Conveyancing

legislation update

Australian Institute of Conveyancers NSW

Division Sydney Seminar

Tony Cahill

Scope of this presentation

• “Foreigners” law reform –FATA, Land tax and purchaser

surcharge duty; FRCGW

• Extension of UCT provisions to small business contracts

• Swimming Pools Act

• Home Building Act and loose-fill asbestos insulation

• Strata law reform

• Conveyancing Rules version 2.0 and priority notices

2

Foreign Acquisitions and Takeovers

Act 1975

• Act fundamentally rewritten with effect from 1 December 2015 (but still the 1975 Act).

• All but the first two sections renumbered even if not amended.

• For example, the final section of the Act (the regulation-making power) was section 39 on 30 November 2015, and became section 139 as at 1 December 2015.

• Practice tip: Check any form letters of advice which refer to sections of the Act and update.

• Clause 22 of the land contract (and corresponding clause in water contract) sufficiently broadly drawn to continue unamended.

3

Who is a ‘foreign person’? – s 4 FAT

Act

• an individual not ordinarily resident in Australia; or

• a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

• a corporation in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

• the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or

4

Who is a ‘foreign person’? – s 4

(continued)

• the trustee of a trust in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or

• a foreign government; or

• any other person, or any other person that meets the conditions, prescribed by the regulations:

➢ Certain general partners in limited partnerships

➢ Some foreign government investors

See FIRB Guidance Note GN31 for more details.

5

Key FIRB changes of interest to

property practitioners

• Thresholds for “agribusinesses” and “agricultural land” now $55 million and $15 million respectively.

• Fees (on a sliding scale) where interest is in residential or agricultural land – ranging from $5,000 to $100,000.

• Higher fees for other classes of property.

• Commissioner of Taxation (rather than Treasurer) now deals with residential real estate.

• Federal Register of foreign interests in agricultural land (and foreshadowed extension to interests in water)

6

FATA Fees – Practical Issues 1

• Intending bidders at auction?

• “Established dwelling exemption certificate (auctions)”

• Permitting the purchase of one property – either under the hammer or once passed in via post-auction negotiations

• Application must specify maximum price – if exceeded breach occurs

• Certificate valid for 6 months

• FIRB Guidance Note GN9

7

FATA Fees – Practical Issues 2

• Sales off the plan?

• Developer exemption certificates (similar to former “advanced off the plan” certificates)

• Must be marketed in Australia

• 50 or more residential lots, DA approved

• Developer to pay an initial application fee - $25,000.

• Developer liable for a per dwelling fee for each foreign sale at basic scale–plus reporting obligation

• If foreign purchaser acquires interests greater than $3 million P must apply for approval

• FIRB Guidance Note GN8

8

Land tax changes from 1/7/16.

• Taxation Administration Amendment (Collection and Disclosure of Information to Commonwealth) Bill 2016

• Bulk of provisions relate to authorising information gathering.

• Amends Conveyancing (Sale of Land) Regulation 2010 to effectively shift the onus of applying for a section 47 certificate to the vendor.

• Implied term that a vendor must serve a ‘current land tax certificate’ on the purchaser, in most cases at least 14 days before completion.

9

A ‘current’ land tax certificate

Clause 8A(2) of the Regulation:

➢ a certificate issued under section 47

➢ either pre- or post-subdivision (better if it is pre-subdivision from a fees perspective)

➢ applied for by, or on behalf of, the vendor (so not passed down a chain)

➢ that is issued:

(a) in the year in which the contract is to be completed, or

(b) no more than 3 months before the date on which service is required (see Schedule 2 of the Regulation).

10

‘Current’ does not equal ‘clear’

• The vendor’s section 47 certificate need not be clear for the current land tax year at the time of service.

• Further, a matter may roll over into the following land tax year.

• The obligation to cause the unencumbered legal title to pass means a vendor will have to arrange for any land tax charge cleared by completion.

• Subtle rewording of clause 16.6 – contractual clearance obligation triggered if either party serves a certificate disclosing a charge.

• A section 47 is now important even for property which would be exempt for land tax.

11

Other important revenue changes

• As from 1 July 2016, all stamping capable of being processed in EDR is no longer assessed by OSR.

• Processing must be done in EDR (either by the practitioner or via an authorised EDR agent).

