May 9, 2022 | Property Law
Strata title is a recent phenomenon, created with the introduction of legislation in 1961. Strata title now covers nearly all apartment blocks and unit properties. Prior to 1961, there was no strata title, and all these types of property were covered by company title. This is less common today and most units have converted to strata title (though company title still exists in certain places). Prospective purchasers often have an aversion to company title properties and steer clear of them. In reality, it is just another form of property title, alongside the widespread torrens title and strata title properties, although it has unique features.
What is Company Title?
Company title emerges when a company owns a unit complex. The usage of the individual units in the complex is granted by the purchase of shares in the company that owns the complex. An example would be a company that owns a unit complex that has four individual apartments. There are forty shares in the company and each owner purchases ten shares. Each owner purchasing ten shares is entitled to the use and enjoyment (but not ownership) of an apartment in the complex. It is important to re-emphasise here that the owner of the unit does not enjoy title that he/she would normally enjoy if it was a strata unit. Instead, they own a portion of the shares in the company and this allows them to use the property. The company itself has the title.
Advantages
An advantage of company title is that it is valued less than an equivalent strata unit. This is because there is reduced administration fees and the nature of the title brings the value of the property down.
There may be long term advantages with company title property, as it may be converted into strata title and increase the value of the property.
The possible restrictions on the use of the property may suit some purchasers. For example in some company title properties, rules could be imposed on shareholders to regulate security of the building matters.
Disadvantages
A disadvantage of company title is the possible restrictions on the use of the unit or apartment being purchased. As a company owns the complex, it is governed by a constitution or articles of association. This is unlike strata title, which is governed by legislation and by-laws. This means that it can be more restrictive and can limit what a potential purchaser can do. It is important for a prospective purchaser to review a company title constitution with a solicitor, so they are aware of what these restrictions will be.
Another disadvantage is the approval process that may be required to purchase the shares of the company. When purchasing a unit in company title, it is subjected to the approval of the Board of Directors. This means that while a prospective purchaser may have all the capital required to purchase a unit, it does not mean they will be able to purchase it. The approval process from the Board of Directors changes from company to company, and it is crucial for a purchaser to discuss this process with their solicitor, who will be able to advise them of the requirements.
Consulting a Solicitor
As seen above, people should not be turned off by a company title property. It is simply another form of property title with its own unique features. A potential purchaser should discuss with a solicitor whether this type of property is right for them. If you would like more information on how we can assist you with your matter, do not hesitate to contact us on 9963 9800 or via our contact page.
Apr 26, 2022 | Property Law
When renting a property from which you intend to run a business, it is important for both landlords and tenants to understand the relationship they are entering into and the rights and obligations that they each have. The document that governs this relationship is usually a commercial lease.
So, what is a Commercial Lease?
A lease is a legally binding contract that gives you certain rights to a property for a set term. A commercial lease is used when leasing property that is used primarily for a business.
You should never sign a lease without understanding all of its terms and conditions. If you don’t understand what you are agreeing to you could experience serious financial and legal problems.
It’s important to properly investigate the property and lease document before you sign. It is a good idea to ask your lawyer to explain each clause of the lease to you. Your lawyer can give you legal advice, draft new clauses and help you negotiate the terms and conditions to suit you.
Important issues to consider when entering into a lease
A commercial lease will usually contain terms dealing with items such as:
- Rent: How much is the rent and when is it due? The amount of the rent will usually be calculated based on the area of the This may not always be as simple as it sounds. For example, if the shape of the property is irregular or the area includes a lift, more than one floor, outdoor area or interior walls, this may modify the amount of rent.
- Rent Increases: Rent will usually increase annually during the term of the lease, with increases determined by a fixed percentage, market based values or based on the Consumer Price I. It is common for CPI or fixed reviews to occur during the term of a lease and for a market review to occur at the expiry of the initial term and each option period.
- Security Deposit: The landlord will usually ask for some form of security from the tenant in case the tenant defaults on their obligations (e.g. not paying rent). The security is usually for an amount equal to 3-6 months’ rent and is by way of bank guarantee or security If the tenant is a company then personal guarantees from the company’s directors may also be required. The lease should also specify the terms regarding its return.
- Term of the lease: The lease should set out the length of the lease and any options to renew the A landlord will generally want a longer initial lease term (typically 3, 5 or 10 years) whereas the tenant is likely to want a shorter period (1-3 years).
