Family Homes
Must you always lose your
deposit if you don't settle your property purchase?
Paying a 10% deposit on a Property Purchase Contract is a
standard requirement for a reason.
As Justice Emmett said, paying the deposit is "a sanction
so that purchasers treat the making and completing of
contracts with due seriousness". In other words, if you
don't settle a contract to purchase a house, home unit or
land, you will lose your deposit.
But in recent years, consumer rights have upset the
certainty that a purchaser will lose their deposit if they
don't settle on a property purchase. In NSW, the rights are
that property certificates must be attached to the contract
and consumer warranties are implied that there are no
adverse affectations. In Queensland there is a Disclosure
Statement and in Victoria there is a Section 32 Vendor
Statement.
In a recent decision, a purchaser tried to terminate the
Contract and recover the deposit paid, relying on a breach
of a consumer warranty. The warranty was that the property
complied with Council requirements to be used as a dual
occupancy. It was a house which had been extended by
building a 'granny flat' underneath which could be
separately rented out (see the floor plan image).
The problem was, the Council had never approved using the
'granny flat' as separate accommodation.
Even though the facts are straightforward, the purchaser
failed to prove a breach of warranty and lost their deposit.
They failed because of a lack of evidence.
The lesson from this decision is that it is possible for
a purchaser to terminate a contract for purchase of
property, and receive a refund of the deposit, if the
purchaser can prove a breach of warranty. But as always,
high quality legal representation is needed to gather the
evidence to prove the case.
To read my case note on the decision
click Using building non-compliance to
rescind a Contract for Sale
Keeping the wolf from the
door - protecting the family home from the Trustee in
Bankruptcy
 What's
the best way to protect the family home from claims by
creditors and the Trustee in Bankruptcy?
Many professional people, company directors and business
owners put the title to the family home in their spouses'
name, to put it out of reach of creditor claims.
But does this provide effective protection against a
bankruptcy claim by the Trustee in Bankruptcy?
According to a Federal Court of Australia decision last
week, the family home may not be protected even if the title
is not in the name of the bankrupt.
Applying what is known as a common intention
constructive trust, the Federal Court said that the
Trustee in Bankruptcy can claim an interest in the family
home if:
- A common intention existed between spouses /
partners to buy the home as their matrimonial home /
place of residence; and
- The bankrupt made a contribution to the costs of
acquisition or improvements or maintenance.
The interest the Trustee can claim is proportionate to
the contribution.
Is it possible to defeat that claim? The answer is yes:
if the bankrupt has good legal advice, they may be able to
find a way around the common intention and contributions
traps when buying the family home, and protect it from the
Trustee in Bankruptcy.
For my case note on that decision, in which the home
owner was successful in protecting the family home from the
Trustee in Bankruptcy, click
Is it possible to save the family home
from the Trustee in Bankruptcy?
Even if you’re renting to
your own brother, ALWAYS SIGN A LEASE
Recently, it cost Steve Zitsis almost $100,000 in legal
fees to learn that even when renting to his own brother
George, without a signed lease it is an expensive process to
evict a tenant.
It started on friendly terms - there was a verbal
agreement that George would rent the house for $250 per week
plus paying council rates, water rates and utilities. Steve
would pay the home insurance and be allowed to stay in one
bedroom every six months when he came to Sydney for medical
appointments.
Eight years later, it turned into a family dispute when
Steve asked George to move out so Steve could sell the
house. George refused to move.
George argued that he was entitled to stay in the house
because Steve had promised him he could live there forever,
and had even promised to leave the house to him in his will.
George also said he had treated the house as his own, he had
spent $50,000 renovating the kitchen, ripping up the carpet
and polishing the floorboards, installing an air-conditioner
and wardrobes.
If there was a signed lease, George would not have
been able to argue he could live there forever because the
lease would have a fixed term. Nor could he claim the
renovations gave him the right to stay, because no
renovations are allowed without the landlord's permission.
Steve could not use NCAT (the Tenancy Tribunal) for the
eviction because he was now residing at the Surfers Paradise
and interstate residents cannot use NCAT. So the eviction
proceeding was in the Supreme Court of NSW, hence the high
legal fees.
There, Justice Megan Latham (ex ICAC Commissioner) threw
out George's arguments and ordered George be evicted.
The photo is of the house, and if you look closely, you
will see George's black Mercedes parked in the garage.
