Archive for category: Leverage Review

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

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

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

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