Black Mould (pictured under a microscope) can cause
serious respiratory difficulties, asthma and dermatitis in
people. It is definitely a health hazard.
Landlords have a legal duty to provide premises fit to
live in. This applies not only at the handover, but also
during a tenancy. For landlords, mould in rental house is a
The law is: if mould appears, the tenant should notify
the landlord to treat the mould because it may make the
premises unfit for habitation. And the landlord should take
steps to treat the mould and its source as soon as possible.
These are some actual case studies on mould affected
properties from NCAT (the NSW Tenancy Tribunal) which
illustrate the consequences of mould infestation:
Townhouse at Waitara: The tenants moved out 2
weeks after moving in because mould was everywhere and
they were suffering respiratory disruption. The landlord
was ordered to reimburse the revivalist's cost of
$1,741, refunded the rent paid in advance and the bond
House at Greenwich: The tenants suffered
mould for a year before they stopped using bedroom 3,
and notified the landlord. The landlord installed
underfloor vents, but the mould remained. The day the
tenants moved out, they had an expert's mould report
done which stated that the mould had made the house
unfit for habitation. The landlord was ordered to pay
$15,000 to reimburse the cost of decontamination of
personal possessions, a rent rebate of $230 per week for
being unable to use bedroom 3, as well as a bond refund
and a break fee for early termination of the lease.
Abandoned houses are not difficult to spot - the long
grass, peeling paint, torn curtains, gates off hinges,
leaning fences and overflowing letterbox are giveaways.
It could be a deceased estate, or a house awaiting
demolition or major renovation, it could be the owner has
been away for a long time, or it could be that a long term
tenant has died.
There's always a story.
One story concerns a house in Erskineville, in inner-city
Sydney. The neighbour had noticed a terrible smell coming
from the house, but it was not until a year later that she
reported it to the Police. Her neighbour's decomposed body
was found wedged between the stove and the sink. A real
estate agent tracked down the owner's family and sold the
house, putting paid to any claim for possessory title.
In most cases, someone is keeping an eye on the house.
Someone is paying the Council rates and water rates. Someone
is collecting the mail. Someone mows the lawn once in a
while. If you are interested in purchasing, you ask the
neighbours or the Council for contact details. Or tape a
note on the front door. You could carry out a title search.
Occasionally, the occupier dies and nobody takes an
interest. These houses are suitable for possessory title
A recent example was in the NSW Supreme Court case of
McFarland v Gertos where the Court awarded possessory
title to a person who took possession of an abandoned house
at 6 Malleny Street, Ashbury (pictured today in restored
condition). The house is in a quiet suburban street, next to
Canterbury Racecourse in Sydney.
In that case, Mr Bill Gertos took possession and
persuaded the court that his adverse possession was Open,
not secret; peaceful, not by force; and adverse, not by
consent of the true owner; and it was continuous for
He took possession in 1998, cleaned out the rubbish, made
it habitable, rented it out and paid the rates. He spent
more than $100,000 renovating the house in 2015.
It was not until 2017 that the deceased's family took an
interest in the house. But it was too late: their
father/grandfather's title was extinguished in 2010 (12
years after 1998).
As a result, the title is now in Bill Gertos' name to a
house worth $1.7 million.
But is it unjust enrichment? The family did not
claim compensation for the value of the house net of what Mr
Gertos spent in renovations in this case, presumably because
it did not occur to their legal team to make a claim for
The NSW Court of Appeal has now shed light
upon a dark corner of the Commonwealth Constitution, which
is that only a court of a State can hear
disputes between residents of different States.
You may think that this is a purely academic question,
but it's not the case if you are a Queensland resident who
owns a residential rental property in NSW, according to the
You may want to evict a tenant for non-payment of rent, or
claim a rental bond for the cost of cleaning and repair of
damage when the tenant moves out. Up until now, you made an
application in the NSW Tenancy Tribunal (NCAT), which
provides quick and cheap eviction orders and payment orders.
