Archive for category: Leverage Review

We have now reached the one hundred and seventh day of the year.  How quick have we reached the first pit stop! I blinked after Christmas, and Easter is here.

Once upon a time, Easter was on the calendar as a holy festival for Christians.  These days, its just a pit stop from the hustle and bustle of Australian business life.  And what a pit stop!  It starts on 19 April and ends on 28 April.  Running on the back of Easter, we have Anzac Day and another weekend.  Leverage’s commitment to family has meant that we have determined to shut our office down on 26 April, so our staff can have two long weekends and to celebrate Easter and Anzac Day.

Easter seems to represent two completely different perspectives; on one hand, it’s just a holiday for most, but for others, it represents a solemn and important day on the Christian calendar.  This is so reflective of modern society.

The week leading up to Christmas on the sporting news, we had two individuals which stand out over all others; First we have had a person who has appealed to the Federal Court regarding being stood down with full pay while his criminal proceedings occur.  Secondly, we have a man who has committed no act of violence against any person but has made an inappropriate post which has insulted certain parts of our society.

For the sports, it is the issue of brand.  There is no conversations of values or standards which should be set by those people who are in those organisations, but whether the conduct itself affects the brand.  Both the possible criminal and the insulter have been deemed to affect the business brand of their various codes and have been stood down.  As an employer, if a person in our business did something to affect our brand, we would have no hesitation dismissing them.

Two things have stood out during this debate;

1. Talk back radio has been filled with conversations regarding both the activities.  Most of them, however, have been regarding the post by the greatest try scorer in super rugby history.  No-one has gone to his defence, believing his career should be wiped out for life.  On the other hand, notwithstanding the gravity of the offence, society is split regarding whether the rugby league player should be stopped whilst being heard in the Court.  Somebody said to me the other day, “the world has gone mad where the person who harms is defended and the person who comments inappropriately is vilified!”
2. Although Easter and Christmas are holidays to celebrate Christian festivals, most take it as a holiday.  I note there is no discussion regarding the relevance of these holidays in Australian society whilst we wish to rid ourselves of Australia Day.  If we are secular and the Christian calendar is no longer relevant, should Christmas and Easter therefore be a public holiday?  Public holidays are meant to celebrate a purpose which is important to society; if it is no longer important, it should be treated as a normal day and the holiday be dispensed.  Interestingly enough, I see no requests by any other religion or any of the doom day???  Regarding Christianity about getting rid of the holidays; any excuse for a holiday!

Easter Sunday is supposed to represent a resurrection.  Forgiveness of our sins and a pathway for renewal.

Let’s hope for all of us Sunday brings a renewal and positivity to life.  Let’s hope that the business, health and family Gods smile on all of us on Easter Sunday and we are all revitalised.

From us here at Leverage, we hope that everyone is revitalised, and you have an excellent and safe Easter.

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 or call 1300 438 538

If you haven’t heard of the amendments to the Residential Tenancies Act 2010 (RTA), which will give tenants a free pass from obligations under the Residential Tenancies Agreement, you must have been hiding under a rock. On 28^th February 2019, a tenant who is a victim of domestic violence will be able to terminate a Residential Tenancy Agreement immediately without penalty.

The amendment provides that a person who is a victim of domestic violence, including their child, is immediately released from their obligations under the Residential Tenancies Agreement without penalty provided that:

1. The victim serves on the Landlord/Agent the termination in the prescribed form;
2. The domestic violence is proven by attaching one of the following:
3. Evidence of a conviction by the perpetrator;
4. An injunction from the Family Court of Australia;
5. An interim or permanent apprehended domestic violence order against the perpetrator;
6. A letter from a Medical Practitioner setting out that the person is a victim of domestic violence.

Fair Trading has produced a fact sheet setting out all the requirements that relate to the amendment. All landlords or agents should carefully read this notification. Link

Governments should protect weaker parties against violence, the threat of violence or the fear of violence. Those who are truly the victims of domestic violence should be able to remove themselves from points of danger immediately.