The lesson is: Even if it's your own brother, anytime
you're allowing anyone to live in your house, ALWAYS HAVE
THEM SIGN A LEASE
For my legal case note
click Family Disputes #1 Without a
lease, brotherly love goes out the door
Purplebricks real estate
promises greater fee transparency for sellers
Real estate agents charge sellers a commission, which in
Sydney is currently 1.65% of the price - $16,500 on a $1m
property; plus marketing expenses of about $5,000 which
cover a signboard, photography, listings on domain.com.au,
realestate.com.au and its own website, brochures and auction
expenses.
Online marketers are disrupting this traditional business
model. They are doing away with shopfronts, and operate
virtual agency models. By doing so, they are able to lower
their cost base and charge less for selling a property.
The most prominent online marketer is Purplebricks real
estate, which charges a fixed fee, instead of a commission,
for selling a property. It advertises prominently a fixed
fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The
fixed fee includes the services of a 'Local Property
Expert', photography and write up for listings on the
domain.com.au, realestate.com.au and its own website, a
generic signboard, and inspections booked on the internet.
You might think that the fixed fee includes accompanied
viewings, marketing reviews, marketing upgrades, an auction
and so forth. But you would be wrong! In the fine print, you
will find that these are additional services for which
additional fees are payable.
Consumers complained to the Queensland Office of Fair
Trading that Purplebricks was being misleading in
advertising fixed fees, when additional fees were payable.
The OFT agreed, and as a result, Purplebricks has changed
its advertising to make the additional fees payable more
prominent, and has agreed to pay $10,000 to the OFT as a
'fine'.
When carrying out its investigation, the OFT found that
Purplebricks was in breach of many of the real estate
licensing requirements, and fined Purplebricks another
$10,000.
For more information on the action taken by the OFT,
click on my article Purplebricks
promises no misleading advertising of fixed fees and
additional services, and admits breaches of the real estate
licensing law
Are you
selling your home or investment property? Is a flat fee
online agent better than a traditional estate agent? Is it
the difference in marketing?
Digital disruption has come to real estate agents in
Australian in the form of online agencies which are offering
marketing and sales services to assist sellers in selling
their property for a low fixed-fee. They are undercutting
full service real estate agents which charge a sales
commission.
Purplebricks is an online agency. For a look at the
Purplebricks Real Estate operating model, and how it is
attracting owners to list properties in the Australian Real
Estate market,
click here
Court rules that Airbnb style
holiday letting is unlawful in a strata building
The "Pinnacle" is an exclusive residential condominium on
Grace Bay Beach in the Turks and Caicos Islands.
The developer aimed to attract buyers looking for an
exclusive place to live, not the holidaymakers along the
beach. So the developer included a strata by-law which
banned owners from renting out their apartment for less than
one (1) month.
This ban was ignored by the owners of apartment 102, who
rented to holidaymakers, usually with one week stays. The
body corporate sued the owners for breaching the strata
by-law. The owners countered by arguing that the strata
by-law was invalid because the Strata Law did not permit any
restriction on a strata owner’s right to rent out their
apartment. The Strata Law is the same in Turks and Caicos as
it is in Australia.
The case was fiercely fought, all the way to Judicial
Committee of the Privy Council in London, which was also
Australia's final court of appeal until 1986.
In the last year or two, the topic of Airbnb style
holiday lettings in strata apartments has been hugely
controversial in Australia. NSW Fair Trading has advised and
the NSW Civil and Administrative Tribunal has ruled that a
strata by-law cannot restrict the rights of an owner to rent
out their apartment in any way.
The Privy Council rejected this strict interpretation. It
ruled on 21 December 2017 that it was possible that the
owner’s rights be restricted, if the restrictions were
reasonable. In this case, the strata by-law was a reasonable
restriction on the right to lease because it was aimed at
preserving the residential use of the building. It was
reasonable to draw the line at 30 days to distinguish a
residential use from a holiday letting use. Therefore the
strata by-law was valid.
The ruling is a game changer. This is the new game plan
(in my view):
- The NSW Fair Trading advisory and the Tribunal
ruling can be ignored as they are both wrong to reject
any restriction on the right to lease.
- If a strata scheme wants to restrict Airbnb style
holiday lettings, it passes a strata by-law with a one
(1) month minimum stay requirement, just like in the
"Pinnacle"!
- If an owner is unhappy with the strata by-law
restriction, they can apply to the Local Council or
Planning Authority for an approval or permit to use
their apartment or villa as a serviced apartment or as a
bed and breakfast establishment. If an approval or
permit is granted, it will override the strata by-law.
