THE LOT A QUARTERLY BULLETIN ON DEVELOPMENT SECTOR ISSUES MAY 2017 EDITION ONE

Transcription

1 THE LOT A QUARTERLY BULLETIN ON DEVELOPMENT SECTOR ISSUES MAY 2017 EDITION ONE

2 DEVELOPER SERIES SUMMARY Maddocks recently delivered a seminar as part of its regular Developer Series. The seminar covered: Valuing reserved land The right to planning compensation Compensation for designated land in PSPs At the outset, it is important for developers to know the difference between planning compensation and compensation for compulsory acquisition of land. The former is available under the Planning and Environment Act 1987 for the diminution in market value of land by reason of its reservation and can be claimed before the land is acquired by a public authority (e.g. VicRoads). The latter is payable upon the compulsory taking of land by the authority. On this basis, the market value of reserved land upon sale could never realise full market value. However, it appears that municipal councils take a varied approach to the valuation of reserved land. Not unlike reservation of land under public acquisition overlays (PAO), the designation of PSP areas is clearly a key aspect of planning for future infrastructure requirements. However, unlike land under a PAO, the legislation is less clear with respect to compensation rights. A VCAT decision has entrenched this uncertainty. In Skerdero Pty Ltd v Cardinia SC [2014] VCAT 1334, the applicant owned a relatively small site of which approximately 80 percent was designated for a future school site under the Officer PSP. The applicant applied for, and sought refusal of, a development permit on the basis that the land was required for a public purpose. Such refusal would have triggered the applicant s planning compensation rights. However, the Tribunal held that it could not be satisfied that the land was, as a matter of certainty, required for a public purpose. It found that, in the absence of a specific requirement by the Department of Education for the site, it could only be satisfied that the land may be required for a school site in the future. This outcome is clearly unsatisfactory as it results in land owners holding designated land for public authorities for an uncertain period, while paying all holding costs, and without the right to recover the loss in value caused by the designation. A better basis for confirming compensation rights might be a finding that designation of land within a PSP is, for legal purposes, no different than reservation of land under a PAO. This would require a ruling by the Supreme Court. As with payment of GAIC for reserved land, rates and taxes also impose an additional cost upon developers holding reserved land. The legislation suggests that such land should be valued on the basis that it retains carcass value only that is, with compensation for the reservation assumed to have been paid and therefore excluded from the land s market value. This is because the Planning and Environment Act 1987 denies a purchaser of reserved land the right to claim planning compensation. THE LOT EDITION ONE MAY

3 DUTY & TAX CHANGES As part of its housing affordability initiative, the Victorian Government has announced a suite of changes, scheduled to commence on 1 July 2017 if passed by the Victorian Parliament. The proposed changes include: 1 RESTRICTION TO OFF-THE-PLAN DUTY CONCESSION 2 DUTY GRANT INITIATIVES FOR FIRST HOME BUYERS 3 INTRODUCTION OF TAX ON VACANT RESIDENTIAL PROPERTIES 4 PROPERTY TRANSFERS BETWEEN SPOUSES Investors and those relying on the investor and foreign purchaser market should be wary of the government s proposal to limit the current offthe-plan duty concession to purchasers who will occupy the property as their principal place of residence where the dutiable value is under $550,000 or, for those who are also first home buyers, the higher threshold below. This will mean that the off-the-plan duty concession will no longer be available for investment properties, commercial properties or holiday homes. There are indications that contracts entered into on or after 1 July 2017 will be affected by the above initiatives. However there are a number of details which still need to be understood, such as the effect of nominating or varying contracts entered into prior 1 July Source State Revenue Office First home buyers purchasing either new or existing properties will be entitled to the following: if purchasing a property of a dutiable value not more than $600,000, no requirement to pay duty. if purchasing a property with a dutiable value between $600,001 and $750,000, a concessional rate of duty calculated on a sliding scale. The mechanics of how the sliding scale will operate are yet to be confirmed. This applies to contracts entered into from 1 July To be eligible for the above, purchasers must also be eligible for the First Home Owners Grant and use the property as their principal place of residence for of 12 months (from when they are entitled to possession of the property). A new annual tax equivalent to 1 percent of the capital improved value of each taxable property will be imposed on vacant residential properties in specific inner city and middle suburb Council areas from 1 January A residential property may be considered to be vacant if it is unoccupied for more than six months in a calendar year (whether those six months are continuous or not). Certain properties will be exempt from this tax such as holiday homes (owned by those with a principal place of residence in Australia), deceased estates and homes subject to legitimate temporary absences such as medical care or overseas appointments. Property transfers between spouses and de facto partners involving commercial and/or investment properties will no longer be exempt from duty. Exemptions for the principal place of residence and for transfers following a relationship breakdown will remain in place. The Victorian Government has commented that these changes reflect the Government s efforts to support first home owners and bring Victoria s policy on property transfers between spouses into line with NSW, QLD and WA. The Government also proposes to increase the First Home Owners Grant available for purchasers buying property in regional Victoria. 3 THE LOT EDITION ONE MAY 2017 THE LOT EDITION ONE MAY

