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Rental Property Investment


If you change real estate agents, will you pay double commission?

You have spent $4,000 in marketing costs and still, after 90 days, your real estate agent cannot find a buyer willing to pay the price you want for your property.

Apart from spending another $4,000 on new marketing costs, do you run the risk of paying double commission if you change agents?

Specifically, are you legally liable to pay sales commission to the first agent as well as to the new agent if you sell the property to a buyer who inspected the property through the first agent?

Most sales agency agreements provide that the real estate agent is entitled to the remuneration if the agent is the effective cause of the sale, which is to say, if a person has been 'effectively introduced to the Principal or the Property by the Licensee during the Agency Period … and that person … enters into a contract to purchase the property...'

Not long ago, I received an email from a real estate agent whose agency agreement had been terminated because they had not achieved a high enough offer for a prestige property in Hunters Hill. The email contained this demand: If the property is sold to a purchaser in the list below, we require our commission of $80,000 to be paid. The list contained 138 names!

Fortunately, the name of the buyer who purchased the property through the new real estate agent was not on that list, so a legal dispute was avoided.

But what if the buyer's name had been on that list? A recent decision of the NSW Court of Appeal has shed light on what a real estate agent must do to earn their commission.

The Court said that it was not enough for the buyer's name to be on a list of people who had enquired about or had inspected the property, such as in an open house (see image).

More is required: The first real estate agent must have passed on an offer from the prospective buyer to the seller, and must have continued to assist in the negotiations (as required).

In the Court case, the first agent made a fatal error. They did pass on an offer, and conducted price negotiations. But then they made a fatal error - they went overseas on a holiday over Christmas and New Year, and were uncontactable for a few weeks. The buyer approached a second real estate agent to who completed the negotiations. Note: both agency agreements were non-exclusive agencies.

The Court rejected the first agent's claim for commission.

For more information, click on my article Property seller narrowly avoids paying two sales commissions on one property


What can a landlord do with items left behind by a former tenant?

Evicting a tenant for non-payment of rent is sometimes to win only half the battle. The other half is to dispose of what they have left behind in the property, without attracting legal liability for wrongful disposal.

With Residential Leases, the landlord’s rights to dispose of goods or rubbish left behind after a residential tenant vacates are: the landlord must give a disposal notice, then wait 14 days before disposing of the goods, and account for the proceeds of sale. A landlord can dispose by sale, or by donation to a charity, or leaving it out on the street for a Council collection.

This does not apply to perishable items which can be disposed of straight away or to personal documents which must be kept for 90 days and then returned to the issuer.

With Commercial leases, the landlord’s rights to dispose of goods left behind by a tenant are governed by a covenant in the lease. If there is no covenant in the lease, or if the landlord desires greater certainty, they can obtain a court order for disposal under the Uncollected Goods Act 1995 (NSW).

Obtaining a court order for disposal of tenant’s goods is a relatively simple and inexpensive procedure. It has the advantage that it is made with the authority of the Court, it is not simply the enforcement of a covenant in a lease. A court order will confer good legal title on a purchaser and will give directions for payment of the proceeds of sale.

Recently, we obtained a court order to dispose of 2,800 200 litre / 44 gallon drums full of Activated Carbon which had been left behind in a warehouse by a defaulting tenant

For more information, click on How does a landlord legally dispose of goods left behind by a former tenant?


New tenant friendly laws start in NSW

Residential real estate investment has always been subject to both encouragement and regulation by Governments.

The encouragement is mainly in the form of tax breaks, such as half tax on capital gains, negative gearing and depreciation. It's not all encouragement - land tax is a negative.

The regulation is mainly in the form of tenant rights and protections.

NSW has introduced new tenant friendly laws which started on 23 March 2020, which are:

  • Seven 'fit for occupation' standards have been introduced to spell out what 'fit for occupation' means, such as there must be natural or artificial light and ventilation to all rooms, electricity, water and gas, contain a bathroom and be in a reasonable state of repair. (applies to existing and new tenancies)
  • Smoke alarms must be checked and batteries replaced annually. (applies to existing and new tenancies)
  • Tenants are allowed to make minor changes such as installing hooks, nails or screws, installing curtains and blinds, an internet connection and fly screens, and even planting vegetables, flowers and herbs. (applies to existing and new tenancies)
  • Tenants can terminate fixed term leases early without reason and pay a small early termination fee such as 3 weeks rent for a termination before the term is half way through. (applies to new tenancies)
  • There is a new standard form lease and condition report.

