Strata schemes with 'no pets' rules are now on notice because the NSW Court of Appeal has decided that 'no pets' by-laws must be consigned to the dustbin of history.

The appeal court's decision was about "Angus", a miniature schnauzer dog, which had the fortune/misfortune of living in The Horizon, a luxury apartment tower of 43 levels in Darlinghurst, Sydney. "Angus" was a well-behaved dog, well suited to apartment living.

The strata scheme had always had a 'no pets' strata by-law, ever since it was built in 1998.

But over the years, community standards have changed in favour of keeping pets in apartments. As a result, in 2016, the NSW State Government decided to change its model strata by-laws to exclude the 'no pets' option that had been in available since 1997. The only options that remain for 'pet' by-laws are either to allow owners and occupiers to keep pets without restriction or to restrict how the pets are to be kept, their breed and size.

The owners in The Horizon decided not to replace their 'no pets' by-law with a restrictive 'pet friendly' by-law, despite the changes in community attitudes and the model strata by-laws.

This was never going to end well. When Angus' owner decided to challenge the validity of the 'no pets' by-law all the way from NCAT to the NSW Court of Appeal, they succeeded in having the by-law struck down and the owners corporation being ordered to pay their legal fees.

As a result, if your strata scheme has a 'no pets' by-law it must replace it with a 'pet friendly' by-law, with or without restrictions.

For more click on my article - Court strikes down 'no pets' strata by-law

If you change real estate agents, will you pay double commission?

You have spent $4,000 in marketing costs and still, after 90 days, your real estate agent cannot find a buyer willing to pay the price you want for your property.

Apart from spending another $4,000 on new marketing costs, do you run the risk of paying double commission if you change agents?

Specifically, are you legally liable to pay sales commission to the first agent as well as to the new agent if you sell the property to a buyer who inspected the property through the first agent?

Most sales agency agreements provide that the real estate agent is entitled to the remuneration if the agent is the effective cause of the sale, which is to say, if a person has been 'effectively introduced to the Principal or the Property by the Licensee during the Agency Period … and that person … enters into a contract to purchase the property...'

Not long ago, I received an email from a real estate agent whose agency agreement had been terminated because they had not achieved a high enough offer for a prestige property in Hunters Hill. The email contained this demand: If the property is sold to a purchaser in the list below, we require our commission of $80,000 to be paid. The list contained 138 names!

Fortunately, the name of the buyer who purchased the property through the new real estate agent was not on that list, so a legal dispute was avoided.

But what if the buyer's name had been on that list? A recent decision of the NSW Court of Appeal has shed light on what a real estate agent must do to earn their commission.

The Court said that it was not enough for the buyer's name to be on a list of people who had enquired about or had inspected the property, such as in an open house (see image).

More is required: The first real estate agent must have passed on an offer from the prospective buyer to the seller, and must have continued to assist in the negotiations (as required).

In the Court case, the first agent made a fatal error. They did pass on an offer, and conducted price negotiations. But then they made a fatal error - they went overseas on a holiday over Christmas and New Year, and were uncontactable for a few weeks. The buyer approached a second real estate agent to who completed the negotiations. Note: both agency agreements were non-exclusive agencies.

The Court rejected the first agent's claim for commission.

For more information, click on my article Property seller narrowly avoids paying two sales commissions on one property

Parents and Children at war over who can stay in the family home

This is the story of how a daughter, with the best of intentions, saved the family home from being sold from under her parents feet by the ANZ Bank, only to find it all fall apart later.
This is what happened:

The father was a builder. He built a house at Pennant Hills in 1985, and he and his wife raised their family in it.
The father was forced to retire in 2012 due to a heart condition. His financial affairs were in a mess. He owed the ANZ Bank $740,000 and had other creditors and was being threatened with legal proceedings.
He had a plan. He converted the house into two units, an upstairs unit and a ground floor unit with separate entrances. He invited his daughter, her husband and two sons to move into the upstairs unit provided they paid off the Bank debts.
The daughter raised $840,000 which was enough to pay out the ANZ Bank and the other creditors. The title to the property was transferred into her name as security for her loan.
Four years later, they were at war because the new co-habitation arrangement did not work out - the father kept tinkering with building materials he stored in the drained pool area; he was rude to the daughter's husband and children. The police were called more than once.
In the court proceedings that followed, all the parents wanted was to stay in the house for life. But the daughter and her family could take it no more and wanted them to leave. The Court agreed with the daughter and issued an eviction order.