But NCAT is not a court - it is a tribunal which sits
outside of the formal court structure.
This is where the Commonwealth Constitution comes into play.
According to the decision of the NSW Court of Appeal,
interstate landlords cannot obtain orders under the
Residential Tenancies Act (NSW) from NCAT because it is not
a "court of a State". They must use the slow and expensive
Local Court or District Court of NSW instead.
This decision could have ramifications for interstate
landlords throughout Australia. But for now, interstate
landlords who own property in Queensland are protected by a
decision of the Supreme Court of Queensland.
Let's start by making it clear that a sunset date is not
a romantic meeting. A sunset date is a date that a property
developer inserts into off the plan sale contract by which
they expect the building to be completed and the strata plan
to be registered.
Until 2 November 2015, there were no restrictions on
vendors or purchasers terminating the sale contract if the
building was not completed by the sunset date. But in a
rising property market, some property developers were
delaying completion and were using the sunset clause to
terminate then re-sell at a profit.
In response, the NSW Government introduced a Sunset
Clause Law which requires the vendor in the contract to
obtain permission from the NSW Supreme Court to rescind the
contract. Permission is granted if the court is satisfied
that it is just and equitable in all the circumstances to be
able to rescind.
In only the second case which has been decided under the
Sunset Clause Law, the Court has decided to refuse
permission to the property developer to rescind nine off the
sale contracts in an apartment development in Surry Hills,
The court refused because the purchasers would lose the
benefit of an average increase in value of $200,000 above
the Contract Price and lose the 'lifestyle' choice of moving
in. This was so, even though the property developer was not
wholly to blame for the delay in completing the building
because its builder went into administration.
The short answer is that it can be, but ever since 1677
it has become a lot harder.
What happened in 1677? The English Parliament passed the
Statute of Frauds, which made verbal agreements for
the sale of land legally unenforceable because they
encourage fraud. The Statute of Frauds came to Australia and
is the current law in every state and territory in
Australia, 341 years after it first became law.
As a result, the Courts will not enforce an agreement which
is partly verbal and partly in
writing, or an incomplete written agreement for
the sale of land, such as a receipt for payment
of deposit or a real estate agents sales advice.
This is because the written agreement does
not contain all of the terms of an agreement for
sale of land, and does not contain the
But there is an exception: it is still possible to
enforce a verbal agreement for the sale of real estate if
there is part performance by the buyer.
What is part performance? Part performance is when a
buyer pays some or all of the price, or moves into
possession, spends money on improvements, and is led to
believe by the seller that for all intents and purposes they
are buying the property!
The Court of Equity will not sit idly by and allow the
seller to dishonour an agreement which does not comply with
the Statute of Frauds, because it would result in another
fraud - a fraud on the buyer.
Therefore, if a buyer demonstrates part performance, the
Court will enforce that agreement and order that the title
to the property be transferred, subject to payment of the
As you can imagine, the rules applying to part
performance are complex. Recently, the High Court of
Australia settled upon a set of rules.
Property vendors are anxious to know what happens when a
purchaser registers a Caveat over the property they are
selling under a Contract for Sale.
They ask: Will the Caveat derail the sale and what
should I do? This is a guide.
First: Why has the purchaser registered a Caveat? If it
is because they have released the deposit to the vendor or
if settlement is deferred beyond the standard time, then it
is perfectly justifiable for a purchaser to register a
Caveat, provided they have been granted a 'caveatable
interest' in the Contract for Sale.
