Don’t Kill Your Clients

Sometimes we do and say things that appear not to have any relevance and then find out that its vitally important. Leverage had a conveyance this week where an agent had said something innocuous to a prospective purchaser that sent us down a pathway of discovery.

Our clients were looking at a townhouse on the Central Coast. The agent knew that he was dealing with a person who had been appointed by the Guardianship Tribunal. He made two assumptions:

  • Because there was an order by the Guardianship Tribunal, the public trustee was managing the property; and
  • Because the public trustee was involved, the person must be dead.

These assumptions were completely wrong! Yes, there was an order from the Guardianship Tribunal, but it was in favour of the owner’s daughter. In other words, the daughter would execute the contracts for sale and the transfer. Secondly, because there was an appointment by the Guardianship Tribunal, it must mean the person is alive.

Most special conditions for contracts allow a contract to be terminated for death, mental illness etc. This little bit of fact sent us on a pathway to find out what that particular clause would mean to our client if we didn’t know the facts.

The last thing you need is a clause which says that if the vendor dies then they can withdraw from the contract. If they have already passed away, this clause becomes completely irrelevant.

What was most interesting however was that the guardian had been appointed to the vendor. We obviously couldn’t continue with a contract which allowed for withdrawal, because this would allow the vendor to withdraw at any time. Leverage contacted the vendor’s solicitor and had any reference to mental illness removed from the agreement.

Passing on the information lead us to a more secure contract for the purchaser, and ultimately a better contract for the agent. It’s important that your facts are correct.

Whatever you do, it is poor form to kill your client off before they are dead. Moreover, if there is a guardian, an agent’s agency agreement must be executed by the guardian and instructions must only be taken from that person.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Get the Numbers Right

In a Continuing Professional Development course, I was made aware of a situation that had confronted an agent. It is probably illustrative of the time but raised different questions than we had considered previously.

The facts of the matter are:

  • The landlord had managed the property personally;
  • The landlord had entered into a contract with the tenant under a Standard Residential Tenancies Agreement, which identified that four persons could live in the premises;
  • The tenant has lived in the property since 2015 and was on a Periodic Continuing Tenancy Agreement;
  • The tenant, at some time, put another person in the second room as a subtenant;
  • The tenant gave notice and moved out of the premises;
  • The subtenant did not leave;
  • The tenant and the subtenant went before the tribunal and agreed that a tenancy arrangement was in place between them;
  • The subtenant has now indicated to the agent that they have a 12-month lease from the tenant;
  • The subtenant is refusing to provide access to the agent because he has no agreement with the landlord;
  • The landlord has lost all their paperwork and no paperwork exists; and
  • The subtenant has advised the agent that if they attend, he will barricade them from the premises.

What a shemozzle! It does however provide a number of interesting issues.

  1. People do not take seriously enough the concept of how many people are going to live in a premises. It appears that a habit exists in many agencies where it is accepted that two persons per room is appropriate. Therefore, they place four people on a Residential Tenancies Agreement. This demonstrates a problem in itself, because the tenant was able to place a subtenant in the premises, without being in breach of the lease. If a person has applied for themselves, the maximum should only be one person. If they then wish to extend it to other people, the agent has to be informed that they wish to place a subtenant in place. This is a greater protection to the landlord.
  2. Apropos to the issue above, your routine inspections should always look to see how many people are in the premises. It is a bit like looking for a pet, if there are more people on the premises than what the lease provides, they are technically in breach. Taking steps to ascertain what really happened, and to place the tenancy on a proper legal fitting, is therefore important.
  3. The tenant purportedly gave a subtenant lease to the subtenant. This is impossible. A tenant cannot provide any greater term on a lease than they are entitled to have. If it was on a Continuing Agency Agreement, the best term the tenant could give is 90 days. This is arguable in that a tenant can walk away with three weeks’ notice. A subtenancy is only as strong as the tenancy and therefore the twelve months will be a clause which is rendered void.

This is the second problem we have spoken about in two years regarding subtenants. The only control an agent or a landlord has is when granting the tenancy at first instance. Don’t allow any more persons to be on the lease than the tenant has told you is going to live there. If more move in, they are in breach and the landlord and the agent have greater control.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Uber: An Employees Fringe Benefit

How many employers out there make certain that their staff catch a lift home, if they are travelling at night? Most businesses have a policy that either requires or encourages the staffer, to catch a lift home if it’s dark, at the expense of the business.