We have not heard the end of this story because the parents have appealed and the eviction order has been put on hold. But there will be no winners. The appeal judges will most likely order the house to be sold and the proceeds divided up between the parents and the daughter.

All this because they did not tie up loose ends when they went into the transaction. Specifically, the living arrangements and the payment arrangements were left up in the air.

To read my case note click here - Parents are evicted from their home because they transferred title without safeguarding continuing occupation rights

2 Schofield Parade, Pennant Hills

Is a seller responsible to fix a water leak after settlement of the sale of a house?

Properties are 'sold as is', as the legal maxim, caveat emptor (let the buyer beware) warns.
Caveat emptor means that if a real estate buyer wants a price reduction because of a building defect they must point it out to the seller before the Contract for Sale becomes unconditional. Otherwise, the buyer cannot complain about the condition of the house.

For this reason, buyers commonly obtain Building and Pest Inspection Reports before the Contract becomes unconditional. The real value of these reports is to find defects which are not obvious to the untrained eye such as dampness in walls or ceilings caused by water entry or below the shower caused by a waterproofing failure. As you will find out, these Reports can protect the seller as well as the buyer.

Imagine the shock that Ms Ashton received when after settlement of the sale of her renovated terrace house in Darlinghurst, in inner city Sydney, she received a demand from her purchaser to compensate him for a long list of building defects!

What made Ms Ashton different from other sellers was the fact that two years previously, she had extensively renovated the terrace house, with Council Consent. She had an owner-builders licence and managed professional tradespersons to carry out the building work.

This was residential building work which meant that the defects warranties in the Home Building Act applied. These warranties are that the work is to be carried out with due care and skill and in accordance with building standards.

The Consumer Tribunal ruled that she was liable to pay the purchaser a total of $42,317.77 in compensation for defective waterproofing of the first floor balcony and improperly installed cladding to the exterior of the attic and bedroom. She was also ordered to pay the purchaser's legal costs. The amount could have been much higher, but the Tribunal rejected many of the purchaser's claims.

The lesson here is that if a seller sells a property in which extensive building work has been carried out within the previous 6 years, then they may be liable for defects after settlement, despite caveat emptor. The exception is that if the purchaser has purchased with "full knowledge" either by obtaining Building and Pest Inspection Reports or if the vendor has pointed out the defect.

For more information, click Can a home buyer claim compensation for a water leak after settlement?

Paint bubbling from a water leak

What's new in conveyancing? These are six trends to keep an eye on

Conveyancing, the legal side of a property sale, is adapting to new trends.

Trends such as electronic conveyancing settlements, auction contracts, personal guarantees for company purchasers, subject to finance, tree problems and tax clearances.

This is a summary of these six trends:

Electronic Conveyancing Settlements - settlements are the business end of a property sale when the title is transferred in exchange for payment of the price. E conveyancing has replaced the paper based settlement process of bank cheques, titles and transfers. It's all now done on a computer screen.
Auction Contracts - Purchasers often request, and vendors often agree to two changes to the contract - (1) a 5% deposit instead of 10% and (2) a longer settlement period than 42 days, to give time to sell their current property.
Personal Guarantees - the directors of a company are now expected to provide their personal guarantee when they buy in the name of their company.
Subject to Finance - In Queensland and Victoria, contracts often contain a subject to finance
clause. But not in NSW - unconditional contracts are the norm.
Tree Problems - Don't assume you can remove a tree easily from a property you are buying.
Tax Clearances - If a property is sold for $750,000 or more, the vendor must obtain an ATO Tax Clearance, otherwise the purchaser must pay 10% of the price to the ATO.

For more details click on my article Conveyancing trends in NSW

Screenshot from a PEXA workspace as a property settlement is taking place

Must you always lose your deposit if you don't settle your property purchase?

Paying a 10% deposit on a Property Purchase Contract is a standard requirement for a reason.

As Justice Emmett said, paying the deposit is "a sanction so that purchasers treat the making and completing of contracts with due seriousness". In other words, if you don't settle a contract to purchase a house, home unit or land, you will lose your deposit.

But in recent years, consumer rights have upset the certainty that a purchaser will lose their deposit if they don't settle on a property purchase. In NSW, the rights are that property certificates must be attached to the contract and consumer warranties are implied that there are no adverse affectations. In Queensland there is a Disclosure Statement and in Victoria there is a Section 32 Vendor Statement.