4 FIVE BUSINESS DAY PLAN REGISTRATION A WIN FOR DEVELOPERS In a big win for developers, Land Use Victoria has announced that it is trialling a new system which will see a five business day turnaround for registration of plans of subdivision of ten or more lots. UDIA has worked tirelessly with Land Use Victoria to secure this win. Bettina Sheeran of Maddocks played a major role in assisting the UDIA, on behalf of the broader industry, to achieve this landmark commitment from Land Use Victoria. The new timeframes will apply to all applications for both land and apartment plans of subdivision of ten lots or more provided the application is complete and correct, as submitted. Lodgements that require re-certification or consent to an amendment by a council or any other amendment to the plan or associated documents not satisfied within 24 hours will lose their priority status and be subject to the standard registration timeframes. The approach will see Land Use Victoria prioritise non-requisitioned plans with larger lot numbers, but continue to treat all requestioned plans the same. What this means is that if a mistake is made in the application process, the application will not be prioritised and will be subject to the general timeframe target of 15 business days (or longer in some instances). Common errors that hold up registration of plans include: SPEAR references are not correctly noted on the plan registration forms are not correctly completed incorrect lodgment fees being provided. If land is subject to GAIC, developers will need to ensure GAIC release certificates are obtained as these need to be submitted when lodging a plan for registration and usually take around 10 business days to receive once requested. Land Use Victoria s target for registration of all other plans is 15 business days from lodgement. PARLIAMENT PASSES LEGISLATION TO ADDRESS UNDERQUOTING The Estate Agents Amendment (Underquoting) Act 2016 (Vic) has been passed, which amends the provisions of the Estate Agents Act 1980 to address underquoting by estate agents. Consumer Affairs Victoria is actively pursuing estate agents that engage in underquoting. The key changes are: 1. The requirement for estate agents to ensure that an estimate of the selling price contained in an engagement or appointment to sell residential property is reasonable and is determined in accordance with the legislation. 2. The requirement for estate agents to take into account the sale price of three comparable properties when determining an estimated selling price for a residential property. 3. If an estate agent knows or could be expected to know that an estimated selling price has ceased to be a reasonable estimate, the agent must notify the seller, in writing, stating that the estimate has ceased to be reasonable, the reason the agents believes this, that the agent proposes to revise the estimate and amount of the revised estimate. 4. Agents are required to prepare a statement of information for a residential property that they are appointed to sell. The statement must contain, among other things, an indicative selling price, the median selling price for properties in the relevant suburb during a prescribed period and, if the agent took into account three comparable properties to determine the estimated selling price (see above), the address, sale price and date of sale of those properties. 5. A prohibition against estate agents making certain representations while marketing a residential property. This includes stating a selling price (or likely selling price) that is less than the estimated selling price in the agent s engagement, modified by words or symbols, or less than any written offer that the agent knows the seller has rejected. THE LOT EDITION ONE MAY

5 CONTACT US If you have any questions or would like to learn more about how Maddocks can help you throughout all stages of your project, please contact: Nick Holuigue nick.holuigue@maddocks.com.au David Hartney david.hartney@maddocks.com.au Nick Sparks nicholas.sparks@maddocks.com.au Paul Woods Partner Construction paul.woods@maddocks.com.au Simone Holding Partner Construction simone.holding@maddocks.com.au Ian Beattie Partner Project Finance ian.beattie@maddocks.com.au Michael Taylor-Sands Partner Tax & Structuring michael.taylor-sands@maddocks.com.au Arlene Colquhoun Special Counsel Commercial arlene.colquhoun@maddocks.com.au The copyright in this publication is owned by Maddocks. All rights are expressly reserved. This publication may not be downloaded, printed or reproduced, in whole or in part, without the prior written consent of Maddocks. Copyright enquiries and requests for additional copies should be directed to Maddocks. This publication provides general information which is current as at the time of production. The information contained in this communication does not constitute legal or other advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information and any action taken or decision made by any party based on this publication is not within the duty of care of Maddocks. Maddocks disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information contained in this publication. Any party that relies on the information contained in this publication does so at its own risk. Access to this publication is not intended to create nor does it create a solicitor-client relationship between the reader and Maddocks.