Category Archives: Property

New laws introduced on 30 November 2016 allow for the forced sale of units in an apartment

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forced sale of apartment buildings

The strata management industry is in for a significant shake up with the “once-in-a-generation” changes to strata laws being introduced on November 30, 2016.

The NSW Government has amended the laws regarding the management of apartment buildings allowing 75% of owners in apartment blocks will be able to sell the entire building to developers, regardless of objections from the other 25%. Essentially the 25% of the apartment block owners will be forced to sell.

Currently you need 100% of owners in an apartment building to force the sale of a building. The new laws will take effect 30 November 2016.

There are further changes that will arrive as a result of the NSW Governments changes to the strata laws. What the New South Wales Government is hailing as “modern,” “flexible” and “reflecting 21st-century strata living” will be the kiss of death for many agency agreements, as some strata managers face the prospect of their income disappearing overnight.

One of the government’s selling points is “stronger accountability for strata managers and caretakers” and under the new laws developers and people connected with them will be banned from being managing agents for 10 years from the registration of the strata plan.

That means many managing agents won’t be eligible for reappointment when their existing agreement comes to an end, and for some that could be as early as the end of December.

This presents significant opportunities for independent managing agents to win new business.

For strata managers, the rollover of agency agreements has been an industry-wide practice. By not being presented with a contract for renewal, but simply asked to roll over a contract, executive committees have a much easier path. They do not have a decision to make and invariably maintain the incumbent.

When the new legislation comes into force, agency agreements between the strata managing agent and the owners corporation will be limited to a maximum term of three years. After that, the strata committee (currently known as the executive committee) would then be able to extend the appointment in three-month blocks, but only until the next annual general meeting.

Strata managers also won’t be able to receive gifts and other benefits from suppliers which will stop a very common practice of strata managers receiving considerable financial rebates from suppliers to a strata building.

Pet owners are getting a break with the new laws, with the new standard bylaws including a default option that allows pets to reside in apartment building.

And the management of the strata scheme is moving into the electronic age, where a scheme can adopt social media, video and teleconference to hold meetings. Voting can occur electronically and through secret ballots, with the possibility of sending papers by email.

ATO targeting property investors

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ATO targeting Property Investors

A recent taxpayer alert [Trusts mischaracterising property development receipts as capital gains] concerning property development and the use of trusts is significant for property developers.

Taxpayer Alert 2014/1, describes an arrangement whereby a trust undertakes property development activities as part of its normal business. The developed property, which could be either commercial or residential, is subsequently sold and the proceeds are returned on capital account, resulting in access to the general 50 per cent capital gains discount.

The proceeds are not returned as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), either on a gross basis (as part of a business of property development, where the underlying property constitutes trading stock for the purposes of section 70-10 of the ITAA 1997) or on a net basis (as part of a profit-making undertaking).

The ATO stated it considers that certain arrangements of this type give rise to various issues relevant to taxation laws.

Property developers may be at risk should they be using a trust to access the beneficial capital gains discount, instead of recording sales income on revenue account. The ATO have declared that they have begun audits in this area.

A mischaracterisation has been identified by the ATO where a property, either commercial or residential, is later sold with the proceeds being classified as a capital gain event (which can attract a 50% discount), rather than as ordinary income. The sale of property by a property developer is classified as ordinary income as this action is considered part of the nature of the business.

If caught deliberately trying to use trusts to ‘disguise’ the proceeds of developments, penalties of up to 75% can be applied.

The specific concerns of the ATO and areas they are targeting:

  • The property constitutes trading stock on the basis that the trust is carrying on a business of property development
  • The gross proceeds from the sale constitutes ordinary income on the basis that the trustee is carrying on a business of property development
  • The net profit from the sale is ordinary income on the basis that, although the trustee is not carrying on a business of property development, it is involved in profit making undertaking


WHO ARE THE ATO TARGETING?


  • Trusts that have been established for the purpose of acquisition, development and sale of property
  • Trusts that have trust deeds stating the purpose of the trust is to hold the development property as a capital asset to generate rental income
  • Activity by the taxpayer is opposite to the stated purpose of treating the developed property as a capital asset
  • Properties that are sold as little as 13 months after purchase
  • Trustees that treat the sale proceeds as being on capital account and claims the general 50% capital gains tax deduction


HOW IS INCOME TAX REGIME APPLICABLE TO PROPERTY TRANSACTIONS


The income tax consequences surrounding dealings with property may be subject to assessment under a number of different parts of the tax law. The result is that dealings in property may have a number of different taxation consequences flowing to vendors of real property.

