only about 160 metres inside the exclusive territory granted to Haviv.

HCW admitted it breached the territory provision. Haviv claimed, and could show, to have suffered loss and damage by reason of HSW's breach. Haviv eventually ceased operating the Burwood store. HCW claimed it terminated the franchise agreement due to alleged breaches by Haviv, whereas Haviv denied this and claimed otherwise.

The court found that Haviv was entitled to claim damages. It considered different scenarios, or methodologies, of how those damages are to be calculated.

Importantly for the franchisee, the court found that the damages should take into account Haviv's loss of net profits for the period until the expiry of the last option for renewal period, in the year 2022.

In further assessing the damages, the court found that various discounts were to be applied to allow for various factors were to be taken into account, such as future refurbishment costs during the terms of the leases, rent increases and other "vicissitudes of life" - these are the unknown factors and risks that affect people during their lifetime generally.

This decision applied a principle that where there has been an actual loss, the law does not permit difficulties in calculating the loss to defeat the only remedy it provided for breach of contract, an award of damages.

The court adjourned the matter for the parties' experts to calculate Haviv's loss, or damages, based on the court's findings on how that loss is to be calculated.

Falling interest rates are claiming some home loan victims

2009-03-12T22:38:00.005+11:00

If you're on a fixed rate home loan, make some enquiries before you commit to re-financing or discharging that loan. Remember, if you're selling a property, that usually means you'll be also discharging your current loan.

Despite all the gloomy financial news from the onset of the current global financial crisis, most Australian home borrowers, particularly those who've been repaying their loan for some time, at least were able to grasp the positive benefits of falling interest rates, significant reduced interest and/or repayments on their mortgages... or have they?

Believe it or not, there are financial victims from falling interest rates. If your home loan is a fixed interest rate loan for a fixed period, then beware!

Fixed interest rate mortgage loans are those where a borrower's mortgage interest rate and repayments are fixed for a set period. They make it possible for borrowers to avoid interest rate increases on their fixed rate home loan. Their popularity therefore tends to increase in times of rising interest rates. Depending on their circumstances and advice obtained at the time the loan was first obtained, these borrowers can set the fixed rates for periods from 12 months to 5 years or more.

Fixed interest rate mortgage loans are also a gamble. The sting is what happens in times of falling interest rates. If you're a borrower who wants to switch loans, or pay off a fixed rate home loan (usually when selling a property) watch out for those break costs.

Break costs is the additional amount, over the amount of the loan still outstanding and owning, you must repay to a lender. If you repay your home loan before the agreed fixed rate period ends and interest rates have gone down, the lender can only re-lend those funds it recovers from you at a lower rate than the rate they had you locked into. The break costs is the lender's claim for the financial loss they "suffer" from this.

There have been previous reports about a rise in complaints made about banks' break costs charges.

This doesn't surprise me. I too have noted similar complaints in the same period about the same issue from my own clients. Calculating break costs can be quite complex and involves many variables.

One client, aware of the issue a couple of months ago, enquired to his bank when deciding whether to sell his investment property. His bank quoted a break costs fee of $7,000.00. With that information he committed to a sale. As there have been at least 2 interest rate decreases since, his bank now advises this fee increased to over $18,000.00!! Furthermore, with his sale due to be completed in 2 weeks, his bank warned that this fee will increase again if there's a another fall in official interest rates.

If you're deciding whether to re-finance your current fixed rate home loan, whether to sell a property where you have a fixed rate loan, or even if you're thinking about switching to a fixed rate loan, the least you should consider doing before committing yourself includes:

Ask! Ask you lender if break costs apply to you if you discharge that loan.
Ask how those costs are calculated
Ask if it is prepared to waive or at reduce those costs
Will your lender agree to commit to quoted break costs remaining unchanged at least for a short period, regardless of interest rate movements?
Consider and compare the real savings from taking out a new loan with lower interest rate, compared to the costs you'll incur for discharging your current loan.
If you feel you've been charged break costs improperly, or have been misled, seek professional advice, or contact the Banking & Financial Services Ombudsman.

Deciding when to buy... tougher decision for First Home Buyers

2009-03-04T18:12:00.006+11:00

With handouts by the federal and NSW state governments totalling up to $24,000.00, plus stamp duty concessions in NSW all available to first home buyers, making that decision on whether, or rather, when, to buy just gets tougher.

On the one hand, there's evidence of continuing falling home prices. So, do you wait until they fall further?