To save money, most businesses have moved to Uber. You may need to think again.

Ordering a taxi for your staff has always been a tax deduction. You would have thought Uber was in the same category. But, from what I hear, it makes me think – perhaps not??

We are advised that the use of a vehicle, with a taxi plate, will give you the deduction. However, the use of hire cars, limos or an Uber ride has been ruled on, as a fringe benefit.

An acquaintance of mine just got hit with a $200,000 tax bill. They removed the Uber deductions for the past 4 years and the ATO has then charged him fringe benefits tax.

If you are using Uber in your business, check with your accountant.

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Checking Identification

Many property managers have moved to “1Form” as a means of accepting applications from prospective tenants. One of the features of the 1Form platform is the ability for the applicant to upload their identification.

This is a great step forward, but you still need to be vigilant in respect of the identification of your tenants.

A property manager advised me the other day that they had received a warrant from the Police to produce a property management file. The property is part of an ongoing investigation into drug trafficking and the use of firearms.

After reviewing the file, the officer rang the property manager to advise that all the identification documentation was forged. The agency therefore has a tenant who they don’t (legally) know, who is being investigated for crimes involving drugs and firearms. Who said being a property manager wasn’t a thrill seeking occupation!

Obviously, I am not going to recommend avoiding using 1Form. It’s an excellent tool. But what I will say is that you need to add another layer of due diligence.

What we suggest that, when you select the tenant, notify the successful tenant that they need to bring all original identification with them when signing their lease.

There’s always the possibly that you may still be out-smarted, but you will have done everything necessary and required by law. In other words, you’ll done enough to protect yourself.

By the way ….. anyone willing to serve the termination notice ….. in person ….. to this particular tenant?

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Remember the Water

The rules for properties that have access to water resources was amended in 2009. Prior to these changes, if a river ran past your property, you had an unfettered right to use the water. This meant that many owners and occupants were misusing the water and the farms downstream often missed out on the good stuff.

No property owner can use the water in a river without a licence. A licence can be for the use of the waterway (for example, to create a boat ramp) or it may give a right to use a specific amount of water per annum.

These licences have their own certificate of title and title reference (WAL). In some instances, many properties might have access to the same WAL.

The WAL is noted on the certificate of title of the property and if you are selling a property with a WAL, it must also be transferred. If it isn’t, the new owner has no right to use the waterway or extract the water.

Because a single WAL may be attached to many properties, you need to identify who holds the certificate of title for the WAL. This might be with a bank, one of the owners, etc.

We recently had a sale where the WAL was transferred to another party, leaving our client with a right on another lot. The parties were related and thankfully, the matter was resolved.

This potential problem exists not only in the country, but on the fringes of Sydney too.

If there is a river on or connected to the property, check the title to ensure what you are selling. The purchaser will not love you if you forget their water !

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Hormonal Hurt

When one of my boys turned eighteen, I pulled them aside to talk about the “18 by 18 by 18 rule”. That is, for 18 minutes if pleasure, you could end up losing 18 percent of your income, for 18 years! I think his girlfriend got excited about the 18 minutes, thinking that was a long-term vision. I did this to show how the power of hormones can cause you long term hurt.

Leverage is currently dealing with two matters where couples have fallen in love and moved in together. One purchased a property with a new girlfriend only to find that she left him within three months, leaving him with the off-the-plan purchase. The other, who funded the purchase of the house, found that after two years, his girlfriend left.

People have now forgotten that you don’t need to be married to have the Family Law Act apply. All that is required is that a person has “cohabited” for up to six months, for the law to apply. Whether you are straight or LGBTIQ, this problem is real. A short-term relationship of six months whereby people essentially live in the same house, makes them a potential party to a de-facto relationship claim. This means that these short-term relationships could leave your short-term lover with a claim on your property.

It is true that we don’t choose who we are going to fall in love with. But, we need to understand that this may cause long-term hurt. If a cohabitation occurs, do something about it before the relationship goes sours. Whilst it is sweet, take the opportunity to protect yourselves against each other.

Although pre-nuptial agreements can be set aside or read down, they are accepted by the Family Law Act 1975 as being something the court must take into consideration. It also means that, solicitors acting for your former lover, will consider the binding financial agreement and usually find a way to apply it.