• On 10 June 2016, OSR website updated to detail Commonwealth Reporting Requirements and data required by OSR.

• 14 June 2016: Announcement: stamp duty foreign buyer surcharge (extra 4% as from 21/6/16) and extra 0.75% land tax (as from 2017 land tax year).

12

State Revenue Legislation Amendment

(Budget Measures 2016) Act 2016

• Passed by both Houses 23 June 2016.

• Substantial amendments to Duties Act effective 21 June 2016.

• New Chapter 2A imposing surcharge purchaser duty on certain dutiable transactions relating to residential land (defined in s104I) giving rise to a transfer to a foreign person (defined in s104J –similar but not identical to FAT Act definition).

• Other basic concept: residential-related property (s104K).

• Rate = 4% of dutiable value (s 104J(1)).

• Section 49A ‘off the plan’ concession no longer applies if anypurchaser or transferee is a foreign person.

13

Capital gains withholding tax

obligations

• Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015 passed both Houses on 22 February 2016.

• As from 1 July 2016, the sale and purchase of interests in real property (including leases) and mining rights will need to deal with a 10 per cent non-final withholding tax where vendor is foreign.

• $2,000,000 threshold based on market value will exclude some sales.

• Obligation to remit resides with the purchaser.

• To be implemented via a “clearance” system for sales, and a system relying primarily on a vendor declaration for indirect interests in, and options over, real property.

14

Practical issues of concern

▪ If the value of the property exceeds the threshold, purchaser will have to withhold 10% of the “price” (which itself has definitional difficulties) and remit to the ATO unless the vendor serves on purchaser:

➢ A clearance certificate; or

➢ A statement from the ATO that a lesser amount is payable.

▪ On a sale and purchase, vendor is effectively a foreigner unless proves the contrary to the ATO’s satisfaction.

▪ Amount generally to be paid by electronic means and due on the day of completion according to the Act!

▪ The $2 million threshold does not apply to options or ‘indirect’ transactions.

▪ See www.ato.gov.au/frcgw for latest information & guidance, including (belatedly) information on options, deceased estates and trusts.

15

FRCGW Changes in the 2016 Land

contract

• New item 22 in the list of documents – clearance certificate.

• Clause 1 new definitions – note especially ‘clearance certificate’ and ‘remittance amount’.

• Clause 16.7 – confirms obligation to withhold any remittance amount from the price.

• Detailed clause 31 – applies only if:

➢ the transaction is not an excluded transaction; and

➢A clearance certificate for each vendor is not attached to the contract.

16

Purchaser’s obligations under clause

31.2

• Provide evidence of registration as a withholder with the

ATO at least 5 days before the date for completion

• Produce settlement cheque for the ‘remittance amount’ at

settlement (unless PEXA is used).

• Forward the cheque immediately after completion.

• Serve evidence the payment has been received.

• These obligations do not apply where the vendor has

served a clearance certificate in respect of each vendor.

17

Consequences for vendor re

FRCGW

• See new Warning 11 on page 4 of the 2016 edition.

• If a clearance certificate or variation is served during

the course of the matter, the vendor cannot compel

completion until at least 7 days after service.

• The vendor cannot refuse to complete merely

because the purchaser is complying with its

withholding and remitting obligations.

18

Unfair contract terms 2014 and 2016

contracts

Retitled “contract for the sale and purchase of land”

• Key driver was introduction of unfair contract terms provisions in the Australian Consumer Law.

• The printed form is almost inevitably a “standard form contract” within the meaning of the UCT provisions.

• Some, but not all, standard form contracts are covered by the UCT provisions.

19

How do the UCT provisions of the

ACL operate?

The UCT provisions currently apply to:

• A standard form contract

• Which is a consumer contract

• Unless an exemption applies

A consumer contract is a contract for:

(a) a supply of goods or services; or

(b) a sale or grant of an interest in land;

to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.

• Supplies, sales or grants to a corporation cannot be a consumer contract.

• UCT will be extended to small business contracts late 2016.

20

UCT provisions and small business

contracts.

• Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015.

• Provisions apply to some small business contracts entered into or after 12 November 2016.

• But note transitional provisions – also applicable to contracts renewed (e.g. options) on or after 12/11/16; and terms varied on or after that date.