- Option to Renew: An option allows the tenant to continue leasing the property on similar terms at the end of the period of the lease for a further defined period and rent (subject to any review). An option gives the landlord potential greater security of income and the tenant the ability to make longer term plans for their business. Knowing the procedure for exercising the option, especially when the option can be exercised, is critically important.
- Improvements: A lease should address what improvements or modifications can be made to the property, who will pay for the improvements and whether the tenant is responsible for returning the property to its original condition at the end of the lease.
- Description of the property: The lease should clearly describe all of the property being leased, including bathrooms, common areas, kitchen areas and parking spots. A plan of the property should also be included.
- Signage: Any restrictions on putting up signs, such as those that are visible from the street, must be included in the It is also important to check local zoning regulations to determine what other limitations may apply.
- Use of the property: Most leases will include a clause defining what the tenant can do on the property (e.g. what type of business). A tenant should ask for a broad usage clause just in case the business expands into other activities. Ask your local council if your business can operate in your desired location. Also consider the council’s development plans for the area.
- Outgoings: The lease will set out who is responsible for costs such as utilities, property rates & taxes, insurance, and
- Insurance: You should contact your insurance company and discuss the clauses referring to insurance so you fully understand what is covered by the lease.
- Exclusivity clause: This is an important clause for retail businesses renting space in a commercial An exclusivity clause will prevent your landlord from renting space to a competitor. If there is no exclusivity clause in the initial lease, this is something you should consider.
- Assignment and subletting: A tenant should maintain the right to assign the lease or sublet the space to another tenant. Usually the tenant is still ultimately responsible for paying the rent if the business fails or relocates, but with an assignment or sublet clause in place, the business can find someone else to cover the rent for a period.
- Maintenance & Repair: The lease should clearly set out who is responsible for maintaining or repairing the property and the fixtures and fittings during the term of the lease.
- Make Good: A make good clause sets out how a tenant should leave a property at the end of the lease term. A tenant should carefully review the make good obligations in the Often these can be onerous and involve considerable expense on the tenant, and they may impact your plans for the property.
- Termination: The circumstances under which the lease will be terminated should be set out in detail in the
- Costs: The landlord may want the tenant to pay the costs of preparing the lease, this should be clearly set out in the lease.
Retail lease or general commercial lease?
The Retail Leases Act 1994 has specific legislation relating to retail leases. This legislation is designed to promote fair leasing arrangements, improve communication and provide access to low cost dispute resolution for the retail industry.
For a new retail lease the landlord is legally required to give the tenant:
- A written lease with matters agreed to and signed off by both parties.
- A disclosure statement.
- The NSW Retail Tenants Guide, which gives notice of some of the tenants’ rights and obligations and some commercial matters that the tenant should be aware of.
The disclosure statement outlines important information about the lease. It must be in the prescribed form and contain a statement notifying the tenant that independent legal advice should be obtained. It would also normally include details about:
- The term of the lease
- Whether there are options for further terms
- The occupancy costs for leasing the premises (including rent and any outgoings)
- Specific information for shopping centre leases Tenant’s fit out requirements
- If there are any relocation or demolition clauses
Conclusion
Although many of the terms of a commercial lease are fairly standard it is important that you fully understand your rights and obligations, especially the provisions which relate to retail leasing.
It is a good idea to ask your lawyer to explain what each clause in the lease means and to get their assistance in negotiating the terms and conditions that suit you.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or via our contact form here.
Apr 23, 2022 | Property Law
For a long time, the ‘Great Australian Dream’ has been to own property. It is usually the largest asset you will own and provides you with a sense of freedom. However, this could be more akin to a pipe dream for some people due to the huge price tags associated with home ownership. If this is you, you may think an off-the-Plan (“OTP”) property may be the alternative you are looking for. However, OTPs can carry some significant and inherent risks.
What Does Buying off-the-Plan Mean?
When you buy off-the-plan you commit to buying a property before it has been built. In general, prices are cheaper than buying an existing unit. One other benefit is that you will move into a brand new property. Most developers will have mock-up displays or presentations to show you what it will look like once built. However, you can’t be sure exactly what you’ll end up with.
Flexible Contracts
The interests of developers can be quite different to your interests as a buyer. Developers want as much freedom as possible in the terms and conditions of the contract. This is so they can make changes to the plans later. For example, their display model of the building might have parking allocated in a certain way. If this is not specified in the contract’s terms and conditions they can change this at a later date.
