Spring Update - Property Law Update by hjkuiw354


									Property Law Update
Spring 2010

Building Energy Efficiency Disclosure Requirements for Owners and
Tenants – Important: Disclosure Commences 1 November 2010
by Bill Hazlett, Partner and Matt Vicars, Lawyer

The energy efficiency disclosure                   3   an owner or tenant must provide             National Australian Built Environment
provisions under the Building Energy                   a copy of the registered BEEC to a          Rating System (“NABERS”). A base
Efficiency Disclosure Act 2010 (“Act”)                 prospective purchaser or lessee (if it is   building rating only applies to the
came into force on 1 July 2010. However                requested in writing).                      energy consumed in central services and
the disclosure obligations do not begin            Under the Act the disclosure                    common areas, so it will be important
until 1 November 2010 which is the                 requirements do not apply to offers to let      that separate metering of the base
Implementation Day.                                or sublet a building or part of a building      building and tenancy areas is conducted
                                                   with an area of 2,000 square metres or          in order for a rating of this type to be
Who does the Act apply to?
                                                   more if the term of the proposed lease or       carried out and disclosed.
The Act establishes a compulsory
                                                   sublease is 12 months or less including
disclosure scheme on corporations that                                                             A BEEC will only be current for 12
                                                   any options to extend.
are owners or tenants of buildings,                                                                months from the date of issue.
and parts of buildings, that are used              What must be included in the                    What are the penalties?
or capable of being used as offices                BEEC?
and which exceed the net lettable area                                                             The Act imposes substantial penalties
                                                   The Building Energy Efficiency Disclosure       upon owners or head tenants who fail to
threshold of 2,000 square metres or
                                                   Regulations 2010 (“Regulations”)                comply with the disclosure requirements.
                                                   set out the information that must be
Corporations that are owners or tenants            included in a BEEC. The Regulations             The Act provides a maximum civil penalty
must disclose the energy efficiency of             prescribe that a BEEC must include              of $110,000 for the failure to register
their buildings, or parts of buildings, that       (amongst other things):                         a BEEC or for not providing an energy
exceed the net lettable area threshold                                                             efficiency rating in any advertisement.
                                                   •   the net lettable area of the building
when either selling or leasing.
                                                       or area of the building                                            (Please see over)
What are the energy efficiency                     •   the hours of occupancy for the
disclosure requirements?                               building, as determined by the
The disclosure requirements will apply                 NABERS Energy rating rules
from the Implementation Day. The Act               •   whether the energy efficiency rating
                                                                                                   Also in this issue
imposes three central obligations on                   is a base building rating or a whole
owners and head tenants:                               building rating
                                                                                                   •	 Australian	Consumer	Law	
1   an owner or tenant cannot offer to             •   the energy consumption of the               •	 Property	Use	and	GST	on	
    sell, lease a building or a part of the            building per year                              Residential Sales
    building, or invite offers to purchase         •   the greenhouse gas emissions                •	 Impacts	of	Australian	Consumer	
    or lease the building (or part), unless            generated by the building                      Law	on	Queensland	Land	
    a valid and current building energy                                                               Contracts
    efficiency certificate (“BEEC”) is             •   an assessment of the energy
    registered in the Building Energy                  efficiency of the lighting in the
    Efficiency Register                                building

2   in any advertisement for the sale,             •   guidance on how energy efficiency
    lease or sublease of the building                  might be improved.
    or part of the building, the owner             The energy efficiency rating to be
    or head tenant must disclose the               disclosed on the BEEC can be either
    appropriate energy efficiency rating           a base building rating or a whole
    as set out in the BEEC                         building rating, as measured under the
                                                                                          Consumer Law
                                                                                          New Consumer
                                                                                          by Phillip Ng, Associate