• Applicable where:

➢ At least one of the parties is a small business (<20 employees); and

➢ Up front price no more than $300,000 (or $1 million where contract is for more than 12 months).

21

New clause 8.2 in the 2014 and 2016 land (and

the new water) contracts

8.2 If the vendor does not comply with this contract (or a notice under or relating to it) in an essential respect, the purchaser can terminate by serving a notice. After the termination –

8.2.1 the purchaser can recover the deposit and any other money paid by the purchaser under this contract;

8.2.2 the purchaser can sue the vendor to recover damages for breach of contract; and

8.2.3 if the purchaser has been in possession a party can claim for a reasonable adjustment.

22

Swimming Pools Amendment Act

2012

• Six key dates

29.10.12 – Assent, extension of Act to wider class of premises (including backpackers, B&B, farm stay, serviced apartments), narrowing of “exemptions” (in fact concessions NOT exemptions) for “old” pools, some existing pools (on small, large or waterfront properties).

29.4.13 – Swimming pools register, more comprehensive (and expensive) inspection regime, section 22D certificate of compliance.

29.4.14 – Conveyancing and leasing disclosure changes legislated to commence.

28.3.14 – 12 month postponement of 29/4/14 key date.

26.2.15 – further 12 month postponement – commenced 29/4/16.

23

Further swimming pool reform -

key changes

• Introduction of a third disclosure path – a certificate of non-compliance.

• If that certificate is attached to the contract, rectification obligations shift to the purchaser.

• Purchaser must rectify (and it appears obtain a certificate of compliance to confirm) within 90 days of settlement.

• Vendors of a lot in a strata or community scheme comprising more than two lots are exempt from any ‘certificate’ vendor disclosure obligation.

• Vendors under an off the plan contract also exempted.

• ‘Swimming pool warning’ survives

24

Swimming pool changes in the 2014

and 2016 editions

• Additional check boxes in the 2014 edition list of

documents – certificate of compliance, evidence of

registration, relevant occupation certificate.

• Still more check boxes in the 2016 edition – certificate of

non-compliance, detailed reasons of non-compliance.

• Clause 1 – amended definition of work order to make it

clear that ‘preliminary’ swimming pool correspondence

(e.g. list of defects) does not constitute a work order.

25

Home Building Amendment Act

2014

Existing section 95 replaced. New section:

• Abolishes statutory cover for owner-builder work (s 95(1))

• Disclosure by way of a conspicuous note of details of the owner-builder permit and the absence of owner-builder insurance (s 95(2))

• Section does not apply where sale occurs more than 7 years and 6 months after date of the permit (s 95(3))

• Consumer warning requirement applies not only to the owner-builder but to successors in title (s 95(4))

26

Home Building Amendment Act

2014 - 2

• New section 96B(1) : A contract for the sale of land comprising a house or unit excluded from the definition of dwelling because it was designed, constructed or adapted for commercial use as tourist, holiday or overnight accommodation must contain the warning required by this section if work has been done on the land in the previous 6 years that would have been residential building work had the property not been excluded from the definition of dwelling.

• Warning is a “prominent statement” to the effect that the property does not have protection under the Act.

• Prohibition on entering into the contract unless statement attached; contract voidable if no statement in contract.

• Savings and transitional provisions affect ss 95, 96B.

27

Loose-fill asbestos insulation

• Response to the activities of ‘Mr Fluffy’

• Fair Trading is lead agency for NSW response

• Amendments to the Home Building Act to create a register of affected properties (ss 119A to 119C). Register is searchable online by property address at no charge.

• Free inspections in 63 LGA’s (offer closed 1 August 2016).

• Residential Tenancies Regulation amended to make listing on the register a ‘material fact’.

Schedule 4 EPA Regulation amended effective 20 June 2016 –‘If the land includes any residential premises (within the meaning of Division 1A of Part 8 of the HB Act) listed on the register, a statement to that effect.’

28

Conveyancing (Sale of Land)

Regulation 2017

• Some points to ponder of particular interest to rural and regional practitioners:

➢ Should there be any additional prescribed documents?

➢ Are the current range of statutory warranties appropriate?

➢ The problem of sales of multiple lots and potentially numerous s149 certificates (with some councils charging a separate fee per lot; others a separate fee per assessment; still others a single fee).