But, the additional government cash handouts are scheduled to end by 30 June 2009.

Does the Reserve Bank's hold on further reducing official interest rates (see this news item) send a positive signal for the economy? If so, could that result in home prices holding, or maybe even increase?

No, I don't have an answer, and my crystal ball is in for a major service, but John Kavanagh's article in the Money section of today's Sydney Morning Herald provides some helpful insights.

Proof of Identity Factsheet for NSW First Home Buyers

2009-02-21T21:00:00.005+11:00

In last week's post I noted how the NSW Office of State Revenue (OSR) informed those of us on its mailing list of new Proof of Identity Requirements to be introduced for NSW First Home Plus (FHP) applicants and their spouses.

The OSR has now published this factsheet (it's a downloadable PDF document) listing the acceptable documents it requires. Note that 4 separate certified copies of documents, at least 1 from each of the 4 categories are required.

First Home Buyers, remember, from 20 April 2009, only the new FHP application form with the POI requirements will be accepted.

NSW First Home Buyers - New requirements for first home benefits applicants

2009-02-13T15:37:00.006+11:00

The NSW Office of State Revenue (OSR) today issued a notification advising that from 2 March 2009, it is introducing Proof of Identity (POI) requirements for First Home Plus (FHP) applicants and their spouses (mainly exemptions from stamp duty on most contracts for first home buyers).

These POI requirements for FHP will be the same as those required for applicants in the First Home Owners Grant Scheme (these include documents from 4 categories - for example, birth certificates, citizenship certificate, current passport, Medicare card, evidence of applicant's residential address).

Knowing what new documents are required and when, can help a first home buyer smooth the whole process in applying for FHP benefits.

Whilst the current application form will be accepted by the OSR up to 19 April 2009, from 20 April 2009, only the new FHP application form with the POI requirements will be accepted.

Details, including guides and factsheets, are expected to be posted on the OSR's website soon.

First home buyers should be at least aware of these coming changes and ensure they're complied with. The last thing you want, as a first home buyer, is for a purchase to be delayed or compromised because the FHP benefit you're relying upon couldn't be processed and be ready for settlement due to incorrect or obsolete forms being completed and lodged.

Typically FHP application forms are processed by the first home buyer's solicitor or representative, whereas the application for the First Home Owner's Grant (FHOG) are processed by the buyer's lender or finance broker.

Here's a practical hint. As the POI documents are to be the same as those used in the FHOG application, as a first home buyer, it would be most helpful if you keep a duplicate set of certified copies of those same POI documents used in the FHOG application to give to your solicitors for use the in the FHP application.

Sold! Now tell the tenant

2009-01-31T16:02:00.004+11:00

Investors sell residential properties too. Obviously many such properties are tenanted when they're sold. It therefore amazes me how often I see sellers of such properties not being reminded, by their agent or lawyer, to notify their tenant to leave the property before the time the sale is completed in cases where the fixed term part of the tenancy has expired. This can result in any number of problems for both sellers and buyers.

The lesson at the end of this post is a simple one. If you've just sold a residential tenanted property in NSW where: (a) the tenancy has expired; and (b) the buyer is entitled to vacant possession; then make sure, and make sure again and again, that early and proper formal notice is given to the tenant to leave the property by just before the sale is completed.

In NSW, most private residential tenancy leases (or more correctly, Residential Tenancy Agreements) are governed by the Residential Tenancies Act. The Act sets out the minimum notice that must be given by a landlord to a tenant to end the tenancy and for the tenant to leave the property.

If the fixed term part of the lease has expired, generally the landlord must give the tenant a minimum of 60 days' notice for the tenant to leave the property. BUT, if the landlord has sold the property AND entered a sale contract, this notice period by the landlord is reduced to 30 days.

If a seller has not given the correct notice to a tenant, then that tenant is well within their legal rights to not leave the property. This can cause numerous problems.

For example, if the sale contract provides that at completion the buyer is entitled to vacant possession of the sold property, the seller won't be able to do so if the tenant is still in the property. This leaves the seller exposed to a breach of contract claim by the buyer.

Not that most buyers are ready to pounce to make a claim, however think of a situation where the buyer has already not only made moving arrangements, but given notice to their landlord, and that landlord has new tenants moving into that property, so the buyers can't just simply stay for just a little while longer.