Identifying the taxing regime is mostly dependent on the determination of two issues, being:

  • the characterisation of the transaction; and
  • the profile of the taxpayer in relation to the transaction.

The taxing regime that may apply in the context of a property transaction can be divided into three possibilities, being:

  • Capital Account – as a gain on the disposal of a CGT asset with taxation taking effect upon the ‘mere realisation’ of an investment in land;
  • Revenue Account (Trading Stock) – as a disposal of trading stock, where land is held for sale in the ordinary course of a taxpayer’s business with taxation taking effect when the Land is sold as part of a property development business (where the property is being held for the purpose of re-sale); or
  • Revenue Account (Revenue Asset) – as part of a profit-making scheme with taxation taking effect when land is sold as part of an isolated or ‘one-off’ transaction. The transaction has been entered into with a profit-making purpose, and in a sufficiently commercial / business-like manner.


LAND AS TRADING STOCK


In the event that property is sold as part of a property development business, then the property will be subject to the trading stock provisions (Division 70 of the 1997 Act). The issue is therefore whether your activities amount to the carrying on of a property development business. The High Court upheld this view in the FC of T v St Hubert’s Island Pty Limited 78 ATC 4104, where it was held that land would constitute trading stock if it has been acquired for the purpose of resale – including land that is purchased for the purpose of subdivision, development and resale.


LAND AS A CAPITAL GAINS ASSET


When property acquired on or after 20 September 1985 is not held as trading stock of the taxpayer or otherwise on revenue account, but rather is held on capital account by the taxpayer, any gain or loss arising upon disposal of the land will be calculated and assessed under the CGT provisions.

Property held by a taxpayer may be characterised as either a:

  • a revenue asset – on the basis that there is an intention by the taxpayer to make a profits on the disposal of the property; or
  • a capital asset – on the basis that the property forms part of the profit yielding structure of the taxpayer therefore its disposal will be subject to CGT.

Land held on capital account will be a CGT asset (section 108-5 of the 1997 Act). Joint tenants are treated as owning separate CGT assets proportionate to each tenant’s interest in the CGT asset (section 108-7 of the 1997 Act).

A disposal of a CGT asset occurs upon the occurrence of a ‘CGT event’. Some of the relevant CGT Events applicable to property transactions include:

  • CGT event A1 – disposal of a CGT asset by a change in beneficial ownership to another person
  • CGT event E2 – transfer of a CGT asset to a trust
  • CGT event E4 – capital payments from a unit trust to a unit holder
  • CGT event E5 – a beneficiary of a trust becoming entitled to a trust’s CGT asset
  • CGT event K4 – a CGT asset becomes trading stock

For CGT assets acquired before 21 September 1999 and held for at least 12 months, the taxpayer can choose to calculate the capital gain based on either:

  • the indexed cost base (cost base adjusted for the ‘consumer price index’ up to 30 September 1999); or
  • by applying the ‘CGT 50% discount’, which is unavailable for companies (Division 115 of the 1997 Act).

Where the capital gain is made by a trust, the CGT 50% discount is applied and the balance distributed to an individual beneficiary, the beneficiary will ‘gross up’ the distribution apply losses if any then apply the CGT 50% discount to the grossed-up amount. That is the discount effectively flows from the trust to the beneficiary. A similar result occurs when the payment passes through a chain of trusts.


LAND AS A REVENUE ASSET


The disposal of a revenue asset generates ordinary income for the taxpayer. Generally, a ‘revenue asset’ is one that is purchased with a view to profit upon its eventual realization (FCT v Whitfords Beach Pty Ltd 82 ATC 4031). It is more than ‘merely’ realised, but it is not held as an item of trading stock.

The Commissioner of Taxation considered in paragraph 6 of Taxation Ruling TR 92/3 entitled Income tax: profits from isolated transactions that receipts derived from an ‘isolated transaction’ would be assessed as ordinary income under section 6-5 of the 1997 Act if:

  • First – the taxpayer entered into the transaction with a profit-making purpose; and
  • Secondly – a profit was made in the course of carrying on a business or in carrying out a business operation or commercial transaction.