In a recent decision, a purchaser tried to terminate the Contract and recover the deposit paid, relying on a breach of a consumer warranty. The warranty was that the property complied with Council requirements to be used as a dual occupancy. It was a house which had been extended by building a 'granny flat' underneath which could be separately rented out (see the floor plan image).

The problem was, the Council had never approved using the 'granny flat' as separate accommodation.

Even though the facts are straightforward, the purchaser failed to prove a breach of warranty and lost their deposit. They failed because of a lack of evidence.

The lesson from this decision is that it is possible for a purchaser to terminate a contract for purchase of property, and receive a refund of the deposit, if the purchaser can prove a breach of warranty. But as always, high quality legal representation is needed to gather the evidence to prove the case.

To read my case note on the decision click Using building non-compliance to rescind a Contract for Sale

Keeping the wolf from the door - protecting the family home from the Trustee in Bankruptcy

What's the best way to protect the family home from claims by creditors and the Trustee in Bankruptcy?

Many professional people, company directors and business owners put the title to the family home in their spouses' name, to put it out of reach of creditor claims.

But does this provide effective protection against a bankruptcy claim by the Trustee in Bankruptcy?

According to a Federal Court of Australia decision last week, the family home may not be protected even if the title is not in the name of the bankrupt.

Applying what is known as a common intention constructive trust, the Federal Court said that the Trustee in Bankruptcy can claim an interest in the family home if:

A common intention existed between spouses / partners to buy the home as their matrimonial home / place of residence; and
The bankrupt made a contribution to the costs of acquisition or improvements or maintenance.

The interest the Trustee can claim is proportionate to the contribution.

Is it possible to defeat that claim? The answer is yes: if the bankrupt has good legal advice, they may be able to find a way around the common intention and contributions traps when buying the family home, and protect it from the Trustee in Bankruptcy.

For my case note on that decision, in which the home owner was successful in protecting the family home from the Trustee in Bankruptcy, click Is it possible to save the family home from the Trustee in Bankruptcy?

Even if you’re renting to your own brother, ALWAYS SIGN A LEASE

Recently, it cost Steve Zitsis almost $100,000 in legal fees to learn that even when renting to his own brother George, without a signed lease it is an expensive process to evict a tenant.

It started on friendly terms - there was a verbal agreement that George would rent the house for $250 per week plus paying council rates, water rates and utilities. Steve would pay the home insurance and be allowed to stay in one bedroom every six months when he came to Sydney for medical appointments.

Eight years later, it turned into a family dispute when Steve asked George to move out so Steve could sell the house. George refused to move.

George argued that he was entitled to stay in the house because Steve had promised him he could live there forever, and had even promised to leave the house to him in his will. George also said he had treated the house as his own, he had spent $50,000 renovating the kitchen, ripping up the carpet and polishing the floorboards, installing an air-conditioner and wardrobes.

If there was a signed lease, George would not have been able to argue he could live there forever because the lease would have a fixed term. Nor could he claim the renovations gave him the right to stay, because no renovations are allowed without the landlord's permission.

Steve could not use NCAT (the Tenancy Tribunal) for the eviction because he was now residing at the Surfers Paradise and interstate residents cannot use NCAT. So the eviction proceeding was in the Supreme Court of NSW, hence the high legal fees.

There, Justice Megan Latham (ex ICAC Commissioner) threw out George's arguments and ordered George be evicted.

The photo is of the house, and if you look closely, you will see George's black Mercedes parked in the garage.

The lesson is: Even if it's your own brother, anytime you're allowing anyone to live in your house, ALWAYS HAVE THEM SIGN A LEASE

For my legal case note click Family Disputes #1 Without a lease, brotherly love goes out the door

Purplebricks real estate promises greater fee transparency for sellers

Real estate agents charge sellers a commission, which in Sydney is currently 1.65% of the price - $16,500 on a $1m property; plus marketing expenses of about $5,000 which cover a signboard, photography, listings on domain.com.au, realestate.com.au and its own website, brochures and auction expenses.

Online marketers are disrupting this traditional business model. They are doing away with shopfronts, and operate virtual agency models. By doing so, they are able to lower their cost base and charge less for selling a property.

The most prominent online marketer is Purplebricks real estate, which charges a fixed fee, instead of a commission, for selling a property. It advertises prominently a fixed fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The fixed fee includes the services of a 'Local Property Expert', photography and write up for listings on the domain.com.au, realestate.com.au and its own website, a generic signboard, and inspections booked on the internet.