The seller too, may have committed to another purchase that was also to be completed on the same day, but the sale proceeds from their frustrated sale are required to complete that purchase, which now too must be delayed. Now, the original seller could be exposed to another breach of contract claim, this time by the seller to them!

You can see now the beginnings of a domino effect happening. I had two situations within about the last 12 months where seller clients had what turned into unpleasant experiences but which thankfully did not deteriorate into what could've been much more costly incidents. In both cases, the agent was both the selling agent and managed the tenancy on behalf of the seller/landlord.

In the first case, once his sale contract became unconditional, following my advice the seller instructed his real estate agent to give the tenant notice of the end of the tenancy and to leave the property before the sale was completed. 31 days before the contract completion date, my client telephoned me to confirm he had given those instructions to his agent and the agent assured him that he would hand deliver the notice to the tenant that day; my client was satisfied with that.

Now, fast forward to the week before the sale was due for completion. The agent advises that the tenant refuses to leave the property as he had nowhere to move into. My client then finds out the agent simply forgot to give the Notice to tenant three weeks beforehand! In trying to make up for his forgetfulness and neglect, the agent frantically tries very hard to help the tenant find alternate accommodation. The end result is that completion of the sale occurs almost 3 weeks late. Apart from the stress, frantic telephone calls, disagreements with the agent, my client also pays almost 3 weeks' additional interest on the loan he was meant to discharge with the sale proceeds.

In the other case, the completion date was more critical for my vendor client. After obtaining reassurances, she made firm commitments to apply all the sale proceeds due to her on the sale completion date. She asked the agent to provide the formal written notice to her tenant, she called back afterwards and the agent confirmed he personally delivered the formal notice. My client then telephoned me to confirm all this. In addition, the buyers fixed the completion date to coincide with the completion of their sale. The buyers' representative had notified my client and I that my client's buyers had to move out of their house to let their purchasers in on the same date.

Well, you've probably guessed by now... About a week before completion the buyer's representative informed me that the agent informed them completion had to be delayed as the tenant was refusing to move out; their client buyer was frantic. It was the first I heard about this, and my client hadn't heard anything either. What also puzzled, and then angered, my client was why was the agent discussing this with the buyer and not with her? The agent refused to discuss the issue with my client, and even hung up on her! Remember, this is my client's agent!

The agent refused to provide to my client (his customer) and to me a copy of the Notice he earlier assured he had "personally delivered" to the tenant. It turned out that no Notice was ever given to the tenant by the agent. With the assistance of the buyers' representative, we managed to encourage the agent to finally come to the party. What appears to have happened is that the agent found, and paid for, for temporary accommodation and other compensation to the tenant, in return for the tenant agreeing to move out early.

In both cases the tenant was not given the proper Notice. This caused a lot of unnecessary stress upon sellers, buyers and the tenants. Any stress the agents may have suffered was self-inflicted. Additional unnecessary costs were incurred. In the circumstances, neither tenant was being unreasonable, they just weren't properly notified. So what lessons, or precautions, can sellers draw from examples such as the above two? I would suggest:

where the fixed term part of the tenancy has expired, ensure that your agent (the agent managing the tenancy) gives adequate, and at least 30 clear days' written notice - preferably more - to the tenant to leave the property before the time the sale is completed;
check with the agent regularly to confirm compliance;
again, check and confirm with the agent;
ask the agent to give you a copy of the formal written notice he provided to the tenant - if this request is refused or excuses are made, you should be hearing alarm bells!;
if you're able to, and you're comfortable with this, consider personally giving the notice to the tenant yourself - if required, ask your agent or solicitor to draft a form of notice for you;
keep diary notes of conversations concerning these.

I'm sure there's probably other precautions a seller could take, but this list should at least provide some guide for a good start.

Displaying a Statement of Ethics

2009-01-24T14:46:00.003+11:00

Just the other day I was in a meeting attended by various businesses people. Someone raised the subject of codes of ethics for various industries and professions. From that came a question to those present as to whether we followed such a code that applied to our respective industries and professions. All replied yes. The next question was whether such code was displayed at our places of business. Almost all present, including me, replied yes. For years I have been proudly displaying a Statement of Ethics in my office reception, where its visible to visitors.

The conversation then moved to whether these codes were on our respective websites. Well, until then it hadn't even crossed my mind, but I immediately realised there wasn't one my website. I've now rectified that by adding a page reproducing my profession's Statement of Ethics to which, as the preamble on the linked web page states, I aspire to achieve and maintain.