Just because you’re doing it, doesn’t mean you have to live together. If you find yourself living together, and one of you has been the beneficiary of somebody’s good will in assisting you buying a property together, you should enter into a binding financial agreement. Additionally, if you are a parent of a person who is being overly generous, this is when you need to step in and advise about such protections.

In the old days, we would wait until we were married, before we bought a house. This is now considered somewhat quaint; it is out of fashion. It does not reflect the realty of our modern world. Nevertheless, “the old ways” have some genuine legal merit – in that, you shouldn’t think about purchasing property together, until you are long-term committed.

It is always worth having a binding financial agreement, perhaps designed for a short period, until you can test your commitment to each other. One couple for whom we drafted a binding financial agreement, some years ago, had it terminated on their wedding day. They have remained married since that time and they believe that being financially “honest” with each other, early in their relationship, has helped form the solid basis for their ongoing, long-term commitment to each other.

At Leverage we say that, “we are passionate about property and the people in it”. You should sometimes, however, harness your passion, so that your property asset is protected.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Wrong Water Bill

Leverage has recently been giving advice to a Strata Plan Owner’s Corporation, regarding a water bill which has been transferred into their name.

The Strata Plan forms part of an 8 lot Community Association. The water services were installed and form part of Community Association Property. The Community Management Statement (CMS) acknowledges that the water services are not separately metered. The CMS goes on to state that, the water bill will be charged based on community lot entitlements.

There are major problems plaguing this particular Community Association, however the issues arising in regard to the water supply, tops them all! The developer, being the owner of the other seven Community Lots (and the original owner of the strata plan), requested that the water services provider bill the strata plan. The strata plan has for the last seven years, been receiving the bill for the whole Community Plan.

The water services operator is quite correct in issuing the bill to whomever they have been advised as being the operator. Therefore, the water services operator has done nothing unlawful. They are quite within their right to take action against the strata plan.

The water services operator has now agreed to put all new bills in the name of the Community Association in accordance with the CMS. Unfortunately, they have not amended the earlier invoices, in order to have the Community Association pay. The strata plan is still liable for those bills.

If you are a Strata Manager or the Treasurer of an Owner’s Corporation that constitutes part of a Community Association, always check your invoices. You might just find that you’re paying for something which in fact, is not for your account! Don’t carry someone else’s monkey!

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Pest and Building Reports

One of the trends in the market is for agents to encourage their vendors to get a pest and building report done. Most of the agents use a pest and building inspector of their choice as a means of obtaining a positive outcome. Without knowing the financial arrangements, these pest and building reports are sold by the agent to the prospective buyers.

Leverage has just observed a case whereby a purchaser bought a pest and building report through the agent. The pest and building report was wrong, not outlining some major defects. The pest and building inspector had missed the mould forming under the house and the two bathrooms had leaks. The cost of repairing the damage is in the vicinity of $100,000.

Ultimately, the pest and building inspector will be the person responsible for breaching their duty of care in relation to the incorrect advice. Unfortunately, however, the pest and building report is provided to the vendor and not to the purchaser. This means that it will be difficult for the purchaser to have direct legal action against the pest and building inspector.

An effective litigator would, in these circumstances, sue the agent and the vendor for misleading and deceptive conduct. Section 18 of the Australian Consumer Law states that a person in trade or commerce shall not mislead or deceive or do anything that is likely to mislead and deceive. As noted in previous editions, misleading and deceptive conduct is not necessarily about falsification or fraud, it is simply about being wrong.

The report was sold by the agent as a means of representing the state of the property to the purchaser. The representation was wrong and therefore the agent carries a level of liability. Yes, if the agent were sued, they would cross claim against the pest and building inspector, but this does not remove the cause of action against the agent or the vendor. It is probable that a judge would apportion the blame between the parties, including of course, the pest and building inspector. In what percentage? No one knows. It’s yet to be tested …..

If I were an agent representing a vendor, and I was involved ed with obtaining a pest and building inspection, I would do two things:

  • Indicate to the purchaser that, although you provided this report from a trusted source, you can’t guarantee the contents and the purchaser may wish to obtain their own pest and building report; and
  • Whenever a pest and building report is purchased from the agent, the pest and building report is produced from the offices of the Pest and Building operator and the names changed to reflect the purchaser.

In some ways, we wonder if it is even worth doing this. Pest and building reports are flawed because of the superficial nature of the inspection. The representation itself seems to leave the agent vulnerable. Quite possibly, the risk may well outweigh the reward!