In Taxation Ruling TR 92/3 the Commissioner of Taxation uses a broad approach to characterising business gains from isolated transactions, stating that for ‘… a transaction to be characterised as a business operation or a commercial transaction, it is sufficient if the transaction is business or commercial in character’.

Chinese regulators may turn off the money flow that is funding the Australian real estate bubble

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A Chinese Government crackdown on the recently exposed activities of the Bank of China’s money laundering efforts in Australia will have repercussions on the sustainability of high property values in Sydney and Melbourne.

China’s state broadcaster CCTV has launched an attack on one of the country’s most powerful government controlled financial institutions – the Bank of China, accusing it of money laundering in Australia, via the Australian Significant Investor Visa Program.

Australia’s Significant Investor Visa program offers an accelerated pathway for wealthy investors to gain permanent residency by investing $5 million in the Australian economy.

There are over 1,200 applicants either approved, or in the pipeline for approval for the Significant Investor Visa, with an estimated $6 billion of proposed investments in Australia. A significant amount of the funds being invested in Australia through the program have been used to fund new residential housing developments in major Australian cities, particularly Sydney and Melbourne.

Chinese and other Asian investors have been a major force in driving the price of dwellings in Sydney and Melbourne to high levels. If the Chinese were to suddenly curtail their buying, then the Australian dwelling market would almost certainly suffer a considerable setback.

Under the Labor government, only a small number of Significant Investor Visas’ were granted, whereas the Liberal government is ramping up its approved of the Visa’s.

Under China’s stringent foreign exchange law, citizens are only allowed to send $US50,000 or $A53,000 abroad per year. Australia has been repeatedly been mentioned as the destination of “grey money” coming out of China in relation to Australia’s significant investor visa program.

“We don’t care where your money is from or how you earn it, we can help you get it out of the country”, a Bank of China employee told CCTV. “We don’t care how black your money is or how dirty it is, we will find ways to launder it and shift it overseas for you,” according to a detailed CCTV investigative report.

CCTV undercover footage clearly shows the Australian national flag on a Bank of China stand at a busy immigration show, advertising Australia as an important destination for investors. Social media posts from major media outlets about the story prominently feature a picture of a map of Australia

A senior manager with one of the big four Australian banks told the CCTV reporters that the Bank of China was crucial to the bank’s migration business. “The money is very safe and will leave the country in a very grey channel. The Bank of China is the same as an underground bank [a Chinese term for black market operators that launder money],” he told CCTV.

We have just seen development land in Melbourne and Sydney with building permits double in price on the back of frantic Asian buying, funded by Chinese banks.
The risk of the curtailing of the Significant Investor Visa program leading to a significant downfall in the residential property market cannot be discounted, and even the possibility of the end of the program leading to a technical recession must be acknowledged.

We will be watching to see whether Chinese regulators turn off the money flow that is funding the Australian real estate market.

Contact us for a Free Consultation


Our lawyers always go over and above to give you the best advice as quickly as possible.

Whether its quick information over the phone for a question that’s been on your mind for while, or general information about an area of law, we’re happy to help. Call us today and experience the difference:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Changing A SMSF Trustee to a Corporate Trustee

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SMSF


Benefits of a Corporate Trustee

1. Changing Members


If an SMSF is set up with a corporate trustee structure you can add a member (e.g. a spouse or child) or remove a member (e.g. if a member dies or can no longer act as trustee) with much less hassle than an individual trustee structure. If there is a change of fund members, it’s not necessary to change the name on the ownership documents for each fund asset as the trustee of the fund remains the same.

On the other hand, a fund with an individual trustee structure will be required to re-register all assets held in the SMSF (with relevant authorities and registries) each time a member is added or removed. If you have a number of different investments in your fund, this can result in a lot of administration, paperwork, time, and potentially cost, to manage this change. For corporate trustees, the only change is notification to both ASIC and the ATO of the change of directors and members as the name on the assets will be the name of the corporate trustee.

2. Estate planning


An SMSF set up with a corporate trustee can have a single member and director. So, if one member of a two member fund leaves (for example, where either a husband or wife member passes away) and a corporate trustee structure is in place, the fund will continue to satisfy the trustee structure rules. In the case of a two member SMSF with an individual trustee structure, if one member dies, another individual will need to be appointed as a trustee of the fund.