                                                                                          New consumer guarantees take

Building Energy Efficiency Disclosure                                                     effect from 1 January 2011 as part
                                                                                          of the new Australian Consumer
Requirements for Owners and Tenants –                                                     Law reforms.
                                                                                          The guarantees replace the existing
Important: Disclosure Commences                                                           regime of implied conditions and
1 November 2010 (Cont)                                                                    warranties	under	the	Trade	Practices	
                                                                                          Act 1974 (Cth) and the various state
A separate contravention will occur for          How to prepare                           and territory fair trading legislation
each day that the building is offered for                                                 with a consistent national scheme.
                                                 Any corporation which owns or leases
sale or lease without disclosure and for                                                  The	Trade	Practices	Act	will	be	
                                                 a building or part of a building that
any advertisement that doesn’t disclose                                                   renamed the Competition and
                                                 is used or is capable of being used
the appropriate energy efficiency rating.                                                 Consumer Act 2010 (Cth)
                                                 as an office and which exceeds the
However the Act limits the penalty
                                                 net lettable area threshold should
payable for certain contraventions
                                                 ensure it has a current NABERS energy
which continue for more than one day
                                                 efficiency rating or immediately begin
                                                                                          False and Misleading
and the maximum penalty for these
contraventions is $11,000.00 per day.
                                                 obtaining a NABERS energy efficiency
                                                 rating for its building to avoid any
                                                                                          Representations in
Transition period                                delays in either selling or leasing.     Relation to Land
The Act allows for a 12 month transition         Owners and tenants need policies
period beginning on the Implementation                                                    The	provisions	in	the	Trade	Practices	
                                                 and processes when contemplating
Day and finishing on 31 October 2011.                                                     Act about false and misleading
                                                 selling or leasing their building or
The transition period will allow owners                                                   representations in relation to land
                                                 part of their building to ensure that
or head tenants to disclose an efficiency                                                 have been reproduced in a simulation
                                                 disclosure of the energy efficiency
rating from a recognised issuing                                                          in the new legislation. But a new
                                                 rating is made at the first instance
authority (such as NABERS) instead                                                        provision has been added prohibiting
                                                 of negotiations or discussions with
of a full building BEEC to satisfy the                                                    false and misleading representations
                                                 prospective purchasers or tenants and
disclosure obligations under the Act.                                                     about offers, gifts or other free items
                                                 in any advertisements. They also need
                                                                                          in connection with sales of land. It
In order to meet the requirements for            to receive written confirmation from
the transition period under the Act, the                                                  extends to ‘rebates’, which includes
                                                 prospective purchasers or tenants
energy efficiency rating must be:                                                         ‘cash-back offers’. While these
                                                 when they have received the building’s
                                                                                          offers can still be conditional upon
•   obtained prior to the Implementation         energy efficiency rating.
                                                                                          certain obligations being fulfilled by a
    Day or during the transition period          Purchasers and tenants need to           consumer, once they are fulfilled the
•   a base building or whole building            review and update their due diligence    new provision applies so the ‘cash-
    rating                                       checklists to ensure they receive the    back’ must be provided within the time
•   a current rating                             current energy efficiency rating of      specified, or if no time is specified,
                                                 any building or part of a building       within a reasonable time.
•   issued from a recognised issuing
    authority such as NABERS                     they intend to purchase, lease or
                                                                                          The new law also introduces an
•   publicly accessible on the                                                            infringement notice system by which
    Department of Climate Change                 Hunt	&	Hunt	can	advise	you	how	to	       the ACCC can issue notices to persons
    and Energy Efficiency’s ‘Commercial          prepare for the disclosure obligations   who breach the law instead of
    Building Disclosure’ website.                and their impacts upon you.              bringing a criminal prosecution.

Page	2	| Property	Law	Update	–	Spring	2010 |	Hunt	&	Hunt
GST on Residential Sales – Don’t get caught out!
by Neil Malcolm, Senior Associate

Sunchen Pty Ltd v Commissioner                 The relevant section provides that the         registered	for	GST,	and	that	person	
of Taxation (2010) FCA 21                      sale of property is input taxed if the         proposes to, for instance, develop the
                                               property is residential premises to be         property then this decision means the
This case provides that a vendor’s liability
                                               used predominantly for residential             supply will not be input taxed but will in
for	GST	on	a	sale	of	used	residential	
                                               accommodation.                                 fact be a taxable supply. The vendor will
premises is actually determined by what
                                                                                              then have to remit 1/11th of the price
a purchaser may or may not do with the         Sunchen’s argument was that he did not
                                                                                              to the ATO.
property in the future.                        buy the property for use as residential
                                               accommodation, rather he bought the            We recommend that if you are a vendor
Sunchen purchased a used residential
                                               property to undertake a commercial             registered	for	GST	and	propose	to	sell	
property from the vendor under a
                                               development and that the words “to be          used residential premises then you
contract which stated the purchase
                                               used” imported a subjective prediction         either	state	the	price	as	“plus	GST”	or	
price	was	GST	inclusive.	Presumably,	
                                               of future use.                                 you include a special condition that the
from the vendor’s point of view it was
                                                                                              parties acknowledge and agree that the
selling “used residential property” and        The judge in the decision concluded
                                                                                              property is a used residential property
assumed that the supply was input              that “to be used” calls for a prediction
                                                                                              and will be used as residential property
taxed	and	no	GST	would	be	payable.             as to future use and the intention of the
                                                                                              after settlement. A vendor could also
                                               purchaser is significant.
Sunchen successfully obtained an input                                                        require covenants as to the future use
tax	credit	for	GST	as	its	purchase	was	a	      So while the decision has been much            remaining residential and appropriate
creditable acquisition. The vendor had         criticised, if you are a vendor registered     indemnities and releases.
to remit 1/11th of the purchase price to       for	GST	and	sell	a	used	residential	
the ATO.                                       dwelling to a person who is also