The intentions behind this legislation are completely valid. Unfortunately, two things often happen with this type of legislation:

• It always goes too far and provides too many leniencies;
• There is always punishment inflicted on the innocent party, that being the landlord.

Apart from some flaws in the limitations in the attached documents, persons who hold convictions, injunctions or apprehended domestic violence orders, is sufficient evidence for a person to be released from the point of danger. The medical practitioners however create an extraordinarily low bar; provided the practitioner signs the standard prescribed form that requires only two things, the person has a free pass from obligations under the Residential Tenancies Agreement. Those two things are:

• The Practioner has consulted with the victim;
• The victim appears to be the victim of domestic violence.

To place faith in the profession which is been found guilty of freely prescribing drugs which cause addiction, is tempting fate. There is always a doctor who will complete a form that gives the tenant what they seek. Remember, domestic violence is not just about committing an act of violence; it’s about threat, abuse, intimidation or offensive behaviour. This particular part of the legislation will become a field day for the professional tenant.

Spare a thought for the landlord who relies on rent to pay the mortgage for often their largest investment. For some strange unidentifiable reason, governments believe that the only persons who own an investment property are those who are wealthy. Many of these properties are bought by self-funded retirees and rely on the income to fund their retirement. Taking away that ability will place the pressure back on the government purse to fund the persons retirement. These circumstances may lead to the punishment of an innocent landlord who has done nothing wrong. The victim can leave without penalty, the co-tenants who haven’t perpetrated the offence have a two week grace period, the co-tenants can apply also to terminate the agreement, and the perpetrator is left to pay the rent.  If a prudent agent how has determined a person’s capacity to pay the rent as being the accumulation of the income of all the tenants, are suddenly left with a person who is incapable of paying the rent, ultimately, the perpetrator will be punished by falling into arrears and being terminated under the Agreement.

There are many more view points that we can have regarding the defects with this regulation but opposing it or becoming disgruntled does not assist our landlords. The industry needs to get its shit together and find a way to best defend your landlord.

A couple of things we need to do before the 28^th February 2019;

1. Inform your Landlords; considering the impact on the landlord, you need to provide advice to your landlords regarding the new legislation. It is our suggestion that you send them a copy of Fair Trading publication so that Fair Trading becomes the carrier of bad news and not yourself. The moment the new laws commence, we believe that people will move immediately to take advantage of these new laws. Don’t leave yourself open to an influx of termination notices before you appraise your landlords of the problem. By advising your landlord, it shows that you are across the issues.
2. Malicious injury; Leverage had cause last year to speak to a non-bank mortgagee who provides 100% finance. His advice is that, there were no more defaults at 60% loan value ratio to 100% loan value ratio. He said however, their greatest problem was in family law disputes. He said that where a relationship broke down and led to a mortgage not being paid, considerable damage was done to the property. What this information provides to us is that, where there is domestic violence, usually becomes malicious injury to the property. It is important that all property managers check the landlords insurance policies to ensure that they have malicious injury cover. If some of your landlords don’t, you should suggest rent cover insurance; Leverage has attempted to make contact with a number of landlord rent cover insurers regarding ADVO terminations. EBM aka rent cover are the only ones who have written back to us regarding clear information. EBM have identified that they have an ADVO option and this could be selected by your landlords. We suggest two things:
   a. You contact your insurer to identify whether they have ADVO cover and how it is taken up;
   b. Advise all your clients to take up the ADVO option.
3. Application forms; although the legislation prevents the recording of ADVO terminations and/or giving out information regarding ADVO terminations, there is nothing stopping a prospective agent from seeking information regarding whether a person has ever terminated a Residential Tenancies Agreement on the basis of an ADVO termination. The question could be;
   • Have you at any time in the past two years terminated a Residential Tenancy Agreement on the basis of an Apprehended Domestic Violence?

You are not certain of everyone replying accurately, but it is an attempt to protect your Landlord’s interest.