3. Borrowing to purchase property


If you are looking to borrow to purchase property in your SMSF most banks require a corporate trustee arrangement. Banks generally prefer that a separately recognised legal entity is identified as trustee of the fund.

4. Reduced liability


A corporate trustee structure can also provide greater peace of mind around liability. Your personal liability, as a director of a corporate trustee, is generally limited to the assets held within the SMSF. An individual trustee arrangement does not provide this security and members’ personal assets may be subject to liability claims. This could be particularly important for you if you are considering holding property in your SMSF as public liability claims can be substantial.

5. Clarity


Having a corporate trustee makes the separation of assets and income for individuals clearer. This makes it easier to satisfy the regulator that superannuation assets are being separately maintained from the member’s personal assets.

When changing to a corporate trustee, the provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’), which impose an additional regulatory framework in relation to corporate trustees of SMSF’S, must be considered. Relevant provisions are:

  • Under as 17A(1) SISA, all members of an SMSF with a corporate trustee must be directors of the corporate trustee of the fund, and vice versa, each director of a corporate trustee must be a member of the SMSF;
  • Under s188 SISA, an individual is not eligible for appointment as a director of a corporate trustee unless they have consented to the appointment in writing; and
  • Under s104A SISA, all individuals becoming directors of a corporate trustee of an SMSF must sign a declaration in the approved form confirming that they understand their duties as directors of thee corporate trustee within 21 days after their appointment. The approved form is the ATO ‘Trustee Declaration’ (NAT 71089). This declaration must be retained by the corporate trustee for as long as it is relevant, and in any case for at least 10 years.

Some other relevant considerations that should be borne in mind include:

  • A corporate trustee must not be paid for their services as trustee, and no director of the corporate trustee can be paid for their duties or services as a director of the trustee;
  • The assets of the fund need to be registered in the name of the company that has been set up to act as corporate trustee; and
  • A company established as the corporate trustee will require a company constitution and certificate of registration.


What is required when transferring from a individual trustee to a corporate trustee?


The following steps will have to be taken if you choose to switch to a corporate trustee:

  • A company must be established to act as corporate trustee;
  • A constitution must be drafted for this company;
  • The current trustees must provide the incoming corporate trustee an instrument in writing stating they will be retiring as trustees and the corporate trustee will be assuming duties as trustee at a given date and this instrument being signed by all relevant parties;
  • The company must provide a signed consent stating it consents to acting as corporate trustee;
  • The directors of the corporate trustee must provide a signed consent stating they consent to being appointed as directors of the corporate trustee;
  • The directors must provide the corporate trustee with a signed ‘Trustee Declaration’;
  • All assets of the fund must be transferred to the name of the corporate trustee.


Contact us for a Free Consultation


If you have any questions regarding your SMSF, call the experienced lawyers at GMH Legal for a FREE consultation:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

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Our Legal Fees & Services

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Family Law, Criminal Law, Immigration, Traffic Law

At GMH Legal we believe that client relationships matter more than time sheets which is why we offer a range of alternative fee arrangements to best suit your needs.

Our focus is on client service and establishing mutually rewarding relationships with our clients. We think that billing by the hour does not encourage the most efficient and effective delivery of legal services.

We strive to be innovative and eliminating the inherent inefficiencies of the billable hour means that we can focus on achieving the best possible result for our clients.

However, we do recognise that not all matters lend themselves to an alternative fee arrangement. That is why we offer a range of alternative fee arrangements, including straight time based billing if that is what works best for you.

We will work in collaboration with you to determine your specific legal requirements and then develop the most effective strategy and fee arrangement for your needs.

What we offer

GMH Legal can offer you the following fee arrangements, or a combination of these, as an alternative to time based billing. These options can be customised to suit your needs. No matter what fee arrangement you prefer, providing you with certainty by scoping and pricing our work upfront is our priority.

Fixed and value pricing

GMH Legal can charge you a fixed price for any matter. We will quote you a price and stick to it. If there is a change in the agreed scope of work, we will send you a variation detailing the new scope and the price for that change.

Value pricing is a fixed price that we agree up front with you that reflects your legal requirements and the service we provide. With value pricing you don’t pay for our time – you pay for the work we do and the value you receive.

This ensures you receive more value for your legal spend. Value pricing can also include fee incentives to achieve your goals and for results that exceed expectations. These incentives align our interests with yours, making your success our success.