Second: How does the Caveat affect the vendor? Anyone
searching the title will see the Caveat - if they are a
lender, they will not lend more money to the vendor; if they
are another purchaser, they will not enter into a Contract
of Sale with the vendor; unless the Caveat is removed. So a
Caveat restricts the vendor in refinancing or re-selling the
Third: Is there a dispute with the purchaser? If there is
no dispute, then the purchaser is using the Caveat to
legitimately protect their interests, and will come to
settlement with a Withdrawal of Caveat. But if there is a
dispute, the purchaser is using the Caveat as a bargaining
chip against the vendor. If so, the vendor needs to take
Fourth: What action can a vendor take to remove the
caveat? The process is called lapsing the caveat. The vendor
serves a lapsing notice which gives the purchaser 21 days
(in NSW) (14 days in Qld) to apply to the Supreme Court to
maintain the Caveat on the title. If the purchaser does
nothing, the Caveat will be removed from the title by the
Fifth: What happens if the purchaser goes to Court? For a
vendor, the most significant part is that the purchaser must
'proffer an undertaking as to damages' which means that they
accept responsibility to compensate the vendor for all
losses, if the court agrees to maintain the caveat on the
title until the dispute with the vendor is determined by the
In a recent case before the Supreme Court of NSW, the
purchaser applied to maintain their caveat. But when the
moment came, they refused to accept responsibility for
losses the vendor might suffer. As a result, the Court
ordered the Caveat be removed and the purchaser pay the
vendor's legal costs of going to court.
New NSW policy
welcomes short stay rentals (Airbnb style)
On 5 June 2018, the New South Wales Government announced
a new policy for hosts for short-term Airbnb style holiday
letting. The new policy will affect both owner-occupiers and
The key is a new cap of 180 days in any one year on
short-term lettings for an investment property, meaning a
property that is not owner-occupied. The cap does not apply
to owner-occupiers who rent a spare room or rooms.
Owner-occupiers - who rent 'rooms' in houses and home
units anywhere in NSW - There is no cap on the number of
days in a year that rooms can be let for short-term
lettings. This applies to owners who let part of the house
for short-term lettings, and live in another part. If
breakfast is served, a B & B Licence might be needed from
the Local Council.
Investors - who rent 'whole' houses and home units
outside of Sydney - There is no cap on the number of
days in a year that the whole house or home unit can be let
for short-term lettings.
Investors - who rent 'whole' houses and home units in
Greater Sydney - there is a cap of 180 days in any one
year for short-term lettings. The boundary line for the
Greater Sydney Region is yet to be drawn.
Investors - who rent home units in Sydney - If the
Owners Corporation passes a 75% majority resolution (a
special resolution) then it can ban short-term lettings by
investors of 'entire' home units in the building. This
cannot affect owner-occupiers who let rooms. It is not clear
whether existing bans will be allowed to continue, or
whether a new resolution will be needed.
For all short-term lettings, there will be a new
mandatory Code of Conduct that hosts and guest must follow,
accompanied by a two-strike policy, whereby hosts or guests
who commit two serious breaches of the code within two years
will be banned for five years and listed on an exclusion
The Chapter on Real
Estate Law in Australia from the International Real Estate
The law applying to Real Estate around the world is both
similar and different.
Law Business Research invited me to join its expert panel
to contribute the chapter on Australia to the international
Real Estate Law Review which covers 35 countries from around
the world including the United States, Indonesia, Hong Kong
All authors answer a common set of questions in our
chapters, which are:
The Australian Chapter I have written is an excellent
birds-eye view of real estate law in Australia. It is
particularly useful for interstate and overseas investors.
Click on this a link - The Real Estate Law Review -
Is it a good idea to switch from a
family trust to a company to save tax?
With family trusts under threat as a tax shelter, are
companies looking like an attractive tax effective
The tax effectiveness of a family trust is that profits
are distributed to members of the family, as you choose,
every year. This means diverting the profit distributions
away from high income earners to low income earners (such as
adult children) to take advantage of the tax free threshold
of $18,200, and the 19 per cent tax bracket up to $37,000,
so as to avoid distributions to high income earners who have
tax brackets of 37 per cent from $87,000 up to $180,000 and
45 per cent above.
The threat (currently the federal opposition policy) is
for family trust distributions to be taxed at a rate of 30
per cent. For example: if the low income earner is earning
wages (from casual or part-time work) of $15,000 pa, then
that is tax free because it is earned income. But on every
dollar of trust distribution which tops up income up to
$37,000, the tax rate is proposed to be 30 per cent. Trust
distributions which top up income above $37,000 will be
taxed according to the tax bracket, which is 32.5 per cent.