For more details, click on my article New laws for residential tenancies started on 23 March 2020 in NSW



Is your rental property fit to live in?

Some landlords refuse to spend any money to keep their rental properties in good shape - to make them fit to live in / fit for habitation. The kitchen cupboards are from the 1960s, the carpet is worn out and the flyscreens are torn.

These are cosmetic defects and mean that the property is rented at a low rent.

But there may be more serious defects, often structural defects, which are a threat to health and safety. It is these defects which can make a rental property not fit to live in.

The NSW Government has introduced minimum standards for rental properties, to start on 23 March 2020, which will make it compulsory for landlords to offer properties for rent which are fit for habitation. Landlords will need to answer Yes to these questions:

  • Are the premises structurally sound?
  • Does the premises have adequate natural or artificial lighting in each room; ventilation?
  • Are the premises supplied with electricity and gas, and have adequate electricity or gas outlet sockets?
  • Are the premises connected to a water supply service; are there bathroom facilities; is there adequate plumbing and drainage?
  • Are there signs of mould or dampness; pests and vermin; has any rubbish been left on the premises; and are the premises listed on the Loose-Fill Asbestos Insulation Register?
  • Have the smoke alarms been installed and checked and found to be in order; have the batteries been replaced within the last 12 months?
  • Are there safety issues, visible hazards relating to electricity or gas?
  • Is a telephone / internet line connected?

    Are water efficiency compliance measures in place?

If the answers are No, the tenants can break the lease without a break fee, and be compensated by a refund of part or all of the rent.

For more click on my article Is your rental property fit for habitation?


Will your neighbour still list on Airbnb after the NSW Govt's latest policy announcement?

In NSW there will soon be one law for houses and another law for home units when it comes to short-tern rental arrangements, as a result of a new policy announcement by the NSW Government.

Short-term rentals, booked on Airbnb, Stayz and with holiday rental agents are popular for holidays, business travel, emergency accommodation and special events. They can be overnight stays or stays of up to 90 days (if more than 90 days they are residential tenancies).

The new policy is an 'open door' policy for short-term rental of houses.

They have their own approved planning use and can rent without local council permission all year round so long as the 'host' - the owner, tenant or permanent resident - is living in the house. This is the traditional rent 'a spare room' use.

But if the host is an absentee landlord, restrictions will apply: the number of days is limited to 180 days in a calendar year in many parts of NSW: Greater Sydney Region, Ballina, Lake Macquarie, Clarence Valley, Muswellbrook and 90 days in Byron. The day limit applies to days occupied by guests. If the guests stay for more than 21 days, they are not counted towards the 180 days. There is no day limit elsewhere in NSW.

The restrictions are much tougher for home units / apartments / town houses in a strata scheme.

If the host is living in the strata property, they can rent the spare room without local council or strata owners corporation permission all year round.

But if the host is an absentee landlord, there are four scenarios:

  1. If the strata property is the principal place of residence, then it can be rented for up to 180 days a year (stays over 21 days not counted).
  2. If the strata property is not the principal place of residence, then the 180 day stay restrictions apply according to where the property is, as outlined above, subject to 3.
  3. If the strata property is not the principal place of residence, the strata owners corporation may ban short-term rentals outright, by passing a by-law by special resolution with a 75% majority at a general meeting.
  4. They can obtain planning permission to use the property as a serviced apartment. This permission is only possible if the property has a mixed use or business zoning. If obtained, it the council consent may override a by-law banning short-term rentals.

In summary, it will still be easy to have short-term rentals in houses, but much harder in home units.

For a detailed explanation, click on my article NSW Govt short stay holiday accommodation policy – planning and compliance update


Why buying a 2 bedroom home unit or townhouse is a smart move

Tony Cordato Property Lawyer discusses with Felicity Heffernan Mortgage Broker

Why is a 2 bedroom home unit or townhouse a smart buy, as opposed to a 1 bedroom unit or studio? We look at loan availability, sale ability, benefits of having a spare room.

