What is hot in conveyancing Phillip Nolan Risk Manager LPLC

Transcription

1 What is hot in conveyancing Phillip Nolan Risk Manager LPLC

2 Introduction Communication let me down. Spandau Ballet

3 Key point Good communication in conveyancing includes: being transparent about costs presenting information in plain English identifying the clients preferred method of communication

4 Key point Good communication in conveyancing includes: giving good advice in a timely manner asking and inviting questions listening to what the client has to say using visual aids

5 Hot topics CGT withholding payments and real estate Cooling-off notice for purchase of land

6 CGT withholding payments and real estate Any vendor selling real estate worth $2million or more will be subject to the withholding tax unless they provide a clearance certificate to the purchaser by settlement. Commencement 1 July 2016 Relevant Act Tax and Superannuation Laws Amendment (2015 Measures No. 6) Act Amends schedule 2 of the Taxation Administration Act 1953 (Cwlth)

7 Assets caught Taxable Australian real property (TARP) Indirect Australian real property interests (IRPI) Option or right to acquire the above

8 Examples of affected transactions Acquisitions directly from the owner of: freehold leasehold mining, quarrying or prospecting rights Acquisitions indirectly from companies, partnerships, trusts including: company title interests transferor owns 10 per cent or more of the entity and the entity is land rich Options or rights to acquire any of the above

9 LPLC bulletins 1 July new CGT withholding payments for real property sales of $2M or more New CGT withholding payments for options, company title interests and indirect Australian real property transactions Practical examples

10 Cooling-off notice An estate agent is not an agent at law for the purpose of being served a cooling-off notice for the sale of land Relevant case Tan v Russell [2016] VSC 93 Relevant Act See s.31 Sale of Land Act 1962 (Vic) Tip Serve any cooling-off notice personally on the vendor and a copy on the vendor s representative

11 Property and conveyancing cost of claims 2015/16 Property and conveyancing % Other %

12 Property and conveyancing number of claims 2015/16 Property and conveyancing % Other %

13 Five main areas of property and conveyancing claims 2015/16 based on cost of claims Duty and CGT - 18% No advice about land - 17% Defective disclosure - 11% GST - 6% Caveats / check searches - 6% Other - 42%

14 Causes of property and conveyancing claims 2015/16 based on cost of claims Failure to manage legal issues - 38% Poor communication - 30% Poor engagement management - 15% Simple oversignts -7% Lack of useable trail - 4% Other - 4%

15 Tax quiz Who should notify the SRO of the acquisition by a trust? client lawyer accountant lender/mortgagee Vote now

16 Land tax and trusts claim In June 2009 a practitioner acted for a purchaser of a house on the Bellarine Peninsula. The property was marketed as a development site with the potential for a number of premium townhouses STCA. The individual purchaser nominated a company as substitute purchaser. The matter settled in September In 2015 the SRO determined that the property was subject to the land tax surcharge for trusts and sought additional land tax of approx. $20,000.

17 Lessons Take time at the outset of a matter to talk about any land tax issues with the client Carefully check all conveyancing documents for any reference to a trust More information State Revenue Office - land tax and trusts LPLC publications: Land can be taxing LIJ 1 March 2014 More land tax woes blog posted 12 December 2014

18 Lessons Inform foreign resident clients of the land tax absentee owner surcharge. This will increase from 0.5 per cent to 1.5 per cent from 1 January 2017

19 Clients and communication What do clients want the most from their lawyer? Cheap legal services Better lines of communication Transparency Vote now

20 Poor communication - example of claim A practitioner received a contract of sale via from a purchaser client. The property was the rear unit on a two lot subdivision in a Bayside suburb. The land information certificate in the section 32 statement disclosed an improved value of approximately $1.5m. On the same day the practitioner sent an in reply stating: there is no active body corporate the boundary of the property is shown on the planning certificate

21 Lessons Resist the temptation to give off-the-cuff advice When asked to advise generally immediately respond by clarifying your retainer Use a precedent first letter to purchasers and/or a checklist Audit files to ensure staff are: using the precedents not copying from other files Ensure your precedents are updated regularly

22 Exercise error spotting You act for the purchaser of 38 Little Lonsdale Street Melbourne. The purchaser has provided you with a section 32 statement which they received on 23 July Prior to signing the contract the purchaser wishes to obtain your advice on the section 32 statement. After a preliminary review you realise that the section 32 contains a number of defects.

23 Action Refer to the section 32 statement in your materials. List three mistakes in the section 32 statement: How would you communicate the errors in the section 32 statement to your client?