You might think that the fixed fee includes accompanied viewings, marketing reviews, marketing upgrades, an auction and so forth. But you would be wrong! In the fine print, you will find that these are additional services for which additional fees are payable.

Consumers complained to the Queensland Office of Fair Trading that Purplebricks was being misleading in advertising fixed fees, when additional fees were payable. The OFT agreed, and as a result, Purplebricks has changed its advertising to make the additional fees payable more prominent, and has agreed to pay $10,000 to the OFT as a 'fine'.

When carrying out its investigation, the OFT found that Purplebricks was in breach of many of the real estate licensing requirements, and fined Purplebricks another $10,000.

For more information on the action taken by the OFT, click on my article Purplebricks promises no misleading advertising of fixed fees and additional services, and admits breaches of the real estate licensing law

Are you selling your home or investment property? Is a flat fee online agent better than a traditional estate agent? Is it the difference in marketing?

Digital disruption has come to real estate agents in Australian in the form of online agencies which are offering marketing and sales services to assist sellers in selling their property for a low fixed-fee. They are undercutting full service real estate agents which charge a sales commission.

Purplebricks is an online agency. For a look at the Purplebricks Real Estate operating model, and how it is attracting owners to list properties in the Australian Real Estate market, click here

Court rules that Airbnb style holiday letting is unlawful in a strata building

The "Pinnacle" is an exclusive residential condominium on Grace Bay Beach in the Turks and Caicos Islands.

The developer aimed to attract buyers looking for an exclusive place to live, not the holidaymakers along the beach. So the developer included a strata by-law which banned owners from renting out their apartment for less than one (1) month.

This ban was ignored by the owners of apartment 102, who rented to holidaymakers, usually with one week stays. The body corporate sued the owners for breaching the strata by-law. The owners countered by arguing that the strata by-law was invalid because the Strata Law did not permit any restriction on a strata owner’s right to rent out their apartment. The Strata Law is the same in Turks and Caicos as it is in Australia.

The case was fiercely fought, all the way to Judicial Committee of the Privy Council in London, which was also Australia's final court of appeal until 1986.

In the last year or two, the topic of Airbnb style holiday lettings in strata apartments has been hugely controversial in Australia. NSW Fair Trading has advised and the NSW Civil and Administrative Tribunal has ruled that a strata by-law cannot restrict the rights of an owner to rent out their apartment in any way.

The Privy Council rejected this strict interpretation. It ruled on 21 December 2017 that it was possible that the owner’s rights be restricted, if the restrictions were reasonable. In this case, the strata by-law was a reasonable restriction on the right to lease because it was aimed at preserving the residential use of the building. It was reasonable to draw the line at 30 days to distinguish a residential use from a holiday letting use. Therefore the strata by-law was valid.

The ruling is a game changer. This is the new game plan (in my view):

The NSW Fair Trading advisory and the Tribunal ruling can be ignored as they are both wrong to reject any restriction on the right to lease.
If a strata scheme wants to restrict Airbnb style holiday lettings, it passes a strata by-law with a one (1) month minimum stay requirement, just like in the "Pinnacle"!
If an owner is unhappy with the strata by-law restriction, they can apply to the Local Council or Planning Authority for an approval or permit to use their apartment or villa as a serviced apartment or as a bed and breakfast establishment. If an approval or permit is granted, it will override the strata by-law.
If the strata scheme does not pass a strata by-law, then the owner can continue with their Airbnb style holiday lettings.

For a detailed analysis read my case note: Can a strata by-law restrict Airbnb style holiday lettings? A new legal decision is a game changer

How to handle Airbnb-style letting in NSW – all you need know

Airbnb is growing fast in Australia and almost half the properties involved are located in New South Wales. Many would-be hosts are wondering about the legal, tax and insurance implications – and their questions have now been answered.

The answers are given in a new video released by Sydney-based specialist travel and tourism lawyer, Anthony Cordato. The video, which is covers six topics, has been placed on YouTube.

“Airbnb-style short-term letting for apartments, for holiday houses and for spare rooms is growing rapidly in popularity for home owners, investors, and of course leisure and business travellers,” Cordato says.

“The regulatory environment is playing catch-up in NSW, and while it is, the legal framework is a grey area.”

New South Wales is a hotspot for Airbnb. There are 30,000 properties in NSW, 70,000 in Australia and 2 million worldwide.

“These are big figures,” Cordato notes.