What you need to know about strata title. We look at owning the airspace but not the walls, strata levies, scope for decoration and renovation, structural work.

The different loan availability for low rise, medium rise and high rise strata buildings.

Felicity's 10 tips for buying a strata unit:

  1. Where is the car parking space?
  2. How many home units in the block?
  3. How many are owner-occupied?
  4. Where are the rubbish bins?
  5. Has the building got a sprinkler system?
  6. How many lifts has it got?
  7. What amenities has it got?
  8. What else is happening in the area?
  9. What are the comparable established properties selling for?
  10. What are the demographics of the people living in the block?


Use these 10 filters when buying an investment property

With more than 9 million residential properties in Australia to choose from, how does a property investor find the best property to invest in?

The answer is simple - make a list of filters to use to guide you to the best property for you.
Luke Moroney, a Buyer's Agent, and I have compiled this list of 10 filters:

  1. Focus on types of properties which make good investments
  2. Is negative gearing worthwhile for you?
  3. Decide whether you are an active or passive investor
  4. Buy townhouses for high cash flow
  5. Buy houses with land to add value
  6. Buy property in an affordable price range
  7. Buy property normal people can afford to rent
  8. Buy property in metropolitan areas
  9. Buy property with growth potential
  10. How will you negotiate a price discount?

Luke and I have put together this 13 minute video in which we discuss these filters. Titled:: Buying Investment Property #1 Tony Cordato discusses property investment strategies with Luke Moroney

For the transcript of the video click here

Mould in rental houses: How serious is it for landlords and tenants?

Black Mould (pictured under a microscope) can cause serious respiratory difficulties, asthma and dermatitis in people. It is definitely a health hazard.

Landlords have a legal duty to provide premises fit to live in. This applies not only at the handover, but also during a tenancy. For landlords, mould in rental house is a wealth hazard!

The law is: if mould appears, the tenant should notify the landlord to treat the mould because it may make the premises unfit for habitation. And the landlord should take steps to treat the mould and its source as soon as possible.

These are some actual case studies on mould affected properties from NCAT (the NSW Tenancy Tribunal) which illustrate the consequences of mould infestation:

  • Townhouse at Waitara: The tenants moved out 2 weeks after moving in because mould was everywhere and they were suffering respiratory disruption. The landlord was ordered to reimburse the revivalist's cost of $1,741, refunded the rent paid in advance and the bond in full.
  • House at Greenwich: The tenants suffered mould for a year before they stopped using bedroom 3, and notified the landlord. The landlord installed underfloor vents, but the mould remained. The day the tenants moved out, they had an expert's mould report done which stated that the mould had made the house unfit for habitation. The landlord was ordered to pay $15,000 to reimburse the cost of decontamination of personal possessions, a rent rebate of $230 per week for being unable to use bedroom 3, as well as a bond refund and a break fee for early termination of the lease.

For more details and more case studies, click on this link Mould in rental properties - tenant's rights and landlord's responsibilities

Is it possible to acquire possessory title to an abandoned house?

Abandoned houses are not difficult to spot - the long grass, peeling paint, torn curtains, gates off hinges, leaning fences and overflowing letterbox are giveaways.

It could be a deceased estate, or a house awaiting demolition or major renovation, it could be the owner has been away for a long time, or it could be that a long term tenant has died.

There's always a story.

One story concerns a house in Erskineville, in inner-city Sydney. The neighbour had noticed a terrible smell coming from the house, but it was not until a year later that she reported it to the Police. Her neighbour's decomposed body was found wedged between the stove and the sink. A real estate agent tracked down the owner's family and sold the house, putting paid to any claim for possessory title.

In most cases, someone is keeping an eye on the house. Someone is paying the Council rates and water rates. Someone is collecting the mail. Someone mows the lawn once in a while. If you are interested in purchasing, you ask the neighbours or the Council for contact details. Or tape a note on the front door. You could carry out a title search.

Occasionally, the occupier dies and nobody takes an interest. These houses are suitable for possessory title claims.