4. Tenant Ledgers; Staff should be trained in reading a Tenants Ledger. It can become very clear from a tenants ledger that monies, which were normally paid on time, suddenly weren’t paid at all. One of the questions that can then be posed to an agent is whether the penalties under the Residential Tenancy Agreement were ever chased. If you receive a negative answer, you’ll know why.
5. Termination; when receiving a termination notice from a victim of domestic violence, you could have a form in your office which essentially acts as an acknowledgment, and the form should include the following:
   • Name of the DVO
   • Name of the Perpetrator
   • An acknowledgment that they have terminated under the Domestic violence provisions of the Residential Tenancy Act 2010
   • A confirmation that all co-tenants and the perpetrator have been served with notices of the Residential Tenancies Act.
6. Special conditions; We have considered a number of different options for special conditions to be included in the Residential Tenancies Agreement. We see no value in any special conditions that will assist the landlord. Please note that, it is dangerous to include any special conditions because at this stage, we don’ know how the landlord insurers are going to deal with the domestic violence. Before developing any special conditions we need two things;
   a. Determine how big the problem is;
   b. See how the insurers deal with the DVO’s.

Before the critic’s get to me about not supporting these laws, I want to reiterate:

We agree with the domestic violence amendments!

We don’t agree with a doctors certificate, which can be obtained too easily by persons who are not victims of domestic violence!

Irrespective of this view point, these rules are here to stay and we must adapt to them to manage an effective rent roll.

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 or call 1300 438 538

The soap opera that starred Tim McKibbin of the REI and Mat Keene, Minister of Fair Trading, late last year was a plot straight from the Game of Thrones. Two princes of the property industry at loggerheads over policy whereby a pretender was attempting to dethrone the incumbent prince. The pretender being Tim McKibbin and the prince being Matt Keene.

The world outside the real estate industry could not have given the time of day for the debate. The word ‘coregulation’ was familiar to them as a technical term for a plant or some foreign disease. In a marketplace where people are unable to obtain finance, the biggest investments were plummeting in price and the Christmas period drew the focus of the average punter, leaving the debate to the egotistical.

What happened: a discussion paper was published in 2016 that considered the concept of coregulation. Coregulation was industry bodies having shared responsibility for regulation of the industry and monopolising the continuing professional development marketplace. It was essentially a carrot given to peak industry groups to support the reforms. It was founded in the belief that coregulation would create a better consumer market place.

Somewhere in 2018, the likely REI principality became shaky. The governments promise of making REI the governor of the province of real estate became questioned. The concept of coregulation fell off the agenda and caused a rift between REI and the NSW Government.

Minister Keene indicated that it was the government which was best placed to conduct consumer protection. REI struck back by recommending that Fair Trading should no longer administer the industry. It should be some other organisation. The REI took their bat and ball home and had said if we cannot be king, nor should you.

We, for some time, avoided wading into the turbulent waters of coregulation. My personal opinion is that, an industry group which is funded by business can never impartially regulate the industry. I will, however, attempt to traverse the difficult waters of this argument in as simple a manner as I can.

In short, REI wanted to be involved with the coregulation of the industry. They wanted to set the educational standards and ultimately be the licencing body for the industry. They would also take over the role of discipline and leave criminal behaviour to the Office of Fair Trading. The REI would therefore be the licencing and disciplinary authority for the industry.

The Property, Stock and Business Agent’s Act 2002, soon to become the Property and Stock Act 2002, will regulate three industries:
1. Real Estate, which includes business brokers;
2. Strata Management; and
3. Stock and Station.

What we did not understand about the model was whether REI became the governor of all the industry. Hence, they were the licencing and disciplinary authority for all three industries or were we going to have three governors:
• The REI governing real estate and business broking;
• Strata Community Association regulating strata management; and
• The Australian Livestock and Property Institute regulating stock and station.