Positive housing finance figures good news for Liverpool & Sydney's south-west

2009-01-18T12:13:00.005+11:00

Following the release of these figures by the Australian Bureau of Statistics (ABS) last week, for a change there was some positive economic news concerning home loans and housing finance. Such reports include those by ABC News and by The Australian.

Summarised, the ABS figures show that in November 2008, compared to the previous month, re-financing approvals for purchases of established houses rose 1.1%. Also, first home buyer commitments - as a percentage of total owner occupied housing finance commitments - increased from 19.5% in October 2008 to 23.6%. This is seen as result of the federal government's decision to increase the first-home buyers grant.

The figures are probably even more positive for Sydney's south-west. NSW Office of State Revenue data (as at September 2008) has consistently shown since first-home buyers' grants became available from 2000, by value most such benefits are made to buyers in Sydney's south-west. These figures are based on postcodes. The two top postcodes are Liverpool NSW (2170) and close behind, Campbelltown NSW (2560). However, here's where statistics can play tricks sometimes. There is a separate figure for Hinchibrook (also in the top 20) as it has a different postcode (2168) but in reality is considered part of Liverpool.

Of course data can be interpreted in different ways but whichever way you slice and dice these figures, the Liverpool area is certainly one of the largest beneficiaries of first home buyers' benefits in recent years.

It's Land Tax time again, and the economic slowdown doesn't help either...

2009-01-11T15:03:00.006+11:00

The land tax rate in NSW for 2009 is to remain at 1.6% (plus $100) on the combined value of all taxable land in excess of the threshold. The NSW Valuer General (VG) has determined the land tax threshold for 2009 is $368,000.00. Note however, that land tax rate for properties valued at over $2.25m is charged at the premium rate of 2%

Who is required to Pay Land Tax?
In NSW, land tax is levied on landowners on the value of the land in NSW they owned at midnight on 31 December of each year.

Generally, your home and land used for primary production (such as farms) are exempt. Land tax is calculated on the combined value of all taxable land (the other land that doesn't include the home or farm) you own above the threshold. That is, it's assessed on the land value between the threshold amount ($368,000.00 in 2009) and the premium rate threshold.

Examples of other land that may included in determining whether you're liable to pay land tax include investment properties, vacant land, holiday homes and factory units.

What about those land values?
This report reveals a problem caused by the economic slowdown, in turn caused by the recent global financial crisis, in that properties' valuations in NSW were assessed before the impact of the economic slowdown really hit. The time lag in those assessments have caused VG figures recently released to suggest that some land values in NSW have actually increased quite handsomely! Other more sobering reports, and probably truer and more current, such as this one, actually discuss the falling market values.

The VG and the NSW government appear not to be denying the anomaly, but state when land values are reassessed in 2009, those assessments will take into account land values relative to the market at that time. We'll see.

Selling a property? Speak to more than one real estate agent

2009-01-06T16:48:00.009+11:00

An alternative heading for this post could have also been "Sometimes a lawyer's best advice that a client should act on isn't even legal advice".

By far almost all sellers who decide to sell their real estate property, list the sale through a real estate agent. After all, it's an agent's business to market and sell property. Often sellers have chosen and signed up their listing agent before they consult their legal adviser.

Like many associations in life, prospective sellers sometimes have an existing relationship with a real estate agent, even before deciding to sell. It could be the agent through which the property was originally purchased, or the agent is managing the tenancy in the property, or a trusted friend recommended the agent.

No matter how well you think you know or trust an agent with whom you're just about to commit to, my advice is that always, always seek the opinion of at least one more real estate agent about the sale of your property, although another one or two more again wouldn't hurt. This is one piece of advice I've consistently given to sellers over many years.

After consulting one, you will be better prepared not only when consulting and asking questions to the next one, but also when, or if, you re-visit the first agent that was consulted. There are many issues to consider and negotiate, including commission rate, advertising, the possible selling price, and whether advertising costs are included.

Some time back a particular married couple consulted me about selling their home. I'd already known them, and knew they were both hard working, had a high level of debt, all on top of raising their young and growing family. They could ill afford to unnecessarily throw money away. Yet, that's exactly what they did.

They had already signed up with an agent, I can't now recall exactly when, but it was at least 3 or 4 days before consulting me, and the cooling-off time limit had already long passed.

It was while taking down other details, answering their questions, explaining the process when, as an afterthought, he handed to me a copy of the agency agreement they had both signed. It looked fairly typical, until I saw something that made me almost fall off my chair!!