Flexible retainers

With a retainer agreement, GMH Legal will charge you a fixed periodic fee for the provision of legal services. A retainer provides the budgetary control and certainty that hourly billing can’t.

We determine the periodic fee by calculating the average value of our services over the time taken to conduct the matter. A retainer means you know exactly what you will pay for the result you desire.

We will regularly review the terms of the retainer with you to ensure it remains fair to both parties.

Event-based pricing

GMH Legal can charge you a fixed price for each stage of a matter. We work with you to properly scope the matter, determine the stages involved and then agree a fixed fee with you for each stage.

Want to know more? Contact us to discuss how we can tailor a fee arrangement to best suit your needs.

George Hanna
Director Solicitor

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Homebuyer’s Guide to Conveyancing

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Buying your first home can be a confusing process, particularly when it comes to conveyancing.

Taking your first step on to the property ladder can be an exciting time.

But for those who have never been involved in a property purchase, the conveyancing process can often seem hard to understand.

Conveyancing - buying / selling property

What is conveyancing?

Conveyancing is the word used to describe the legal steps involved in buying or selling a property and is carried out by a legal professional or solicitor known as a conveyancer.

It includes checking the legal title to a property – that is, whether the house or flat is actually the vendor’s to sell.

It also includes arranging searches to highlight any potential issues that may affect your decision to buy it.

For example, a water and drainage search confirms whether the property is connected to the public sewers and mains water.

And an environmental search will highlight any contamination or flooding issues in the vicinity.

A conveyancer will also deal with payment between parties when the transaction completes.

Is it the same as surveying?

Conveyancing is not the same as surveying.

A survey is concerned with the physical condition of the property and is something that should be carried out by a professional registered with the Royal Institute of Chartered Surveyors.

A surveyor will check physical matters which could affect the value of the property, such as its structural soundness.

If you are getting a mortgage, your lender will usually send its own surveyor to the property to carry out a valuation.

However, this is not the same as a full-blown survey and you should instruct your own surveyor.

Why do you need a conveyancer?

Buying a house is one of the most expensive things you’ll do and the legal process can be very complicated.

As a result, you need someone to give you the right advice and this is what conveyancers are here for.

How much does conveyancing cost?

What you pay your conveyancer varies depending on the value of the property and the circumstances surrounding the transaction.

For example, if the property is a listed building or in a conservation area the legalities involved may be more complicated so the fee may be higher.

Conveyancers tend to offer a fixed fee for their work, but disbursements – the costs which a conveyancer pays on your behalf, such as searches and stamp duty – may fluctuate.

How long does conveyancing take?

If everything goes to plan, on average it takes approximately one to three months from the time you agree to buy or sell the property until you move in.

The biggest hold up is often waiting for confirmation of your mortgage offer.

So buyers would be best advised to get their mortgage arrangements in place from the outset.

How do you choose between companies?

As with any service it is always advisable to shop around for different quotes.

However, conveyancing tends to be competitive, so if you obtain a quote that seems too good to be true it probably is.

Any final advice?

Finally, as well as being an expert in property matters, your conveyancer should be approachable and easy to talk with.

Having direct contact with the person who is dealing with your case is always advisable, to help guide you through the process.

In my experience, the best way to find a good conveyancer is to get recommendations from family and friends who have been through the process. At GMH Legal solicitors, we assist our clients daily in their conveyancing needs, and are ready to assist you when the time is right.

Should you have a conveyancing question, call one of our solicitors on (02) 9587 0458

Shaping the future of strata living

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More than 50 years after the commencement of the world’s first strata title law in NSW, major reform continues with the release of a discussion paper for the public’s input to help shape new laws for the 21st Century.

Minister for Fair Trading Anthony Roberts has said that the government is now accepting submissions into the laws that would govern their future living and working environments.

More than one quarter of the state now owns, lives or works in one of more than 70,000 strata or community schemes worth an estimated $350 billion. The current strata laws are overly formal, old fashioned, complex and restrictive is how many view the current set of laws governing strata.

The discussion paper, Making NSW No 1 Again: Shaping future communities, follows a 3 month online consultation project by Global Access Partners (GAP) that generated 1200 comments and more than 600 suggested law changes.

The University of NSW City Futures Research Centre report, Governing the Compact City: the role and effectiveness of strata management also informed the development of the government’s discussion paper, as did decisions from the Consumer, Trader and Tenancy Tribunal (CTTT), and consideration of arrangements in interstate and overseas jurisdictions.