- If the strata scheme does not pass a strata by-law,
then the owner can continue with their Airbnb style
holiday lettings.
For a detailed analysis read my case note:
Can a strata by-law restrict Airbnb
style holiday lettings? A new legal decision is a game
changer
How to
handle Airbnb-style letting in NSW – all you need know
Airbnb is growing fast in Australia and almost half the
properties involved are located in New South Wales. Many
would-be hosts are wondering about the legal, tax and
insurance implications – and their questions have now been
answered. The answers are given in a new video released by
Sydney-based specialist travel and tourism lawyer, Anthony
Cordato. The video, which is covers six topics, has been
placed on YouTube. “Airbnb-style short-term letting for
apartments, for holiday houses and for spare rooms is
growing rapidly in popularity for home owners, investors,
and of course leisure and business travellers,” Cordato
says. “The regulatory environment is playing catch-up in
NSW, and while it is, the legal framework is a grey area.”
New South Wales is a hotspot for Airbnb. There are 30,000
properties in NSW, 70,000 in Australia and 2 million
worldwide. “These are big figures,” Cordato notes. This
video covers six topics:
- What Planning Approvals are required for short-term
lettings?
- What restrictions are there for strata titles
properties?
- How does Airbnb work?
- Insurance
- Tax
- Loans using Airbnb income
Filmed at a property investment seminar, the video
includes interesting and relevant questions and comments
from the audience. If you are thinking of venturing
into the world of Airbnb, or similar letting platforms,
this is essential viewing. Written by Peter Needham,
chief travel writer, eGlobal Travel Media
The NSW
Government is under pressure from traditional holiday
apartment operators, from strata residents, from Airbnb and
Stayz, and from property owners who all have a different
view about how short-term letting should and should not be
regulated in NSW.
After a
Parliamentary Committee failed to come up with a politically
acceptable compromise, it has issued an Options Paper. It
has asked the stakeholders, the general public and the
industry to let it know what it should do.
The NSW
Government puts forward four options:
-
Self
Regulation: where the industry / operators adhere to a
Code of Conduct, which includes complaints management,
education and ongoing monitoring and reporting.
-
Special Rules for Strata Properties: where owners
corporations cannot ban short-term letting, but are
allowed to make by-laws to make owners liable for
breaches by their tenants, to streamline enforcement, to
levy extra and to strengthen the powers of the Tribunal.
-
Regulation through the Planning System: The Government
would like to lay down clear planning guidelines for
Local Councils, as it sees them as the best gatekeepers.
-
Registration or Licensing: This is seen a lighter touch
than regulation through the Planning System.
This will
not be a quick process. In the meantime, the fast growing
industry will continue to grow in a legal grey area.
Does Airbnb give Boutique
Hotels and B&Bs a competitive edge?
Traditional hotel chains and large resorts have long
dominated the accommodation industry because of their strong
brand marketing and distribution channels.
But as with so many other industries, the internet is
disrupting the traveller accommodation industry. Through
internet booking platform operators such as Airbnb, Stayz,
eDreams and Bookings.com, the internet is providing small
accommodation providers with easy and cheap access to a
global market for travellers, whether it is for business or
pleasure.
There are four services which Airbnb provides, which give
Boutique Hotels and Bed & Breakfasts a competitive edge over
traditional hotels and resorts, and which allows them to
by-pass the traditional travel agents (brick & mortar or
online) in making bookings:
- Marketing
- Bookings Management
- Payments Platform
- Property Damage & Injuries cover
These services are increasing lodging occupancy and pricing
power for small accommodation providers.
For more information about
how Airbnb is empowering Boutique Hotels and B&Bs to build
their business, Click
Here
Is Airbnb the answer to boosting cash flow for property
owners?
If an owner has a spare room in their home, or
has a granny flat, or an investment apartment near a
business centre, or a holiday house, then
they can boost their cash flow by renting it
out as short-term stays to business and holiday travellers.
This is how it works: The owner sets the rent higher than
the long-term rent because it is a short-term letting. For
instance, the Airbnb rent might be $65 per day (plus a
cleaning charge) for the room, which is higher than the
weekly rent of $245 per week ($35 per day) for the same
room. This suits the guest because the rent is cheaper than
the daily tariff charged by a hotel.
Airbnb is therefore effective way to boost cash flow from a
property, whether it is a spare room, a granny flat or a
whole house or apartment.
Click
for more
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