24 Due diligence and section 32 statements Property websites checklist and comments Key Risk Checklist: Purchase of land Questions for the Purchaser

25 Conclusion.don t let me be misunderstood Animals

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40 Joint tenants Tenants in Common John and Mary Smith John Smith Mary Smith John dies John dies Mary Smith Mary Smith John s estate Beneficiaries in John s will

41 Purchase of Land: Questions for the Purchaser Responses required without delay Circle yes or no as applicable. Provide the additional information as indicated. If you do not know the answer or are unable to provide the additional information please insert the words Not known. Please sign where indicated at the foot of the final page and forward this completed list and all necessary information to the sender. No. Question Answer Title 1. Who is to be registered on the title(s) to the land? If more than one person how do you want to be recorded as owners? Joint proprietors on death property goes automatically to other joint proprietor(s) Tenants in common on death share in property forms part of deceased s estate If they are not named in the contract we will need to do a nomination. Nomination must occur without delay to avoid double duty. Proof of identity is required in accordance with the Model Participation Rules issued by ARNECC for anyone who is to be registered on title. Insert details:... ABN: share. ABN: share If tenants in common please advise the share to be held by each person. Consider issues such as: amount paid in cash by each person liability for repayment of any debt / expenses contributions by third parties ie parents entitlement to equity amount to be paid on sale [Please also sign and return the attached client authorisation form if the sale will be conducted electronically.] 2. Is any person to be registered on the title(s) in their capacity as an executor, trustee, guardian or administrator? If yes provide details 3. Is any person to be registered on the title(s) related and/or associated with the vendor, including any subsidiary or holding company? If yes provide details. Last updated: July 2016 (105313) Page 1 of 5

42 About you 4. Is anyone to be named in the contract and/or to be registered on the title(s) a foreign person / resident? A foreign person includes an individual not ordinarily resident in Australia and a foreign company for the purposes of the Foreign Acquisitions and Takeovers Act 1975 (Cwlth) A foreign resident means a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (Cwlth) 5. Provide the date of birth of each person to be registered on the title(s). We are required by law to provide this information to various government agencies. 6. For a corporate purchaser, who is authorised to give instructions, sign the contract/vendor's statement/transfer? If yes, you may be required to obtain prior approval from a state and/or federal government to buy the land and when you sell the land certain withholding obligations apply. Name: /./ DOB Name: /./ DOB Insert name(s): 7. Are you the selling agent or the agent s employee or relative? If yes, refer to section 55 and 55A of the Estate Agents Act 1980 (Vic) for the process to be followed. Insurance, tax, duty and wills 8. Have you arranged insurance for the land? Please discuss any insurance requirements with your insurer / broker. Some purchasers take out their own insurance prior to settlement to ensure adequate insurance is in place. You should be aware that the vendor may not have adequate insurance cover or any insurance at all. 9. Will you be applying for: first home owners grant reduction in duty payable for any reason. For example, pension concession, transfer to spouse. Last updated: July 2016 Page 2 of 5

43 10. Have you considered the tax consequences, such as GST, GAIC, land tax, CGT, and stamp duty of your purchase? If no, do you require us to advise you on any tax issues? We recommend you also discuss any issues with your accountant. 11. Have you considered the effect the purchase will have on your will? Finance 12. Have you paid the full deposit? Please inform us if you paid by bank guarantee / deposit bond. If yes, was the deposit more than 10 per cent of the price? 13. Are you purchasing subject to finance being approved? If yes: you need to keep us informed of your progress every two days and must notify us before the approval date about whether finance has been approved to enable us to notify the vendor to end the contract. the vendor may ask for evidence of your inability to obtain finance should you wish to withdraw from the contract. 14. Are you obtaining a loan to pay for some of the purchase price? For any funds you are providing at settlement we recommend you authorise your lender to draw on your account(s) to deduct funds for settlement. 15. Have you notified your finance broker / lender of your purchase? If yes, have you provided them with a copy of the contract of sale and section 32 statement? If yes, provide the name of your finance broker / lender. 16. Is any person who is not to be registered on the title(s) providing funds to assist with your purchase of the land? If yes, provide details. Last updated: July 2016 Page 3 of 5

44 About the land 17. What is the location on the plan of subdivision of the land? Note: car spaces may be subject to a congestion levy. See attached copy plan of subdivision. Highlight each part including the land, apartment/unit, any car space(s), storage lot(s) or other areas included in the sale. 18. What is your intended use of the land? Insert details: For example a dwelling or shop. Is this the same as the current use? 19. Do you intend on: leasing the property residing in the property Note: if you are buying subject to a lease this lease may continue after settlement. Do you require our advice about any lease matters? If you reside at the property is this your principal place of residence? If yes, land tax may be payable from settlement for the principal place of residence you currently reside in if you are not selling that property. 20. Do you believe any of the information in the section 32 statement is incorrect? 21. Are boundary fences in reasonable condition? Note if you are concerned about the boundary locations we recommend you obtain a land survey. 22. Is there a pool or spa at the property? If yes, provide details: If no - once the contract is signed you will be responsible at your cost for any necessary fencing works. If yes are barriers in place? 23. Do you have any reason to believe that the vendor has done any renovation works in the last 7 years? For example renovated a bathroom. Last updated: July 2016 Page 4 of 5

45 Settlement 24. Where would you like correspondence sent after settlement? The property or insert other address: Any questions 25. Please attach a list of any questions you have about your purchase. Information available from Consumer Affairs Victoria (CAV) 26. You can find information published by CAV about buying real estate, owners corporations, renting and retirement villages here. Signed by or on behalf of the purchaser(s) Plan of subdivision showing the lots to be attached Client authorisation form to be completed and attached Last updated: July 2016 Page 5 of 5