➢ Should mines subsidence be dealt with under the Reg?

➢ Should the next version of the Regulation deal with electronic signatures and formation of contracts electronically?

29

Major strata law reform

• Strata Schemes Management Act 2015 and Strata Schemes Development Act 2015received Royal Assent on 5/11/2015.

• The statutes underpinning the familiar strata framework (the Strata Schemes Management Act 1996, Strata Schemes (Freehold Development) Act 1973 and the Strata Schemes (Leasehold Development) Act 1986) have been repealed.

• The 2015 Acts could not commence until supporting regulations are published (and industry is prepared for the changes).

• Draft regulations and accompanying RISs April 2016.

• Management Reg 2016 issued August 2016; Development Reg 2016 issued 4 November 2016.

• Commenced 30/11/16 (except building bonds to start 1/7/17).

30

Changes in terminology

From definitions in new Management Act (s4):

• Executive committee becomes strata committee

• Sinking fund becomes capital works fund (established under s 74)

• Exclusive use by-law becomes common property rights by-law (with more detail in s 142)

• Section 109 certificate becomes strata information certificate (or a s184(1) certificate)

• Section 118 notice becomes strata interest notice (or a s 22(1) notice)

• Caretaker becomes building manager (with more detail in s 66)

31

Structure of the new Development

Act

• Broadly adopts the structure of the current freehold development Act.

• However, Part 3 of the new Act relating to leases in strata leasehold schemes has effectively been transferred from the current leasehold development legislation.

• Most significantly, Part 10 of the new development legislation (‘Strata renewal process for freehold strata schemes’) has no counterpart in the 1973 Act.

• Part 10 is novel, contentious and was subject to most debate in Parliament.

• Extremely detailed statutory scheme – ss 153 to 190.

• Note that Part 10 is not limited to residential strata schemes, nor to strata schemes ‘over a certain age’.

32

Strata renewal – Part 10

Development Act

• Key definitions – s 154

collective sale of a strata scheme means a sale of the whole strata scheme.

compensation value, in relation to a lot, means:

(a) the compensation to which the owner of the lot would be entitled as determined under section 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (subject to any modifications prescribed by the regulations), or

(b) if the regulations prescribe a different method of determining that value—the value of the lot determined in accordance with that method.

court means the Land and Environment Court.

33

Strata renewal – Part 10

Development Act 2

• Key definitions – s 154 (continued)

dissenting owner, in relation to a strata renewal plan, means an owner of a lot in relation to which a support notice is not in effect under this Part for the plan.

independent valuer means a qualified valuer who:

(a) has appropriate experience or expertise to undertake valuations for the purpose of this Part, and

(b) has no pecuniary or other interest that could reasonably be regarded as capable of affecting the qualified valuer’s ability to give the valuations in good faith.

market value, in relation to a building and its site, means the value of the building and its site determined in accordance with the regulations.

redevelopment of a strata scheme means a redevelopment of the whole strata scheme in a way that alters the scheme to the extent that its termination and replacement by a further strata plan is necessary.

Required level of support = 75% of the lots.

34

Strata renewal – the process

• For pre-30/11/16 schemes, Part 10 transitional opt-in provision.

• Strata renewal proposal submitted.

• Strata committee (formerly called executive committee) to consider proposal

• If further consideration warranted, meeting of owners corporation which can elect a strata renewal committee.

• Committee generally operates for one year.

• SRC prepares a strata renewal plan.

• Plan circulated – opportunity for lot owners in favour to lodge a support notice.

• Once required level of support reached, further meeting of owners corporation.

• Then submitted for approval by L and E Court.

35

Structure of the new Management

Act

• The new Act is totally restructured, and largely divorced from the order of topics in the 1996 Act.

• Hint: Look to the Explanatory Note to the 2015 Management Bill to assist in locating:

➢ where the provisions in the 1996 Act have been moved to; and

➢ the key ‘changes and additions’ in the 2015 Act.

• The new Management Act is even more dependent on subordinate legislation than the new Development Act.

• The new Management Regulation (rather than the Act) contains standard by-laws for pre-1996 Act schemes and also a set of model by-laws for residential strata schemes (but no model by-laws for other categories of schemes).