A recent example was in the NSW Supreme Court case of McFarland v Gertos where the Court awarded possessory title to a person who took possession of an abandoned house at 6 Malleny Street, Ashbury (pictured today in restored condition). The house is in a quiet suburban street, next to Canterbury Racecourse in Sydney.

In that case, Mr Bill Gertos took possession and persuaded the court that his adverse possession was Open, not secret; peaceful, not by force; and adverse, not by consent of the true owner; and it was continuous for 12 years.

He took possession in 1998, cleaned out the rubbish, made it habitable, rented it out and paid the rates. He spent more than $100,000 renovating the house in 2015.

It was not until 2017 that the deceased's family took an interest in the house. But it was too late: their father/grandfather's title was extinguished in 2010 (12 years after 1998).

As a result, the title is now in Bill Gertos' name to a house worth $1.7 million.

But is it unjust enrichment? The family did not claim compensation for the value of the house net of what Mr Gertos spent in renovations in this case, presumably because it did not occur to their legal team to make a claim for unjust enrichment.

To read my detailed case note click on Finders Keepers – Obtaining possessory title to real estate in NSW

Interstate landlords cannot use the NSW tenancy tribunal to evict tenants

The NSW Court of Appeal has now shed light upon a dark corner of the Commonwealth Constitution, which is that only a court of a State can hear disputes between residents of different States.

You may think that this is a purely academic question, but it's not the case if you are a Queensland resident who owns a residential rental property in NSW, according to the court.
You may want to evict a tenant for non-payment of rent, or claim a rental bond for the cost of cleaning and repair of damage when the tenant moves out. Up until now, you made an application in the NSW Tenancy Tribunal (NCAT), which provides quick and cheap eviction orders and payment orders.

But NCAT is not a court - it is a tribunal which sits outside of the formal court structure.
This is where the Commonwealth Constitution comes into play. According to the decision of the NSW Court of Appeal, interstate landlords cannot obtain orders under the Residential Tenancies Act (NSW) from NCAT because it is not a "court of a State". They must use the slow and expensive Local Court or District Court of NSW instead.

This decision could have ramifications for interstate landlords throughout Australia. But for now, interstate landlords who own property in Queensland are protected by a decision of the Supreme Court of Queensland.

For more details, click on my case note: From now on, interstate landlords and their tenants cannot use the NSW Tenancy Tribunal (NCAT)

What happens to an off the plan purchase if the building is not completed before the sunset date?

Let's start by making it clear that a sunset date is not a romantic meeting. A sunset date is a date that a property developer inserts into off the plan sale contract by which they expect the building to be completed and the strata plan to be registered.

Until 2 November 2015, there were no restrictions on vendors or purchasers terminating the sale contract if the building was not completed by the sunset date. But in a rising property market, some property developers were delaying completion and were using the sunset clause to terminate then re-sell at a profit.

In response, the NSW Government introduced a Sunset Clause Law which requires the vendor in the contract to obtain permission from the NSW Supreme Court to rescind the contract. Permission is granted if the court is satisfied that it is just and equitable in all the circumstances to be able to rescind.

In only the second case which has been decided under the Sunset Clause Law, the Court has decided to refuse permission to the property developer to rescind nine off the sale contracts in an apartment development in Surry Hills, Sydney.

The court refused because the purchasers would lose the benefit of an average increase in value of $200,000 above the Contract Price and lose the 'lifestyle' choice of moving in. This was so, even though the property developer was not wholly to blame for the delay in completing the building because its builder went into administration.

For more details, click on my case note Sunset Clause Law bites property developer.

Is a verbal agreement to sell real estate legally binding?

The short answer is that it can be, but ever since 1677 it has become a lot harder.

What happened in 1677? The English Parliament passed the Statute of Frauds, which made verbal agreements for the sale of land legally unenforceable because they encourage fraud. The Statute of Frauds came to Australia and is the current law in every state and territory in Australia, 341 years after it first became law.

As a result, the Courts will not enforce an agreement which is partly verbal and partly in
writing, or an incomplete written agreement for
the sale of land, such as a receipt for payment
of deposit or a real estate agents sales advice.
This is because the written agreement does
not contain all of the terms of an agreement for
sale of land, and does not contain the
requisite documents.