Restrictions of Use
Off-the-plan properties often come with restrictions on their appearance (covenants) and use (easements). For example, the external colours might be mandated and cannot be changed even after the property is completed. Make sure you check the contract for these restrictions.
Risk of Delays
When looking at buying off-the-plan you will be given an estimated time of completion. This could change due to unexpected circumstances. For example, suppliers could be out of stock or renting equipment delayed. Prepare for delays; make sure you have somewhere to live until your property is complete.
Risk of Non-Completion
With OTPs there is also a risk that the property will not be completed and your contract becomes terminated. Lenders such as banks might provide developers with a preliminary loan approval before construction starts. The loan is likely to have conditions, such as selling a minimum number of units. If the developers can’t meet the conditions the loan won’t be granted and construction can’t continue. There are several reasons a contract might be terminated, which you should discuss with a solicitor.
Get legal advice
If you are looking to purchase an off-the-plan apartment we recommend you discuss the risks with a solicitor. We can provide advice and help negotiate the terms of the contract in your favour. For more information, please contact us on (02) 9963 9800 or send a message via our contact form.
Apr 22, 2022 | Property Law
Conveyancing is the process of transferring legal title of real estate from one person to another. The conveyancing process is designed to ensure that the buyer obtains good and marketable title to the property together with all the rights that run with the property, and is notified of any restrictions or rights in advance of their purchase.
For most people, buying a property is the most significant transaction they will enter into in their lifetime, both from an emotional and financial point of view. There can be significant consequences if it is not done properly.
Why do searches and enquiries?
When buying a property, there are some statutory obligations on the seller to make certain disclosures to the buyer about the property before the contract is signed.
However, there is no obligation on the seller to tell you everything about the defects in a property and many enquiries about the property are not done until after the contract is signed or becomes unconditional.
The onus is on the buyer to undertake searches and enquiries to satisfy itself in relation to the property. The old saying caveat emptor, or, “Buyer Beware” applies, as the contract may not protect against adverse search results in all circumstances. Searches will help you to find out if the property is affected by any current or known future plans or licenses issued by government such as inclusion on heritage listing or environmental management registers.
Mortgages or encumbrances registered on title
A review of the searches attached to the contract is necessary to confirm that the seller actually owns the property and has the right to sell it to you.
Searches will also provide information about any encumbrances on the title. Examples include:
- Mortgages registered against the property: mortgages must be removed from the title before settlement.
- Easements to the local council or utility company who may have the right to use a portion of your property (possibly above or below ground) for things such as sewage, electricity, telephones or gas.
- Restrictive covenants which affect how the property can be used: for example, a neighbourhood may have building size and design requirements.
Special Conditions – avoiding conveyancing traps
Your lawyer can include special conditions in the contract, before it is signed, to deal with specific issues which may arise from searches but that are not covered by the standard form contract.
A special condition can provide a buyer with additional protection or rights in relation to adverse search results. For example the contract could be made subject to satisfactory searches, work to be completed or could oblige the seller to compensate the buyer as a result of adverse search results.
Where the contract has already been signed there is generally no opportunity to add special conditions. In some limited circumstances it may be possible to negotiate amendments to the terms of the contract if there is a cooling off period or while the contract is still conditional.
Examples of useful special conditions
If a buyer signs a standard contract unaware of building or pest issues with the property there may be no protection if they subsequently find out that, for example, the foundations are sinking or the property is infested with termites. If a building and pest inspection has been carried out before the contract is entered into and problems are discovered then there may be a possibility of addressing those problems in the contract.
If you are buying a property that requires repairs or maintenance then you may wish to make the settlement conditional upon the completion of specified work and a satisfactory inspection before you are ready to settle the purchase.
If there is a special condition in the contract a buyer may be able to delay or refuse to settle if the issues are not rectified.
Get legal advice
We can help you navigate the process to ensure that you are able to obtain good title on any prospective property and that there are no unknown restrictions on the property before you buy. If you need assistance with a conveyancing matter (either buying or selling) or would like more information please call us on (02) 9963 9800 or via our contact form.
Apr 21, 2022 | Property Law
When you purchase off-the-plan you are buying an apartment before it is built. Off-the-plan properties come with significant risks that you should consider before committing to buy. One of these risks is the sunset clause.