                                                                                  	Hunt	&	Hunt	|	Property	Law	Update	–	Spring	2010	|	Page	3
Impacts of Australian Consumer Law on
Queensland Land Contracts
by Jennie Keane, Associate

                                                     performance or damages and specific                 Further impact	of	Australian	Consumer	Law	
                                                     performance, including costs on an                  on	the	REIQ	Residential	Land	and	Building	
                                                     indemnity basis.                                    Contract from 1 July 2010.

                                                     If a buyer terminates a contract due to             Pest	and	Building	Inspection
                                                     a breach by the seller, the buyer may               The pest and building inspection clause
                                                     recover the deposit and sue the seller              was considered unfair as only the buyer
                                                     for damages.                                        had a right to terminate for a unsatisfactory
                                                     After terminating a contract for the                building and pest report. If no response
                                                     buyer’s default, the seller resold a                was received from the buyer at all, there
                                                     property	within	two	years.	Previously	              was automatic satisfaction with pest and
As a result of both the unfair contract                                                                  building condition. Under the version 7 of
                                                     if a seller resold a property after
terms law aspects of the new Australian                                                                  the contract, both parties have termination
                                                     terminating a contract for the buyer’s
Consumer	Law,	and	the	decision	in	Riggall                                                                rights and the automatic satisfaction of the
                                                     default, the seller could also claim the
v Thompson [2010]	QCA	144,	the	REIQ	                                                                     clause is removed.
                                                     expenses incurred under the original
Residential	Land	and	Building	Contract	              contract, however	the	Queensland	                   Now, the buyer must tell the seller by 5pm
has been amended from 1 July 2010.                   Supreme Court of Appeal found in                    on the inspection date whether it terminates
Previously,	a	buyer	only	had	a	right	to	             Riggall v. Thompson that this was a                 due to unsatisfactory reports, or confirms
return of its deposit if the seller defaulted        penalty and was not a genuine cost                  satisfaction with the reports, or waives the
under the contract, although it had some             caused by the default. The ability to               benefit. If the seller does not receive any of
rights under common law. Under the new               claim those expenses has been removed               the above notices from the buyer, the seller
version seven of the contract, both parties          from the new version 7 of the contract.             has a right to terminate. If the seller has not
                                                                                                         terminated, the buyer can give notice of
have rights to terminate for the breach of           This decision may have implications
                                                                                                         satisfaction or waiver after the inspection
an essential term of the contract.                   for contracts in use in other states and
                                                                                                         date. Once the buyer waives the benefit
                                                     territories.	Contact	your	local	Hunt	&	
If either a buyer or a seller breaches                                                                   of the conditions, the seller’s termination
                                                     Hunt office.
an essential term, the other party may                                                                   right under this clause ends. On termination
affirm the contract and may sue the                  Trade Practices Amendment (Australian               under this clause by either party, the deposit
defaulting party for damages, specific               Consumer Law) Act (No. 1) 2010                      is returned to the buyer.

If you would like to discuss any of the issues raised in this update or require further information, please contact:

Sydney (City)                                        Brisbane                                             Hobart
Ned	Boyce,	Partner                                   Lynette	Reynolds,	Partner                            Antony	Logan,	Partner
+61 2 9391 3001                                      Macrossans	Lawyers                                   +61 3 6210 6213
eboyce@hunthunt.com.au                               +61 7 3292 9735                                      alogan@hunthunt.com.au
Sydney (North Ryde)                                                                                       Darwin
Mark	Byers,	Partner                                  Adelaide                                             Christine	Osborne,	Partner
+61 2 9804 5777                                      Egils	Olekalns,	Partner                              +61 8 8924 2600
mbyers@hunthunt.com.au                               +61 8 8414 3342                                      cosborne@huntnt.com.au
Melbourne                                                                                                 Shanghai
Bill	Hazlett,	Partner                                Perth                                                Candy Ding
+61 3 8602 9259                                      Darren	Miller,	Partner                               +86 21 6249 3544
bhazlett@hunthunt.com.au                             Marks	&	Sands	Lawyers                                cding@hunthunt.com.au
                                                     +61 8 9488 1300

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you have a matter that is legal, or has legal implications, that you consult with your legal adviser. If you no longer wish to receive this Update or any
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Page	4	| Property	Law	Update	–	Spring	2010 |	Hunt	&	Hunt

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