In brief
The Queensland Government is conducting a major review of property law. Partner Tony Davies* and Senior Associate Annabelle Aland report on two issues papers that have been released to help stakeholders contribute to the public submissions process.
Background
The Queensland Government's review of property law will focus on the Property Law Act 1974, the Land Sales Act 1984 and the Body Corporate and Community Management Act 1997 (the BCCM). As part of that review, two issues papers – Seller Disclosure in Queensland and Lot Entitlements under the BCCM have been released to reflect what the Government believes are concerns in the marketplace.
Issues Paper 1 – Seller Disclosure in Queensland
This issues paper seeks feedback from all interested parties in regard to the effectiveness of the current seller disclosure regime in Queensland. The paper raises a number of important questions:
- Should disclosure be made in a number of forms. For example, by a disclosure statement prior to a buyer entering into a contract, statutory warranties treated as given by sellers unless disclosed to the contrary in the contract or certificates/search results from government agencies or body corporate.
- Should any agreed disclosure be provided prior to a contract being signed by the buyer or after signing but before settlement.
- What should be the extent of matters required to be disclosed by a seller. For example, matters affecting the title of the property, things that affect the value of the property, a building and pest inspection report etc in respect of strata schemes, should sinking and administrative fund balances and by-laws (for strata lots) be provided (in addition to levies which are already required to be disclosed).
- Should there be an ongoing obligation on sellers to advise buyers of any material change in disclosed documents.
- If a disclosure is found to be inaccurate, should any remedy to a buyer only be available when the buyer has suffered material prejudice.
- Should certain sales be able to be exempted from the disclosure regime. For example, between sophisticated parties or mortgagee sales.
- Should both seller and buyer be able to rely upon local government and similar searches, regardless of who applied for the search and who should be responsible if they are inaccurate.
The general proposition from the issues paper is that the disclosure regime should:
- provide meaningful disclosure;
- provide information which affects the decision of a buyer to purchase;
- balance the cost of providing information between the buyer and the seller;
- enable all information required to be provided to be in a readily accessible form which is easily obtainable at a reasonable cost.
Issues Paper 2 – Lot Entitlements under the BCCM
Lot entitlements for strata lots determine the basis on which levies are struck and other payments are calculated. Since 1965, when the first strata legislation was introduced in Queensland, the method of allocating lot entitlements has changed significantly. More recently, a right was created to allow applications for an adjustment of lot entitlements. The impact of that has been very significant. It has allowed significant anomalies to occur in the amount of levies paid in the same building which in many cases is clearly unfair.
This issues paper seeks input as to how lot entitlements should be determined and whether there should be an ability to amend them. The sorts of questions raised in the issues paper include:
- Should lot entitlements be used to determine a lot owner's contribution to body corporate expenses and liabilities. If so, what is the most appropriate method of sharing body corporate expenses and liabilities. For example, should there be an equal contribution to all expenses, a contribution based on the value or area of a lot, or some other method.
- Should different principles of expense allocation apply to different types of strata schemes. For example, in a commercial scheme should expenses be determined in a different way to a residential scheme.
- Should developers be responsible for setting lot entitlements or should the Government or another body be required to approve lot entitlements.
- Should bodies corporate of only future schemes (as distinct from existing schemes) have a right to adjust lot entitlements after a scheme is established.
- If lot entitlements are able to be adjusted, what process should apply. For example, should a certain type of body corporate resolution be required and what principles will apply to determine if an adjustment is appropriate.
Clearly, once the ability to adjust lot entitlements was introduced, this opened a 'can of worms'. The issue now is how to 'put the lid back on the can'. Whichever way this is achieved, some people will be adversely affected.
Closing dates for submissions
The closing date for submissions are as follows:
Issues paper 1 – 21 March 2014.
Issues paper 2 – 14 March 2014.
What next
The submissions process is a chance for developers to have their say on these critical elements. In particular, any change to sellers disclosure will significantly affect them.
If you require any assistance in preparing a submission please do not hesitate to contact us.
* Tony Davies is a member of the Expert Panel which is providing input in regard to the Property Law review. He is also a member of the State Government's Land Sales Act Review Committee which is reviewing that legislation.