The agent's commission was to be 6% of the sale price!!! 6%!!!

It got worse. On top of that, the agreement provided that the seller was also to pay the agent's advertising costs, some $700 to $800!

Think about it. If you sold your home today for, say, $500,000, at that rate the agent's commission on the sale would total $30,000, not to mention the GST and the advertising costs.

To put it into context, from my anecdotal observations, agents' quoted commissions on sales of typical residential properties, at least in the south-western area of Sydney, tend to fall between 2 to 3% of the sale price, usually roughly in the middle of that range. Some agents quote their fee as inclusive of GST, others don't.

Obviously I asked my clients a series of questions on how it came to be. They were a little perplexed at the fuss; they assured me that the agent had clearly explained to them his commission rate, he didn't hide it. They told me how the agent reassured them that that was HIS normal rate - I suspected it wasn't despite his very, very careful choice of words. "He was so nice to us. He explained everything..." they told me. He was so nice, apparently, that my clients didn't see the need to at least consider or speak to another agent.

If only they'd just spoken to another agent, even just a phone call. "If only..." At the very least they would've become aware that the 6% commission wasn't so normal after all. No holding punches here, this particular agent saw them coming, and he simply ripped them off!

The couple's house did sell, but unfortunately their story didn't get any better.

If you intend selling your property and listing it with a real estate agent - notwithstanding that by far most are reputable - the very least you should do is no matter how well you like or believe you have made up your mind, is speak and consult with no less than two agents before signing up with any agent. Sure, check out the agents' commission rates but remember, like many goods and services, price is just one of your many considerations.

Updates on some recent Australian franchising cases

2008-12-27T22:47:00.007+11:00

Much of the background information concerning these cases and parties are on my News page. There's really not that much to add other than just provide an update on the present status of the cases below.

ACCC -v- Allphones: matter was heard before the Federal Court on 18 December 2008. Judgment is reserved, meaning that judgment will be delivered on a later date.

Allphones -v- Hoy (this is the appeal by Allphones from the decision in Hoy -v- Allphones): The matter is set down for hearing before the full court of the Federal Court for 2 days, on 2 and 3 March 2009.

ACCC -v- Seal-A-Fridge: matter is listed in the Federal Court on 6 February 2009 for further directions

"the skepticism of a skeptical age"

2008-12-22T22:28:00.007+11:00

It's that time of year, one where on the one hand those of us in this world who are fortunate to be able to, distress at the pressure to get the presents, the food, and all the other goodies that help make Christmas what it is. Of course, Christmas means different things to different people, to some it's merely a curiosity. To many of us it has meaning, a hope, a joyousness that transcends the presents (presence?). Part of the immense joy is what we adults see what it also means to children. Yet, many of us also remember that bursting of the bubble, the innocence lost, the sudden unpleasant realisation that perhaps Santa Claus wasn't real.

I have an 11 year old. I'm fairly certain that he'd been asking the question to himself for at least a year or more - he may have even investigated the question in his own way, but it was recently when some of his peers helped to finally convince him of the "truth". To his credit, he told us he wouldn't spoil it for his younger siblings. We didn't exactly confirm, nor deny, the accuracy of what he'd discovered though.

The time's now come for me to give him a copy of, and to think about, that editorial written well over a hundred years ago to the then 8 year old Virginia. Here's a link to a copy that editorial and a copy of Virginia's letter.

Perhaps he and others may regain that sense of the highest beauty and joy.

Yes, Virginia, there is a Santa Claus. He exists as certainly as love and generosity and devotion exist, and you know that they abound and give to your life its highest beauty and joy.

Go on, read the letter. Ditch of some of that skepticism.

Merry Christmas everyone!

Surveys - still an important consideration when buying

2008-12-20T13:28:00.011+11:00

I can't be exact on this, but up until about 10 years ago, survey reports were often and regularly obtained when a solicitor acted for a buyer of a residential property. Their importance, or more accurately - their requirement, is something that has waned over the years.

In the context of when buying a residential property, the type of survey report obtained, is ordinarily an identification survey. In almost all cases, the survey report usually will:

confirm whether the property described in the contract is the same as that which a buyer has inspected and intends to buy;
indicate the location of buildings and improvements on the land relative to the property's boundaries - surprisingly, many people don't realise that fences are rarely a reliable guide to these - a little more on this below;
identify or confirm easements shown on the title;
show whether there are encroachments by or upon the property;
state whether the buildings comply with any restrictions on use of the land imposed on the title.