But there is an exception: it is still possible to enforce a verbal agreement for the sale of real estate if there is part performance by the buyer.

What is part performance? Part performance is when a buyer pays some or all of the price, or moves into possession, spends money on improvements, and is led to believe by the seller that for all intents and purposes they are buying the property!

The Court of Equity will not sit idly by and allow the seller to dishonour an agreement which does not comply with the Statute of Frauds, because it would result in another fraud - a fraud on the buyer.

Therefore, if a buyer demonstrates part performance, the Court will enforce that agreement and order that the title to the property be transferred, subject to payment of the price.

As you can imagine, the rules applying to part performance are complex. Recently, the High Court of Australia settled upon a set of rules.

For my case note on that decision click When is part performance available to enforce verbal or incomplete written agreements to sell real estate?

What happens when a purchaser caveats the property they are buying?

Property vendors are anxious to know what happens when a purchaser registers a Caveat over the property they are selling under a Contract for Sale.

They ask: Will the Caveat derail the sale and what should I do? This is a guide.

First: Why has the purchaser registered a Caveat? If it is because they have released the deposit to the vendor or if settlement is deferred beyond the standard time, then it is perfectly justifiable for a purchaser to register a Caveat, provided they have been granted a 'caveatable interest' in the Contract for Sale.

Second: How does the Caveat affect the vendor? Anyone searching the title will see the Caveat - if they are a lender, they will not lend more money to the vendor; if they are another purchaser, they will not enter into a Contract of Sale with the vendor; unless the Caveat is removed. So a Caveat restricts the vendor in refinancing or re-selling the property.

Third: Is there a dispute with the purchaser? If there is no dispute, then the purchaser is using the Caveat to legitimately protect their interests, and will come to settlement with a Withdrawal of Caveat. But if there is a dispute, the purchaser is using the Caveat as a bargaining chip against the vendor. If so, the vendor needs to take action.

Fourth: What action can a vendor take to remove the caveat? The process is called lapsing the caveat. The vendor serves a lapsing notice which gives the purchaser 21 days (in NSW) (14 days in Qld) to apply to the Supreme Court to maintain the Caveat on the title. If the purchaser does nothing, the Caveat will be removed from the title by the Lands Registry.

Fifth: What happens if the purchaser goes to Court? For a vendor, the most significant part is that the purchaser must 'proffer an undertaking as to damages' which means that they accept responsibility to compensate the vendor for all losses, if the court agrees to maintain the caveat on the title until the dispute with the vendor is determined by the court.

In a recent case before the Supreme Court of NSW, the purchaser applied to maintain their caveat. But when the moment came, they refused to accept responsibility for losses the vendor might suffer. As a result, the Court ordered the Caveat be removed and the purchaser pay the vendor's legal costs of going to court.

For my case note click Will a purchaser's caveat stand without an undertaking as to damages?

New NSW policy welcomes short stay rentals (Airbnb style)

On 5 June 2018, the New South Wales Government announced a new policy for hosts for short-term Airbnb style holiday letting. The new policy will affect both owner-occupiers and investors.

The key is a new cap of 180 days in any one year on short-term lettings for an investment property, meaning a property that is not owner-occupied. The cap does not apply to owner-occupiers who rent a spare room or rooms.

Owner-occupiers - who rent 'rooms' in houses and home units anywhere in NSW - There is no cap on the number of days in a year that rooms can be let for short-term lettings. This applies to owners who let part of the house for short-term lettings, and live in another part. If breakfast is served, a B & B Licence might be needed from the Local Council.

Investors - who rent 'whole' houses and home units outside of Sydney - There is no cap on the number of days in a year that the whole house or home unit can be let for short-term lettings.

Investors - who rent 'whole' houses and home units in Greater Sydney - there is a cap of 180 days in any one year for short-term lettings. The boundary line for the Greater Sydney Region is yet to be drawn.

Investors - who rent home units in Sydney - If the Owners Corporation passes a 75% majority resolution (a special resolution) then it can ban short-term lettings by investors of 'entire' home units in the building. This cannot affect owner-occupiers who let rooms. It is not clear whether existing bans will be allowed to continue, or whether a new resolution will be needed.