 

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Size Does Matter

Yes, I am back on my soapbox!

Government neither cares nor wants small business to succeed.

Successive governments of different persuasion continuously tell us that they are for small business.

Total and utter bullshit!

The new Property and Stock Act 2002, seems to be corporatising the Real Estate, Strata and Stock and Station industry.

The licencing structure was set up as follows:

  • At the apex, you will have a Licensee-in-Charge (Class 1);
  • Under this will be Licenced Agents (Class 2); and
  • Under those will be Assistant Agents (Class 3).

It was clear from the outset that Fair Trading had created a hierarchical structure for the real estate industry. This is fine if you’re big enough, but it is not in accordance with the “cottage industry” that is the vast majority of the real estate industry.

Last week, the Real Estate Institute published that they have partnered with Fair Trading to create higher standards within the industry. This is the first time it has become clear that the REI have driven this agenda for their own benefit. The REI in NSW has regularly been accused by participants in the industry as representing the interests of the larger agencies. In other words, their membership, their board members, and their bias, is towards the big end of town and the larger corporations.

This has proven true in a meeting with Registered Training Organisations over the last week. In response to a comment from the floor that Fair Trading is killing off the smaller operators that make up the bulk of real estate offices, the Fair Trading presenter (who will remain nameless) seemed unperturbed. The attitude seemed to be that if you are too small to deal with compliance matters, perhaps it’s best that you exit the industry and shut down ! Fair Trading stated pointedly that they are requiring the Licensees-in-Charge to do much more in the way of compliance and to show greater supervision. The best way that this can be done is an organisation which is designed for quality compliance standards.

We were a little bit perplexed regarding these Fair Trading sentiments. The Property and Stock amendments did not change Section 32 (Proper Supervision). It retained it in its current iteration. Moreover, the decision of Davidson indicated that proper supervision meant that a Licensee-in-Charge needed to accurately oversee the accurate execution of duties of their staff.

I ask then, “What higher standard would you want for a Licensee-in-Charge, beyond the accurate execution of duties?”

It is not about compliance. This is a barrier established by the Real Estate Institute and Fair Trading to create larger business within Real Estate. Do I believe that these bigger organisations will be more compliant ? Just ask the Royal Commission into banking ! They are definitely more compliant!

If the government doesn’t want small business, can they just tell us?

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au

Strata Manager Advocates

The new Strata Schemes Management Act 2015 gives greater power to the NSW Civil Administrative Tribunal (NCAT) to hear matters. One of the unexpected outcomes has been that strata managers are being thrown into the role of solicitor.

During one of our training sessions last week, two strata managing agents indicated to me that they had appointed solicitors to conduct matters in NCAT, but that on arriving for the hearing, the (NCAT) Members refused to give leave to the solicitors and required the strata managers to run their cases on behalf of their owner’s corporations. The solicitors were permitted to stay (and “coach”) but were not allowed to speak from the bar table.

We are not surprised with this outcome but didn’t expect it to be thrust on the strata environment without more warning. NCAT legislation is designed to make the process less costly, quick and efficient. Governments perennially believe that to provide quick, cheap and efficient justice, you need to remove solicitors and barristers from the equation. The mode of NCAT for many years has been to refuse lawyers the right to appear.

Currently, NCAT refuses in the large majority of cases, legal representation under $10,000. In fact, it can be considered that if a claim is under $10,000, you would be unlikely to obtain any legal representation. Between $10,000 and $30,000, NCAT will consider legal representation where the issues are complex.  However, this is not always the case. Leverage was refused the right to represent a client in a matter which was incredibly complex and the claim was just on $29,000. It was only $1,000 below the threshold. It is only from $30,000 and above that NCAT will permit legal representation.

Why are we not surprised with this move to push strata managers to do the representation? Easy. Approximately 75% of the claims to NCAT are residential tenancies matters. Since 1987, property managers have been representing landlords without any assistance from solicitors. It is therefore not surprising that strata managers will be pushed down the same line.

If you are a strata manager, you need to expect that sometime in your professional life, you may need to be an advocate. Alternatively, if you work in a big enough organisation, you may have the luxury to have some specific strata managers trained to do advocacy on your behalf.

We always thought the owner’s corporation expected more than the strata manager could deliver. Now NCAT is backing them.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au