This video covers six topics:

What Planning Approvals are required for short-term lettings?
What restrictions are there for strata titles properties?
How does Airbnb work?
Insurance
Tax
Loans using Airbnb income

Filmed at a property investment seminar, the video includes interesting and relevant questions and comments from the audience.

If you are thinking of venturing into the world of Airbnb, or similar letting platforms, this is essential viewing.

Written by Peter Needham, chief travel writer, eGlobal Travel Media

Help the NSW Govt decide on how to deal with Airbnb style short stay letting!

The NSW Government is under pressure from traditional holiday apartment operators, from strata residents, from Airbnb and Stayz, and from property owners who all have a different view about how short-term letting should and should not be regulated in NSW.

After a Parliamentary Committee failed to come up with a politically acceptable compromise, it has issued an Options Paper. It has asked the stakeholders, the general public and the industry to let it know what it should do.

The NSW Government puts forward four options:

Self Regulation: where the industry / operators adhere to a Code of Conduct, which includes complaints management, education and ongoing monitoring and reporting.
Special Rules for Strata Properties: where owners corporations cannot ban short-term letting, but are allowed to make by-laws to make owners liable for breaches by their tenants, to streamline enforcement, to levy extra and to strengthen the powers of the Tribunal.
Regulation through the Planning System: The Government would like to lay down clear planning guidelines for Local Councils, as it sees them as the best gatekeepers.
Registration or Licensing: This is seen a lighter touch than regulation through the Planning System.

This will not be a quick process. In the meantime, the fast growing industry will continue to grow in a legal grey area.

For more information on the NSW Government Policy click: What policy would you recommend to the NSW Govt for short stay traveller accommodation?

Does Airbnb give Boutique Hotels and B&Bs a competitive edge?

Traditional hotel chains and large resorts have long dominated the accommodation industry because of their strong brand marketing and distribution channels.

But as with so many other industries, the internet is disrupting the traveller accommodation industry. Through internet booking platform operators such as Airbnb, Stayz, eDreams and Bookings.com, the internet is providing small accommodation providers with easy and cheap access to a global market for travellers, whether it is for business or pleasure.

There are four services which Airbnb provides, which give Boutique Hotels and Bed & Breakfasts a competitive edge over traditional hotels and resorts, and which allows them to by-pass the traditional travel agents (brick & mortar or online) in making bookings:

Marketing
Bookings Management
Payments Platform
Property Damage & Injuries cover

These services are increasing lodging occupancy and pricing power for small accommodation providers.

For more information about how Airbnb is empowering Boutique Hotels and B&Bs to build their business, Click Here

Is Airbnb the answer to boosting cash flow for property owners?

If an owner has a spare room in their home, or has a granny flat, or an investment apartment near a business centre, or a holiday house, then

they can boost their cash flow by renting it out as short-term stays to business and holiday travellers.

This is how it works: The owner sets the rent higher than the long-term rent because it is a short-term letting. For instance, the Airbnb rent might be $65 per day (plus a cleaning charge) for the room, which is higher than the weekly rent of $245 per week ($35 per day) for the same room. This suits the guest because the rent is cheaper than the daily tariff charged by a hotel.

Airbnb is therefore effective way to boost cash flow from a property, whether it is a spare room, a granny flat or a whole house or apartment.

Click for more

Family Homes

Help the NSW Govt decide on how to deal with Airbnb style short stay letting!

The NSW Government is under pressure from traditional holiday apartment operators, from strata residents, from Airbnb and Stayz, and from property owners who all have a different view about how short-term letting should and should not be regulated in NSW.

After a Parliamentary Committee failed to come up with a politically acceptable compromise, it has issued an Options Paper. It has asked the stakeholders, the general public and the industry to let it know what it should do.

The NSW Government puts forward four options:

Self Regulation: where the industry / operators adhere to a Code of Conduct, which includes complaints management, education and ongoing monitoring and reporting.

Special Rules for Strata Properties: where owners corporations cannot ban short-term letting, but are allowed to make by-laws to make owners liable for breaches by their tenants, to streamline enforcement, to levy extra and to strengthen the powers of the Tribunal.

Regulation through the Planning System: The Government would like to lay down clear planning guidelines for Local Councils, as it sees them as the best gatekeepers.

Registration or Licensing: This is seen a lighter touch than regulation through the Planning System.

This will not be a quick process. In the meantime, the fast growing industry will continue to grow in a legal grey area.

For more information on the NSW Government Policy click: What policy would you recommend to the NSW Govt for short stay traveller accommodation?