As an identification survey usually concerns the improvements on a property, in general it's not common to obtain a survey of vacant land unless you have particular concerns.

In my experience, the main reasons a buyer looks to avoid obtaining a survey include: the costs; delay caused in exchanging contracts, thus increasing the gazumping risk; the unlikelihood of obtaining one before the cooling-off period expires; confidence about the state of the building and the existing disclosures already in the contract; or a combination of all of these and the stress resulting from them.

An identification survey for a regular urban residential property can cost somewhere in the region of $450 to $600, not an insignificant cost.

In past years, by far the main reason why a buyer obtained a survey report was because their lender required it. If a buyer required borrowed funds to purchase a property, the funds weren't available before all the lender's requirements were met. These days, it's rare for a lender to include the requirement of a survey. I don't really know why that is; I can make an educated guess but perhaps if someone working or acting for a lender can enlighten us, that'll be welcome. These days, on the few occasions where a client's lender does require a survey, it qualifies this by stating it's only required "... if available". I haven't yet met borrower who was voluntarily prepared to spend the money for a survey where this was only reason for obtaining one!

Except where a survey is actually required by their lender, most buyers will make up their mind on whether to obtain one based on the advice of their solicitor or conveyancer. In an ideal world, such as where costs and delays are not an issue, a survey would be obtained in every purchase of a residential property; realistically however, a buyer will usually be guided by the professional advice they obtain. That advice will consider the particular circumstances to assess whether a survey is warranted.

Unless advised to obtain one, most buyers, especially when trying to convince themselves of a reason to minimise costs will almost always decide that their circumstances don't warrant a survey. I say "almost", because I can't recall a situation in recent years where a client refused to obtain a survey against strong advice.

Whilst the obtaining of surveys in conveyancing transactions may have reduced over the years, the importance of obtaining one certainly hasn't. A survey report identifying a defect or a problem before a buyer commits to a purchase contract, could save that buyer thousands of dollars rectifying those problems - assuming they can be rectified - avoid costly litigation and, importantly, avoid a whole lot of stress.

Real world examples. Some years ago, in the days before government grants, I was acting for a young and very excited first home buyer. From memory, the vendor was an estates trustee company. The suburban Sydney property was vacant for several years - the elderly owner having moved out into aged care, before dying some years later. The property was old, but in very good condition.

I asked my client to identify the block as shown on the deposited plan in the contract. On that plan, one side of the land splayed out at an angle. She said the property was actually a rectangular shape, but she was describing what the fencing on the property indicated. She instructed me to obtain a survey.

The survey showed that at one corner, the legal boundary was 7 metres beyond the fence! It turned out that the neighbour, when replacing an old fence originally on the correct boundary, had the new fence erected so as to gain him the 7 metres of land! I presume in the belief that it didn't matter, after all, his neighbour's house had been vacant for years; maybe he thought no one would notice! Despite the co-operation of the vendor and the law supporting my client had she purchased, she declined to buy it. It was simply a case of not wanting to deal with the stress.

A farmer on the outskirts of Sydney retired. He farmed for years his block consisting of several hectares. The old family home was located on the same block in a far corner, fronting the road. It had an old fence surrounding it, separating the home and its front and back yards from the farm. The farmer had just subdivided the farm into several very large lots. The part where the old home stood was also subdivided onto its own new regularly sized lot; my client was informed of all this by the agent. After inspecting the property, my client signed the contract and the agent exchanged contracts.

After consulting me and on my advice, my client obtained an urgent survey. It showed that the legal boundary of the lot on which the old home stood, was about 2 metres inside the fence lines! Apart from now making the back yard tiny, it also meant my client was buying well over 100 sq metres less land than he thought he was!

Not only did my client rescind the contract, but he managed to easily recover the 0.25% deposit that normally he would have had to forfeit, after we pointed out the misleading and deceptive conduct of the agent. What soured the whole episode for my client, was when queried the agent earlier insisted that the boundaries were on the fenceline and that a survey was a waste of money. When subsequently confronted with the survey, the agent's response to my client was a dismissive "you win some, you lose some"!

In an upcoming post, I'll be describing two cases where things went wrong after a survey was obtained.

