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Changes to Real Estate Law

As of 1 December 2014, the Property Agents and Motor Dealers Act 2000 (‘PAMDA’) will be replaced by the following pieces of legislation:

Implications for Conveyancing

The POA applies to ‘relevant contracts’ that are signed on or after 1 December 2014.  The definition of ‘relevant contract’ continues to mean a contract for the sale of residential property.

‘Residential property’

The definition for ‘residential property’ has now been (overly?) simplified to mean “real property that is used, or intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production”.

Excluded contracts

A relevant contract continues to exclude contracts formed on a sale by auction. However, section 160 of the POA further excludes a contract:

  1. entered into with a registered bidder by no later than 5pm on the second business day after a property is passed in at auction,;
  2. formed because of the exercise of an option granted under an earlier contract if the parties are the same as the earlier contract;
  3. if the buyer is a publicly listed corporation or a subsidiary of a publicly listed corporation;
  4. if the buyer is the State or a statutory body; or
  5. if the buyer is purchasing at least 3 lots at the same time, whether or not in the 1 contract.

Warning Statement and Information Sheet

The PAMD Form 30c and BCCM Form 14 are no longer required to be attached to a relevant contract prior to a buyer signing it.

Instead, relevant contracts must now include the following conspicuously written words or words to like effect:

“The contract may be subject to a 5 business day statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.”

Under section 165 of the POA, the seller must ensure the words are written once, immediately above, and on the same page as the place in the contract where the buyer signs.

The seller no longer needs to direct the buyer’s attention to the statement. Also, a failure to include the statement no longer gives rise to a termination right for the buyer only a penalty.

Interestingly, the Office of Fair Trading (Qld) website gives further guidance about the warning statement, advising that the statement must be:

  1. the exact words set out above;
  2. obvious, clear and legible;
  3. placed on the same page that the buyer signs to execute the contract; and
  4. placed directly above the space for the buyer’s signature.

New REIQ contracts

The QLS have confirmed that the REIQ will be releasing updated contracts incorporating the changes set forward by the POA.  These are expected to be available on the QLS website by the end of the month.

Waiving or shortening the cooling-off period

Under section 166 of the POA, it is no longer a requirement for a Lawyer’s Certificate form to be signed in order to shorten or waive the cooling-off period.  The only requirement is that written notice is given by the buyer to the seller.

The PAMD Form 32a has been eliminated and no similar form exists under the POA.  This further means that lawyers are no longer required to provide buyers with a certificate explaining their independence to the seller or seller’s agent.

Terminating under cooling-off

To terminate a contract during the cooling-off period, a buyer must still give the seller a signed notice.  The seller can deduct the termination penalty and the balance deposit must also be refunded within 14 days after termination.

However, under section 168 of the POA, the buyer’s written notice no longer needs to be dated nor must it specifically state that the contract is terminated under this section.

Commission

The maximum amount of commission an agent can charge is now deregulated. Furthermore, an agent does not need to disclose to a buyer the amount of commission they will be receiving. However Form 8, which replaces the PAMD Form 27c, deals with the agent’s disclosure of referrals and benefits received.

Form 7 replaces the PAMD Form 28 dealing with an agent’s disclosure to sellers of a beneficial interest.  Section 153 of the POA defines what a beneficial interest is (e.g. the purchase of the property is made for the agent or an associate, or the agent or an associate has an option to purchase the property).

Property Developers

The requirement for deposits and other part payments to be held in a trust account by a real estate agent, law firm or the Public Trustee when the seller is a property developer now has an exception; where the deposit or part payment is paid by bank guarantee under section 161 of the POA.

Changes to the Body Corporate and Community Management Act 1997 (‘BCCMA’), Property Law Act 1974 (‘PLA’) and Land Sales Act 1984 (‘LSA’)

In addition to the changes to PAMDA, the BCCMA, PLA and LSA will also undergo major changes commencing 1 December 2014. These changes are directed at off-the-plan contracts and can be found in the Land Sales and Other Legislation Amendments Act 2014. Some of the main changes are:

(1) Deposits for unregistered lots

A deposit of up to 20% of the purchase price can be paid under contracts for the purchase of unregistered lots without activating the instalment contract provisions of the PLA.  For registered lots, the threshold of 10% remains.

(2) Unregistered lots of land

The term ‘allotment’ has been removed from the LSA.  Exemption from the LSA is automatic for the sale of five or less unregistered lots (or the sale of more than six unregistered lots to the same buyer).

Developers can also sell an unregistered lot of land before development permits have been issued.  The sunset date of 18 months remains unchanged.

(3) Unregistered lots in community title schemes (‘CTS’)

The provisions relating to unregistered lots in a CTS have been migrated from the LSA to the BCCMA.  The seller of unregistered lots in a CTS may nominate a sunset date of up to 5 ½ years (but will remain 3 ½ years if not specified).

Disclosure for unregistered lots in a CTS now fall under a section 213 BCCMA disclosure statement and must be accompanied by  a disclosure plan by a cadastral surveyor.  Any inaccuracies of the disclosure statement must be disclosed to the buyer in a section 214 disclosure statement at least 21 days before the date of settlement (no longer 14 days).

(4) Termination regarding disclosure

If the new disclosure statement given to the buyer (either under section 13 of the LSA or section 214 of the BCCMA) materially prejudices the buyer and the contract has not yet settled, the buyer may terminate the contract by written notice given to the seller within 21 days (no longer 14 days) of the seller giving the new disclosure statement.