For all short-term lettings, there will be a new mandatory Code of Conduct that hosts and guest must follow, accompanied by a two-strike policy, whereby hosts or guests who commit two serious breaches of the code within two years will be banned for five years and listed on an exclusion register.

For more details on the new rules, click Is the new NSW Government policy a win-win for short-term (Airbnb style) holiday letting?


The Chapter on Real Estate Law in Australia from the International Real Estate Law Review

The law applying to Real Estate around the world is both similar and different.

Law Business Research invited me to join its expert panel to contribute the chapter on Australia to the international Real Estate Law Review which covers 35 countries from around the world including the United States, Indonesia, Hong Kong and Singapore.

All authors answer a common set of questions in our chapters, which are:









The Australian Chapter I have written is an excellent birds-eye view of real estate law in Australia. It is particularly useful for interstate and overseas investors.

Click on this a link - The Real Estate Law Review - Australia Chapter


Is it a good idea to switch from a family trust to a company to save tax?

With family trusts under threat as a tax shelter, are companies looking like an attractive tax effective alternative?

The tax effectiveness of a family trust is that profits are distributed to members of the family, as you choose, every year. This means diverting the profit distributions away from high income earners to low income earners (such as adult children) to take advantage of the tax free threshold of $18,200, and the 19 per cent tax bracket up to $37,000, so as to avoid distributions to high income earners who have tax brackets of 37 per cent from $87,000 up to $180,000 and 45 per cent above.

The threat (currently the federal opposition policy) is for family trust distributions to be taxed at a rate of 30 per cent. For example: if the low income earner is earning wages (from casual or part-time work) of $15,000 pa, then that is tax free because it is earned income. But on every dollar of trust distribution which tops up income up to $37,000, the tax rate is proposed to be 30 per cent. Trust distributions which top up income above $37,000 will be taxed according to the tax bracket, which is 32.5 per cent.

Company profits are kept by the company - they do not need to be fully distributed each year - unlike profits from a family trust which must be distributed. After paying company tax, the profits do not need to be paid out as dividends. Therefore, if the shareholders are high income earners, they can avoid receiving income which is taxable in a high tax bracket.

The icing on the cake is the recent company tax rate cuts, which for a company with an annual income of less than $25 million, means a tax rate of 27.5 per cent instead of 30 per cent. This means that small company can retain more of its profits.

But the 27.5 per cent tax rate is available only if 20 per cent or more of the company's income is from business activities. That is, pure investment income does not qualify, such as rent, interest, dividends, capital gains and trust distributions

Conclusion: If a flat tax rate of 27.5 per cent is attractive, then it's a good idea to switch to using a company for a new active investment or business.

For more information, click on Real estate investment companies must pass the 80% passive income test to qualify for the company tax rate cut


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:

  1. What Planning Approvals are required for short-term lettings?
  2. What restrictions are there for strata titles properties?
  3. How does Airbnb work?
  4. Insurance
  5. Tax
  6. 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



Help the NSW Govt decide on how to deal with Airbnb style short stay letting!

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:

  1. Self Regulation: where the industry / operators adhere to a Code of Conduct, which includes complaints management, education and ongoing monitoring and reporting.

  2. 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.

  3. 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.

  4. 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.

For more information on the NSW Government Policy click: What policy would you recommend to the NSW Govt for short stay traveller accommodation?

Property investors lose two tax breaks in Budget 2017

The Federal Budget 2017 has cut two long standing tax deductions that residential property investors enjoy.

The first is the tax deduction for travel expenses, which has been cut out: Property Investors like to visit their rental property to inspect it between tenancies, to carry out maintenance and repairs and collect rentals. The petrol, the airfares, the accommodation, and other travel expenses will no longer be tax deductible for travel after 30 June.

Tip Visit your rental property before 30 June.

The second is the tax depreciation for plant and equipment, which has been cut down:

There is no longer any depreciation if the plant or equipment is in a property purchased after 7:30 pm (AEST) on 9 May 2017 (the time when Budget 2017 was handed down). In a new house or off-the-plan apartment, this could be worth up to $2,000 per annum.