Company profits are kept by the company - they do not
need to be fully distributed each year - unlike profits from
a family trust which must be distributed. After paying
company tax, the profits do not need to be paid out as
dividends. Therefore, if the shareholders are high income
earners, they can avoid receiving income which is taxable in
a high tax bracket.
The icing on the cake is the recent company tax rate
cuts, which for a company with an annual income of less than
$25 million, means a tax rate of 27.5 per cent instead of 30
per cent. This means that small company can retain more of
But the 27.5 per cent tax rate is available only if 20
per cent or more of the company's income is from business
activities. That is, pure investment income does not
qualify, such as rent, interest, dividends, capital gains
and trust distributions
Conclusion: If a flat tax rate of 27.5 per cent is
attractive, then it's a good idea to switch to using a
company for a new active investment or business.
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
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
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
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
“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
“These are big figures,” Cordato notes.
video covers six topics:
What Planning Approvals are required for short-term
What restrictions are there for strata titles
How does Airbnb work?
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
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.
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.
Government puts forward four options:
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.
not be a quick process. In the meantime, the fast growing
industry will continue to grow in a legal grey area.
The Federal Budget 2017 has cut two long standing tax
deductions that residential property investors enjoy.
The first is the tax deduction for travel expenses, which
has been cut out: Property Investors like to visit their
rental property to inspect it between tenancies, to carry
out maintenance and repairs and collect rentals. The petrol,
the airfares, the accommodation, and other travel expenses
will no longer be tax deductible for travel after 30
Tip Visit your rental property before 30 June.
The second is the tax depreciation for plant and
equipment, which has been cut down:
There is no longer any depreciation if the plant or
equipment is in a property purchased after 7:30 pm (AEST) on
9 May 2017 (the time when Budget 2017 was handed down). In a
new house or off-the-plan apartment, this could be worth up
to $2,000 per annum.
What does this apply to? According to the Budget Papers:
Plant and equipment items (usually mechanical fixtures or
those which can be ‘easily’ removed from a property) such as
dishwashers and ceiling fans. We will need to wait for
the full list, but it is likely to include: stoves, range
hoods, hot water systems, clothes dryers, air conditioning
units and solar panels.
The plant and equipment will not be depreciable if it
is already in the property when it is purchased. It will
be depreciable if purchased by the property investor.
Tip Buy plant and equipment separately, (not as part
of a property purchase contract).
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
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:
Property Damage & Injuries cover
These services are increasing lodging occupancy and pricing
power for small accommodation providers.
For more informationabout
how Airbnb is empowering Boutique Hotels and B&Bs to build
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.
Why is a 10% deposit required for a property purchase
contract? Is it possible to pay less than a 10% deposit?
What ways are there to fund the deposit? Are there creative
ways to fund a deposit? What happens to the deposit after it
property buyers guide to Cooling Off Cooling off periods apply by law to all
contracts for the sale of residential property, with the
exception of sales at action or where a solicitor or
conveyancer has provided a 66W Certificate.
How do you use a cooling off period to give you the
breathing space you need to obtain unconditional loan
approval, pest and building inspections, etc?
Compensation awards can exceed $1 million for head
injuries or spinal cord injuries caused by falling from a
ladder, slipping on stairs, and tripping over.
For this reason, it is essential for home owners and
landlords to have Liability insurance cover as part of their
Home Insurance / Landlord's Insurance policy.
The importance of having Liability insurance cover was
recently highlighted in a decision of the Supreme Court of
Tasmania. The court ordered the home owner (i.e. their
insurer) to pay their roofer over $1.1 million in
compensation for his severe head injuries because they owed
him a duty of care for his safety while working on the roof.
Without Liability insurance, such an award would have
been devastating for the home owner. They would have been
forced to sell their home to pay the award, and face
bankruptcy for the shortfall.