Off-the-plan contracts specify the time by which the project must be completed. This is called the sunset clause or sunset date. If the project is not completed by the sunset date, the contract can be rescinded and your deposit returned to you. In the event of delays outside of the developers’ control – such as weather conditions, strikes and issues with council – the sunset clause can be extended.
What is the Purpose of a Sunset Clause?
A sunset clause provides a timeframe for when the project must be completed. The ability to extend the sunset clause provides developers with more time to deal with any issue that arises beyond their control. As a result, off- the-plan contracts are usually completed before the sunset clause.
What are the Risks of a Sunset Clause?
As the sunset date is typically a few years after the exchange of contracts, the price of the property is locked in. This is irrespective of any changes in the market. This means that if you buy a property for $300,000, by the time of completion it could be worth $500,000 due to an increase in property values. Upon completion, you could end up with a property worth much more than you paid for.
Although this can be a good thing, it presents a risk of developers getting greedy. Developers need your initial deposit for loan approval and to start construction, but once complete they know they can sell the apartment for a higher price than originally agreed upon some developers try to rescind (cancel) contracts, return your deposit and then re-sell the apartment at current market prices. While this is uncommon there are still come instances of this occurring. Effectively, they have taken advantage of you as property values rise.
Legislation on Sunset Clauses
This issue has led to new legislative changes for sunset clauses. Now, a developer that wants to rescind your contract on the sunset clause must have your permission to do so. This means that developers need to provide an explanation for why they are seeking rescission. They need to specify why completion of the project cannot be fulfilled as per the sunset clause.
If you do not agree with the developer’s reasons the developer must obtain an order from the Supreme Court to rescind the contract. This precaution is designed to protect you when buying an off-the-plan property.
Seek legal advice
If you are interested in purchasing an off-the-plan property it is important that you seek the advice of a solicitor. We can advise you of your rights and obligations and the protection provided to you. This is by the contract itself and the law. Please contact Etheringtons Solicitors if you have any questions by using the contact form or calling us on (02) 9963 9800.
Apr 18, 2022 | Property Law
Homeowners are required to attach a certificate of compliance or non-compliance to the contract of sale when they sell their property. The owner of a property must register their swimming pool and/or spa on the NSW Swimming Pool Register. In this blog we review how to register a swimming pool and what the requirements are.
How Do You Register a Swimming Pool?
Swimming pool registration is a straightforward process. It is performed online using the NSW Swimming Pool Register website. A Registration Certificate is obtained after entering the required details about the pool or spa.
How Do You Obtain a Certificate of Compliance?
You can seek a Certificate of Compliance from either a private certifier or from a local council. This involves the certifier or local authority inspecting the barrier around a pool or spa. If it is compliant with the legislative regulations, you will receive a Certificate of Compliance which is valid for three years. If you are selling the property or leasing it out, you will need the certificates. The Registration Certificate and the Certificate of Compliance must be attached to the sale contract or to the residential tenancy agreement. This does not apply to strata properties (with more than two lots), or properties in a community scheme.
What Is a Certificate of Non-Compliance?
If the pool or spa does not abide by the regulations, the certifier or local authority will provide a Certificate of Non- Compliance. They will also provide a written notice of why the pool or spa is non-compliant and the steps that can be taken to ensure remedy this. A Certificate of Non-Compliance can be attached to a contract for sale or residential tenancy agreement in lieu of a Certificate of Compliance. It can only be attached if the notice received by the inspector does not deem the pool to be a hazard to public safety. If it is deemed to be a hazard the seller will have to rectify the problem.
If a Certificate of Non-Compliance is attached the responsibility will transfer to the purchaser, who must bring the pool or spa into compliance within 90 days of settlement. Unlike the Certificate of Compliance, the Certificate of Non-Compliance is only valid for one (1) year; if it lapses the owner will have to apply for a new certificate.
Purchasing a Property with a Swimming Pool
When purchasing a property with a swimming pool it is important for your solicitor to check the compliance status of the pool. They can check if the pool registration is missing, or if it is non-compliant. Your solicitor will do this by requesting the notice provided by the certifier or the council from the seller’s solicitor. This can be useful in negotiating the price of the property, and it will inform you as to what steps you need to perform post- settlement, if you need to bring the pool within the regulations.
Seek Legal Advice
Should you require any assistance in relation to swimming pool registration or compliance, get in touch with our expert team by calling us on (02) 9963 9800 or via our contact page.