Obviously the other two peak industry groups would not want the REI to administer all the industry. Hence, if you wanted to hold more than one licence, you would need to contact each of the industries. You would need to be a member of all three groups if you wanted to have each of the licences. Moreover, you would have to comply with each of the codes of conduct, which may not be consistent with each other. In fact, a coordinated approach to education would completely be abandoned, causing absolute confusion in the industry. What you would obtain is a new level of red, green and blue tape to add to the overregulation already in our industry.

The rhetoric around coregulation is that it would create a better industry with higher standards. This is policy mumbo jumbo, it’s never facilitated by reality. No one had been able to indicate why industry regulation would provide better standards than allowing government to regulate the industry.

Let’s have a look at some comparative systems. The legal system is regulated by the Law Society. It is an association of membership which has a monopoly within the legal fraternity. It grants the licences and has the power of discipline. There is an Office of Legal Services Commissioner who also has the power to investigate and discipline those who breach professional standards.

The Law Society is governed by large law firms. The rank and file of the small legal firms throughout the industry are not considered at the top level. When applying for a licence, your application will be placed before the board, where your competitors will determine your future. History has shown that the Law Society has refused to grant people licenses who they consider as not fitting the industry. They may not have done anything wrong, but they don’t fit the category of people that the industry want.

If you ask any solicitor, the Law Society hasn’t represented their interest and believe it is only representing the big end of town. Moreover, the industry is not heard by government.

In 1995, finance brokers licences in NSW were deregulated. The industry was given the right to self-regulate. This gave birth to organisations like the Mortgage Finance Association of Australia (MFAA). You could not work within this industry unless you were an MFAA member and comply with their standards. By 2010, the Commonwealth Government introduced the National Consumer Credit Protection Act which required persons undertaking credit to obtain an Australian Credit Licence. Self-regulation for 15 years was a monumental failure.

Let’s look at the current private certification debacle. In 1992, there was a proposal in the liberal government to introduce private certifiers. Due to the opposition by the then Consumer Affairs Minister Peter Collins, this system did not come to fruition. In 1997, the Carr government then introduced private certification.

Peter Collins was right! If you introduce private certifiers, they can only create a business by serving developers. Once they serve developers, their independence is obliterated. This has been highlighted in the Opal building in Olympic Park. Private certifiers looked after the developer which ultimately did not look after the occupants in the future. Is this the type of industry we want?

Frederick Hilmer, who published a report on National Competition policy indicated that regulations should be there for the purpose of the environment, the economy, safety and the consumer. Can an industry body that represents a trade ever fully represent the consumer? First, it is the government authority vested with the responsibility of regulating a marketplace that only hears all sides of the argument. Secondly, personal interest will always provide a guide for decision making. Regulation should never ever be made that does not protect the consumer or provides an equal playing field for competitors.

It is somewhat fantastic that we even think about the REI as the centralised body. It only holds about 15% of the industry as a member. If you are a member, you’re allowed to display the REI logo in your office. What do you do to get that? Pay a membership fee. When the REI had an opportunity to propose greater standards, they did not. They merely took the money to provide an accreditation which is not demonstrable of a higher standard. Moreover, should an organisation that represents only 15% of the marketplace, now have the ability to control the whole marketplace?

REI is a business. It provides training, superannuation, and other services to the real estate industry. A business should not be put in control of the whole marketplace, because they can only operate to benefit themselves.

The saddest point is that the industry has lost a voice. The REI was introduced in the main part to represent the industry to government. It was there to provide a balance against consumer complaint and unreasonable expectations of the marketplace. It was there to provide us, the industry, with protection against government decision making. If they are the coregulators, they become a pawn of the government and the voice of the industry is lost.

None of us should criticise Tim McKibbin for his campaign to become the Prince of the real estate kingdom nor should we be upset about the REI trying to become the property government. The REI has self-interest, so why not try!

Coregulation: fantasy or reality? It’s a fantasy because coregulation will just mean alternate regulation by an industry body or bodies.