36

Other strata law reform

• September 2015: Minister for Better Regulation and Innovation announced a review of aspects of sales off the plan with a view to giving enhanced protection to purchasers of such properties.

• The two areas of initial concern were:

➢ Vendors escaping from contracts relying on sunset clauses (and, according to anecdotal evidence, in some cases promptly reselling in a rising market to the disadvantage of the original purchaser);

➢ Reconfiguration of lots between the date of contract and the registration of the strata plan.

• The first of these issues was addressed by the Conveyancing Amendment (Sunset Clauses) Bill 2015 - introduced 10 November 2015, and passed by both Houses on 17 November 2015.

• The Act was stated to commence on assent (which occurred on 24/11/15).

• However the amendment has a partially retrospective application, the relevant date being 2 November 2015 (the date of the Minister’s announcement of the proposed Bill).

37

Section 66 ZL(1) Conveyancing Act

1919

• off the plan contract means a contract for the sale of a residential lot (the subject lot) that has not been created at the time that the contract is entered into.

• residential lot means a lot (whether a strata lot or otherwise) that is residential property within the meaning of section 66Q.

• sunset clause means a provision of an off the plan contract that provides for the contract to be rescinded if the subject lot is not created by the sunset date.

• sunset date means the date set out in the off the plan contract as the latest date (subject to any extension provided for in the contract) by which the subject lot must be created.

38

Section 66 ZL(1) Conveyancing Act

1919

• off the plan contract means a contract for the sale of a residential lot (the subject lot) that has not been created at the time that the contract is entered into.

• residential lot means a lot (whether a strata lot or otherwise) that is residential property within the meaning of section 66Q.

• sunset clause means a provision of an off the plan contract that provides for the contract to be rescinded if the subject lot is not created by the sunset date.

• sunset date means the date set out in the off the plan contract as the latest date (subject to any extension provided for in the contract) by which the subject lot must be created.

39

Off the plan– s 66ZL(3)

Conveyancing Act

A vendor may rescind an off the plan contract under a sunset clause if the subject lot has not been created by the sunset date, but only if

(a) each purchaser under the contract, at any time after being served with the notice under subsection (4), consents in writing to the rescission, or

(b) the vendor has obtained an order of the Supreme Court under this section permitting the vendor to rescind the contract under the sunset clause, or

(c) the regulations otherwise permit the vendor to rescind the contract under the sunset clause.

40

Off the plan– s 66ZL(4)

Conveyancing Act

(4) It is a term of an off the plan contract that a

vendor who is proposing to rescind the contract under

a sunset clause must serve each purchaser under the

contract notice in writing at least 28 days before the

proposed rescission that specifies why the vendor is

proposing to rescind the contract and the reason for

the delay in creating the subject lot.

41

Off the plan– “just and equitable”

The vendor must satisfy the Court that making the order is just and equitable in all the circumstances; including

(a) the terms of the off the plan contract,

(b) whether the vendor has acted unreasonably or in bad faith,

(c) the reason for the delay in creating the subject lot,

(d) the likely date on which the subject lot will be created,

(e) whether the subject lot has increased in value,

(f) the effect of the rescission on each purchaser,

(g) any other matter that the Court considers to be relevant,

(h) any other matter prescribed by the regulations.

42

Jobema Developments P/L v Zhu

& Ors

• First decision under the section: Jobema Developments Pty Limited v Zhu & Ors [2016] NSWSC 3.

• Previous developer (Xycom) sold land to the plaintiff.

• Very little work undertaken on site during previous developer’s ownership.

• Plaintiff entered novation agreement assuming development and other obligations of the previous developer under existing off the plan contracts.

• Unable to get plan registered within contemplated time.

43

Subsection 4 notice extracts (at [12])

1

5. Jobema is proposing to rescind the Contract because:

(a) Since the date that the Contract was entered into, construction costs have increased significantly;

(b) [Xycom] did not advance the project to the time that Jobema acquired it in 2015;

(c) The Contract does not meet the financial requirements for funding the project in 2015;

(d) Jobema has offered [Mr Wu] the opportunity to continue with the purchase at a new price which reflects 2015 current market conditions;

(e) [Mr Wu] [has] elected not to continue on the basis set out in paragraph d;

(f) Jobema has the opportunity to sell the property in the Contract at a price which reflects the 2015 market and takes into account the increased construction costs referred to in paragraph a.