The new regulations aim to cut red tape and repetition, streamline and strengthen laws and remove anything that strangles good governance or inhibits necessary protections for people.

Almost three quarters of all schemes have 10 lots or less but all are compelled to elect a committee. Just over half of all lots in NSW are currently investor owned. In some schemes tenants make up all or the majority of residents and yet they have no voting rights and can’t attend committee meetings.

Around 60 percent of all schemes in NSW are managed by a licensed strata managing agent and it’s close to 100 percent in large and complex schemes. About one quarter of all disputes that come to Fair Trading are about the conduct of managing agents.

About 30 percent of residential strata schemes in the Sydney metropolitan area were registered more than 30 years ago. Many older buildings, some nearing 100 years old, have been converted to strata title.

Renewal or termination of schemes is an urgent issue in some developments. Urban consolidation demands will mean many low density existing schemes will need renewal, yet community and majority interests can conflict with those of the individual. Many buildings are not economical to keep repairing and maintaining. We need a fair and reasonable way of allowing schemes to be redeveloped in the best interests of the community.

The discussion paper examines development issues when schemes are established, as well as management issues that arise on a day to day basis during the life of a scheme.

The government intends to release an Exposure Draft Bill by mid-2013 and bring a final Bill to the parliament in the Spring session next year.

Researching ongoing sea level rise

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With more sydneysiders choosing to live waterfront, the NSW government has increased funding into determining sea level increases along the NSW coast.  The installation – the first of two sites funded by the Office of Environment and Heritage also forms part of Land and Property Information’s CORSnet – NSW state-wide network.

Sea level rise along the NSW coast is now more accurately determined with the installation of a Continuously Operating Reference Station (CORS) at Fort Denison, in the heart of Sydney Harbour.

The CORS will allow Land and Property Information to closely monitor Fort Denison for any ground movement which could affect the sea level recordings.

Tide recordings at Fort Denison are among the longest in the southern hemisphere with the initial entry in the Tide Registers dated 11 May 1866.  As an island nation with some 85% of the population residing within 50 km of the coast, Australia faces significant threats into the future from projected sea level rise.

Further, with over 710,000 addresses within 3 km of the coast and below 6m elevation, a projected global rise in mean sea level of up to 100 cm over the 21st century is likely to have profound economic, social, environmental, and planning consequences.

In this context, it is becoming increasingly important to monitor trends emerging from local (regional) records to augment global average measurements and future projections.

For the latest map showing active and ‘soon to be active’ CORSnet-NSW sites around NSW, click on this link: http://www.lpi.nsw.gov.au/surveying/corsnet-nsw/ .

Buddy Relationships between developers and Strata Managers

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gmh legal - strata managers

If you are buying into an Owners Corporation which has been established recently, in that it has already held its first AGM, it is wise to check on the relationship between the developer and the appointed agent.

Where the developer has majority ownership or voting rights he may use his voting power to install managing agents into the property who will resist the will of the Owners Corporation to make any claims against the developer. This can make it impossible for the Owner’s Corporation to agree or form a majority in order to lodge a complaint. This often occurs because the developer is also the builder, or is financially connected with the builder, and is seeking to avoid their responsibilities.

In some instances as the managing agents or caretakers, who have financial or contractual relationships to the builders or developers, have control over access to common property, then they would limit independent building inspectors or representatives of minority lot owners from making inspections or compiling negative reports for example, by denying access to locked areas of the common property etc.

As a result of the above problems the Strata Management Legislation Amendment Act was introduced, thus as of the 1 August 2008 strata managers, individuals and lot owners have the ability to lodge complaints with the Office of Fair Trading. The office of Fair Trading can then provide you with independent building inspectors to assess your problem and managers and caretakers will be obligated to cooperate with officers from Fair Trading and provide assistance to enable the inspection to be carried out.

Should you have any Strata Law or Building Dispute related queries, contact the Principal Solicitor Mr George Hanna on (02) 9587 0458.

Assigning a right to Common Property in a Strata Scheme

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gmh legal - strata common area

Assigning a right to Common Property in a Strata Scheme

When a Strata Corporation decides to deal with common property in a strata scheme, it must conform to the necessary voting requirement of section
65A of the Strata Scheme Management Act 1996 (“the Act”).