Unfortunately, what will be lost in the debate is Mr McKibbin’s submissions that we should have an industry body that just looks after property. Throughout the 90s, the Office of Real Estate Services and the Real Estate Services Council regulated the industry. I worked on both the inside and outside and would indicate that this was a model which operated. Whether it needs to be a separate office of an individual department is a separate question but an organisation which is dedicated to real estate, strata, stock and station and other aspects of the property industry is necessary within the industry. The issue of consumers in relation to small consumer complaints and motor dealers do not marry with the professional industry. This debate has been lost in the jousting in the game of thrones.

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 or call 1300 438 538

If 2017 was the year the property boom stopped, 2018 experienced the fall out. So much has happened, and plenty is about to change.

Every client, course participant or business ally has had the same response to 2018: “It hasn’t been bad, but it’s been bloody hard work”. I wonder if this is fair! Maybe it’s normally tough and we have been spoilt by a property boom.

2018 was the year where clearance rates at auctions dropped below 50% and prices took a tumble. This had to be expected. The two drivers of the NSW property market have always been demand and the availability of cash.

The government shut down the competition. Approximately 10% of the property market is always international. All that changes is the nationality. 12% stamp duty and road blocks to immigration and foreign investment, has robbed the market of significant demand. This has now flowed on to other sectors.

Additionally, the credit squeeze had arrived before 2018. If that wasn’t enough, we then welcomed the banking Royal Commission. The banks have now, like a good bear, gone into hibernation. Getting deals across the line has become an absolute nightmare.

Mortgage brokers are leaving the industry in droves or seeking to expand. For the first time, we have given advice on a broker who has been put into liquidation.

The property market is still resilient however. Even with the hurdles, deals are occurring. The carnage expected because of the credit squeeze has not eventuated. Somehow, settlements have occurred without termination. It’s difficult, but as usual, it happens. It never ceases to surprise me how strong and resilient this industry can be.

You can look at change in two ways: it can be depressing, or it opens the door to innovation. Leverage likes this time because it is the moment in the sun for the clever and the innovative.

2018 has seen the emergence of Purple Brick and other similar platforms. Buyers agents have taken a foot hold and is now becoming a chosen profession.

We have also seen the arrival of vendor’s advocates. If you haven’t experienced it yet, wait for it. Vendor’s are hiring people to negotiate everything on their behalf including agent’s commission. Now you’ll have a sales project manager. Yes, it’s for the rich, but that is why the Eastern Suburbs of Sydney is the melting pot of innovation.

For Leverage, the year has been good. We have trained the biggest organisations in real estate, strata and stock and station. We have grown and expanded our influence in the property industry.

In the law firm, we started the year by settling a class action that made $250,000 for each of our client’s. The innovation age has allowed the law firm to grow, creating web portals, setting up innovative businesses, and protecting those unfairly accused. We have established our presence in the finance industry by acting for lenders and aggregators.

2019 will be new. We have new reforms that will change the industry more than anything in the past 70 years. Banks will be bashed, and we have two elections. Maybe it’s time to take a sabbatical if you have a weak heart. At Leverage we will embrace change and intend to be on the front line. We hope many of you are there with us. This is a resilient and strong industry, representing 12.5% of the country’s GDP, and so it will always survive.

I took a sabbatical from our newsletters. I thought you lads and lassies would be over my crap by now. I have been overwhelmed by the call for Leverage Review to return, and I have been ordered by my team to resume the job of talking to you. In 2019, you can look forward to a new innovative newsletter. Maybe, we may let others speak.

I always want to tell a refreshing story at Christmas. Agents are always called tight, but we have always averred the good in the industry. I spoke to a sports club who are struggling to pays the bills. For the past 15 years, one agent, no advertising requested or wanted, has funded this organisation to the value of one million dollars. This is more than a Christmas present. This may be the biggest I know of, but there are so many similar positive stories. My prayer for 2019 is that the REI and Fair Trading recognise these people.

To all of you who make our business, have a joyful Christmas. It’s all about kids, so look after them. For 2019, may the finance gods be with you.

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 or call 1300 438 538