44

Subsection 4 notice extracts (at [12])

2

6. The lot which is the subject of a Contract has not yet been created following the following reasons:

(a) From the date of the Contract until 5 February 2015 [Xycom] carried out little or no physical work for the Project;

(b) Since 5 February Jobema has entered into contracts to sell other lots in the project in order to secure finance for the Project;

(c) Jobema has commenced physical works but anticipates that the lot will not be created until sometime in 2017.

45

Leave to rescind refused (at [27])

“It seems to me that, in the relevant circumstances, several matters on which Jobema relies to support its application, including increases in construction costs and purchase prices have not been established; to the extent that there has been delay, prior to Jobema's acquisition of the site, that is a matter which Jobema was aware of, and cannot avoid having taken into account, when it has assumed Xycom's obligations under the contract; if Jobema assumed that the legislature would not intervene to increase the protection available to off the plan purchasers, that assumption was a business risk, and the legislative change which has occurred was also a risk which it assumed; and finally, the selective and unexplained process by which some purchasers have their sunset dates extended, by agreement with the vendor, and others do not, is a matter which tends against the grant of leave sought.”

46

More information on strata changes

Development Act

• Administered by LPI.

• October 2016 factsheet (and subsequent website updates) - see

http://www.lpi.nsw.gov.au/__data/assets/pdf_file/0006/214899/2016-11_New_strata_laws_commencing_30_November_2016.pdf

• Existing forms or Administration Sheets will not be accepted if lodged on or after 30 November 2016.

• The 2010 Reg model by-laws cannot be adopted by plans registered on or after 30 November 2016.

• R-G Directions are in the course of being updated.

47

More information 2

Management Act

• Administered by Fair Trading.

• Reform of strata laws subsite - overview:

http://www.fairtrading.nsw.gov.au/ftw/About_us/Have_your_say/Reform_of_strata_laws.page?

• Reform of strata laws subsite - detail:

http://www.fairtrading.nsw.gov.au/ftw/About_us/Legislation/Changes_to_legislation/Major_changes_to_strata_laws.page?

• “Strata living” booklet in course of being updated.

48

Real Property Amendment

(Electronic Conveyancing) Act 2015

• Received assent 15 September 2015; fully commenced as from 1 October 2016.

• Two main objectives:

➢Facilitates the introduction of Conveyancing Rules by the Registrar-General (Version 1 commenced 1 May 2016; version 2 as from 26 November 2016).

➢CR Version 2 allows for the introduction of priority notices – a cheap, limited duration and e-only alternative to a caveat (available as from 28 November 2016 due to constraints within PEXA).

49

Why have Conveyancing Rules

• Among other things, the Real Property Amendment (Electronic Conveyancing) Act 2015 inserts section 12E into the Real Property Act 1900.

• Under s 12E(1), ‘The Registrar-General may from time to time determine, in writing, rules for or with respect to the preparation and lodgment otherwise than electronically of paper documents to give effect to conveyancing transactions (the conveyancing rules)’.

• Objective is to align paper processes with procedures if the parties are using PEXA so as to minimise the inefficiencies associated with having two different paths to settlement and registration.

50

Conveyancing Rules version 1

➢ The first version of the Conveyancing Rules was published on 28 March 2016, and come into operation on 1 May 2016. The Rules are available online via the LPI website at:

http://www.lpi.nsw.gov.au/__data/assets/pdf_file/0016/209410/NSW_Conveyancing_Rules.pdf

➢ Version 1.0 of the Rules addresses three alignment areas:

• Verification of Identity and Authority (Rule 4) – taking effect on 1 May 2016, but with a transition period of three months before full compliance is required by the Registrar-General.

• Retention of evidence (Rule 5) – taking effect on 1 August 2016.

• Certifications (Rule 6) – taking effect on 1 May 2016 (but continuing the requirements in section 117 of the Act and clause 22 of the Real Property Regulation 2014).