Section 65A of the Act states:

(1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed:

(a) add to the common property,

(b) alter the common property,

(c) erect a new structure on the common property.

Within the scheme created by the Act, a duty is imposed upon the owners corporation in key management areas including, relevantly, the management of common property.  The voting requirements in s65A of the Act serve a public policy function of protecting the beneficial
proprietary rights of lot owners in common property. Works which alter, add to, or erect a new structure on common property may be carried out “only if” the voting requirements in s65A are satisfied.

It should be noted that section 65A of the Act is one of a number of provisions in the Act that operates to restrain the ability of a strata scheme executive committee to act autonomously in the management of a strata scheme.

Should a Strata Manager not comply with section 65A of the Act, they could be reported to the Department of Fair Trading.  A strata manager’s conduct is governed by the Property, Stock and Business Agents Regulation 2003 (“the Regulation”). The Regulation requires, amongst other duties, that the strata manager have an adequate working knowledge of the Act necessary to exercise the functions and duties of a strata manager, act in the best interest of the unit holders in the strata scheme, and act in accordance with the client’s instructions in exercising the duty as a strata manager.

Should you have any Strata Law related queries, contact the Principal Solicitor Mr George Hanna on (02) 9587 0458.

NSW Home Buyers to face tighter Stamp Duty Concessions

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gmh legal - stamp duty concessions

First time home buyers currently pay no stamp duty on all properties under $500,000, and receive a discount for properties valued up to $600,000. Currently, first time home buyer benefits of up to $24,990 have been available, including the $7,000 First Home Owner Grant, and a duty exemption of up to $17,990 under the First Home Plus Scheme.

However, with the introduction of the new scheme, from January 1 2012, the stamp duty concessions will only apply to newly constructed homes – including those built off the plan.  The new scheme will provide full transfer duty exemptions for eligible first time home buyers purchasing a newly built home valued up to $500,000, and partial transfer duty exemptions for homes that cost between $500,000 and $600,000.

The $7,000 first time home buyers grant will continue to be available to eligible, first time home buyers.

The new scheme only applies to “eligible” agreements for sale or transfers (where there is no agreement) entered into, on or after, 1 January 2012.

An ‘eligible purchaser’ is a natural person (i.e. not a company or trust) at least 18 years of age, who has not, and whose spouse or de facto has not:

*  at any time owned (either solely or with another person) residential property in Australia, other than property solely owned as trustee or executor

*  at any time been the holder (either solely or with another person) of a leasehold interest granted by the Commonwealth in residential property in the Australian Capital Territory previously received an exemption or concession under “First Home Plus”.

*  The agreement or transfer must be for the acquisition of a first home which is new or a vacant block of residential land, intended to be the site of a first home. This includes the acquisition of a new home (that is a home that has not been previously occupied, or sold as a place of residence), a substantially renovated home or a vacant block of residential land (that is an agreement for the sale or transfer of vacant land that is intended to be used as the site of a first home).

Purchasers need to be aware, that between now and January 2012, there is potential for increased conveyancing matters in NSW as first time home buyers attempt to make the most of existing benefits before they are scrapped.

Casuarina Rec Club Pty Limited v The Owners – Strata Plan 77971

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Casuarina Rec Club Pty Limited

The NSW Court of Appeal backed by-laws where they are consistent with the original by-laws on the strata plan

Recently the Court of Appeal in NSW considered the scope of the power to create by-laws in regards to owners corporations.

In Casuarina Rec Club Pty Limited v The Owners – Strata Plan 77971.The Court of Appeal overturned a Supreme Court decision which disallowed an agreement allowing the owners of strata lots to use the facilities of a resort located 15 minutes from the property was beyond the powers of the owners corporation. This agreement arose out of a by-law which was registered on the original strata plan. In their decision the Court of Appeal noted that the power to create by-laws should be generously construed and that there needed to be a nexus [connection] between the subject matter of the by-law and the use or occupation of the subject property. This was said to be a question of fact and degree and the Court of Appeal resisted the opportunity to formulate more precise rules to determine whether such a nexus existed.

In their decision and on the facts of the Casuarina Rec Club case, the Court noted that the by-law was an original by-law of the strata plan and as such all owners of lots within the strata plan had been aware, or should have been aware, of the arrangement at the time they had purchased their property.