What does this apply to? According to the Budget Papers: Plant and equipment items (usually mechanical fixtures or those which can be ‘easily’ removed from a property) such as dishwashers and ceiling fans. We will need to wait for the full list, but it is likely to include: stoves, range hoods, hot water systems, clothes dryers, air conditioning units and solar panels.

The plant and equipment will not be depreciable if it is already in the property when it is purchased. It will be depreciable if purchased by the property investor.

Tip Buy plant and equipment separately, (not as part of a property purchase contract).

For more information click on the current law and a full extract on the new law from the Budget Papers Federal Budget 2017 – Residential Property Investors lose depreciation and travel deductions

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, 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

How liable are you if a visitor slips or trips when entering your property?

VERY LIABLE accor a Victorian Supreme Court decision of Scott v Wanklyn.
Of course, liability is not automatic. The property owner/tenant must be at fault (i.e. negligent) in some way.

Click for more on aged visitors and uneven access 

The property buyers guide to Contract Deposits
A Deposit is paid and the Contract is signed – these are the fundamentals of entering into a legally binding purchase contract. There are many questions:

Why is a 10% deposit required for a property purchase contract? Is it possible to pay less than a 10% deposit? What ways are there to fund the deposit? Are there creative ways to fund a deposit? What happens to the deposit after it is paid?

Click here for The property buyers guide to Contract Deposits.

The property buyers guide to Cooling Off
Cooling off periods apply by law to all contracts for the sale of residential property, with the exception of sales at action or where a solicitor or conveyancer has provided a 66W Certificate.

How do you use a cooling off period to give you the breathing space you need to obtain unconditional loan approval, pest and building inspections, etc?

Click here for The property buyers guide to Cooling Off.

Without liability insurance, home owners are exposed to million dollar law suits
Personal injury law suits represent the single largest threat to a home owner's and landlord's assets.

Compensation awards can exceed $1 million for head injuries or spinal cord injuries caused by falling from a ladder, slipping on stairs, and tripping over.

For this reason, it is essential for home owners and landlords to have Liability insurance cover as part of their Home Insurance / Landlord's Insurance policy.

The importance of having Liability insurance cover was recently highlighted in a decision of the Supreme Court of Tasmania. The court ordered the home owner (i.e. their insurer) to pay their roofer over $1.1 million in compensation for his severe head injuries because they owed him a duty of care for his safety while working on the roof.

Without Liability insurance, such an award would have been devastating for the home owner. They would have been forced to sell their home to pay the award, and face bankruptcy for the shortfall.

For more information, click - Roofer falls off ladder set up by home owner; Court orders home owner to pay $1.1m

Landlord’s Guide to Renting
This Renting Guide is a reference for landlords to use to make more informed decisions. It is not a DIY (Do It Yourself) guide for landlords.

Buying an off-the-plan apartment in Sydney
Why aren't the prices of off-the-plan apartments falling, like the prices of mobile phones have fallen, when so many are under construction in Sydney?

Buying and renting pet friendly home units
Home unit owners are either strongly pro pets or anti pets. The strata by-laws in a block of home units / apartments will reflect the views of the majority of owners.

Why missing a credit card payment makes it harder to qualify for a property loan.
Pay a credit card or home loan more than 14 days late after the due date, and the missed payment will be recorded as a black mark against your name on your personal credit file.

How do you tell if you are carrying on a rental property business?
Are property partners investors or business partners? The ATO reviews the position of partners carrying on a rental property business.

Mortgage Brokers – What duty of care do they owe to residential property investors?
Mortgage Brokers / Finance Brokers are not often targets in loan enforcement proceedings.

The Investor’s Guide to buying property - In whose name do you buy your next property
Do you buy investment property in a personal name, or use a property investment structure such as a company, a family trust or a self-managed super fund?

How not to structure an investment property purchase - Part I Access to investment losses
The holy grail for tax and estate planners is to structure investment property purchases to have access to investment losses to reduce the taxpayer’s personal tax and yet to protect the investment property inside a discretionary trust.

Buying and Selling with delayed settlement contracts
How does Deposit Builder work for buying and selling a property?


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