51

Conveyancing Rules version 2

➢ Version 2.0 of the Conveyancing Rules was published on 28 October 2016, and come into operation on 26/11/2016. The Rules are available online via the LPI website at:

http://www.lpi.nsw.gov.au/__data/assets/pdf_file/0016/215116/Conveyancing_Rules_October_2016.pdf

Version 2.0 of the Rules:

• clarifies that there is no need to verify the identity of the person to whom you are handing a certificate of title at settlement (amended rule 4.1.3);

• Requires that a standalone DM must be lodged by the discharging mortgagee as from 1 March 2017 (new rule 7);

52

Conveyancing Rules version 2

• Confirms that priority notices and related dealings must be lodged through PEXA (new rule 8.1);

• Mandates PEXA lodgment for standalone DMs, standalone National Credit Code mortgages, and titles where an eCT has issued (relevant date 1 March 2017) (new rules 8.2 and 8.3);

• ADI standalone refinances must be lodged through PEXA (as from 1 August 2017) (new rule 8.4);

• Mandating eCTs for first mortgagees (1/3/17) (new rule 9)

53

More information on the CRs

Further advice and assistance on interpreting and complying with the Conveyancing Rules are available via ARNECC Guidance Notes. For versions 1 and 2 of the Rules the key Guidance Notes are:

• ARNECC MPR Guidance Note 2 - Verification of Identity at: www.arnecc.gov.au/__data/assets/pdf_file/0017/208313/MPR_Guidance_Note_2_-_ Verification_of_Identity_Updated.pdf

• ARNECC MPR Guidance Note 4 - Right to Deal at:www.arnecc.gov.au/__data/assets/pdf_file/0010/207775/MPR_Guidance_Note_4_-_Right_ to_Deal.pdf

• ARNECC Guidance Note 5 - Retention of Evidence at:www.arnecc.gov.au/__data/assets/pdf_file/0011/207776/MPR_Guidance_Note_5_-_ Retention_of_Evidence.pdf

The Right to Deal Guidance Note is especially useful.

54

Priority notices

These notices are likely to be most useful in providing an alternative to a “Black v Garnock” caveat. The key differences between a caveat and a priority notice are likely to be:

• Threshold requirement: In order to lodge a caveat, the caveator must have a caveatable interest. A priority notice can be lodged by a person who “ intends to lodge a dealing to give effect to an entitlement to a legal or equitable estate or interest in land claimed by the person” (section 74T(1) – emphasis added).

• Effect: A priority notice will not “freeze the Register” to the same extent, and across as broad a range of dealings, as a caveat does (see section 74W(2) for dealings which can be registered despite the existence of a priority notice).

55

Priority notices 2

• Duration: A priority notice will have a fixed duration of 60 days (with the possibility of one extension for a further 30 days). A caveat will remain of indefinite duration.

• Fee: Based on the experience of those states which already have priority notices, it is likely that the lodgment fee for a priority notice will be a fraction of a caveat lodgment fee (and in general, there should be no need for a lodgmentfee for a “withdrawal of priority notice”).

• PEXA Specific: Caveats can be lodged in both the paper and the PEXA environment. Priority notices are available only via the PEXA platform.

56

Caveat or priority notice? – points to

consider

1. A caveat can be used to protect a legal or equitable interest; a priority notice is available where “a person intends to lodge a dealing to give effect to an entitlement to a legal or equitable estate or interest in land” (s 74T(1)).

• Each must be grounded in a legal or equitable interest in land.

• Where there is no dealing to be lodged to give effect to the interest, a PN is inappropriate.

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Caveat or priority notice? – points to

consider 2

2. A caveat once lodged is of indefinite duration; a

priority notice endures for 60 days (with only one

possible extension, for 30 days).

• So, where the interest sought to be protected exceeds

(or is likely to exceed) 90 days, a PN will be of

limited utility.

• The effect of a succession of priority notices.

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Caveat or priority notice? – points to

consider 3

3. Lodgement of a caveat will not preclude the

recording in the Register of 28 classes of other dealings

unless the caveat itself prohibits the recording

(s76H(5)).

By contrast, the corresponding section governing

priority notices (s74W(2)) only identifies 9 classes of

dealings, but does not allow the drafter of the PN to

prohibit any of those dealings being recorded.

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Caveat or priority notice? – points to

consider 4

4. Caveats can be lodged through both paper and

PEXA channels. A priority notice can only be lodged

through PEXA.

5. Lodgment fee for a PN is significantly lower ($33.80;

$14 for extension or withdrawal plus in each case a

small PEXA fee) than for a caveat.

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Any questions?

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