Transfer lodgment fee increase - recent comparisons

2008-12-15T13:00:00.013+11:00

I noted in my News page on 1 December 2008 that one of the outcomes of the NSW government's mini budget delivered in November 2008 was slugging an extra impost on property transfer transactions by increasing the lodgment fees for property transfers from $92 to $184! I believe that whilst we don't like price increases, most people accept that they're a fact of life - it happens!

In this case, it was the scale of the increase that appeared disproportionate, so I thought it would be an interesting exercise to compare this increase with previous transfer lodgment fees and increases.

The list below shows the lodgement fees that applied for most dealings, including transfers, from July 2003 to January 2009. The 3rd 'column' shows the rough percentage increase over the previous fee, rounded up.

July 2003 - $64
July 2004 - $75 - 17%
July 2005 - $77 - 3%
July 2006 - $79 - 2%
July 2007 - $90 - 14%
July 2008 - $92 - 2%
Jan 2009 - $184 - 100%

It's fair to say however, that in this last round of fee changes there haven't been lodgement fee increases across the whole range of fees. I'm no actuary, but I wonder if another option that could've been adopted is to increase all fees slightly, thus softening their impact, rather than targeting only select categories for the huge increase, whilst others remain unchanged.

I'm not going to speculate. Like I said, it's been an interesting exercise.

"I am, therefore I blog" - What This Blog is About

2008-12-13T22:41:00.006+11:00

So, I've started a blog. "Why?" is a question I've asking myself too. It's not as if I need yet another layer of responsibility on top of I'm already doing. There are probably several answers but one I keep coming back to concerns my reduced ability, when I'm going about my work, to simply confer with and mull over mostly work, client and other professional matters. I'm a lawyer in sole practice. It hasn't always been that way. Professionally, I've only ever worked for 3 employers - a small firm in country NSW for about 18 months or so, a large medium-sized Sydney firm for over 10 years, and since then in my own practice, the first 8 years of which I was in partnership. The one thing I can't now participate in is that constant banter, collaboration, and consulting one has with their immediate work colleagues - the foil to bounce ideas off.

The idea of a journal is attractive in that putting an idea into print helps me ponder, and focus the mind on an issue. I suppose it's much like writing an essay, you have to analyse and justify, or at least advocate, the point you're making. So, why not just a journal, why publish? Opening one's comments to at least the possibility of scrutiny will, hopefully at least, draw the mind to exercise a degree of respectability and responsibility - a loose form of accountability, I suppose.

Having not gone down such a path before, it's difficult to predict where this blog will venture. I expect it will be somewhat organic, I'll express opinions, it will develop and evolve over time, and it will wander. I suppose I can say what I think it will be about; so here's a short list. It will be interesting to revisit this list in a year's time:

This blog will probably be about:

Mostly conveyancing matters. There are so many other issues, but I wanted to pick one, so this is it. Conveyancing is something that most non-lawyers can relate to. Whereas most people don't expect to see a lawyer in their lifetime (or hope not to) when they do, it will usually be when they're buying, selling or leasing a property. Whilst conveyancing mostly encompasses contract law, to which there are many aspects, many other areas can come into conveyancing transactions - wills and estates is one, purchasing a related business another, injunctive relief is yet another. Many consider conveyancing to be transactional, straightforward, "easy", "form filling" - until there's a problem and it affects them personally. Trust me. It's a serious area of the law. If not handled properly with a sound based systematic approach, suddenly it can so easily become a nightmare - why risk that? I hope over time to comment on and flesh out some of these ideas.
I expect I'll occasionally comment on other areas that interest me, mostly concerning areas that I work in, but not always necessarily so. Just reading my former news items shows that I have an interest in franchise issues, for example.
There are a number of aspects in my practice. As I continue to work and develop each of those, I may choose to express thoughts here on some of those aspects
Engagement. Should anyone (anyone??) wish to comment, it will be interesting for me to see them and perhaps even respond to.

We'll see how things turn out.

From time to time over the past year I've posted occasional commentaries and small news items on the News page on this website. This blog will in all likelihood replace the function of that page. I'll keep that News page where it is for a short time after which I intend to archive it but keep it accessible.

Please feel free to join me at any time perhaps leave a comment or two, where desired. Welcome.

2008-12-10T00:37:00.002+11:00

This blog is presently under development. It has been a very steep learning curve so far. Please re visit soon; I hope to commence posting within days!

First Test Blog

2008-12-07T22:24:00.018+11:00

Some text for testing.