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Property Law tested by Developer

Jobema Developments Pty Limited is the first developer to test the new property law introduced by the Conveyancing Amendment (Sunset Clauses) Act 2015, which requires vendors to either obtain the consent of purchasers before they can rescind an off-the-plan contract in reliance on a sunset clause in the contract, or to obtain the permission of the Supreme Court to do so.


In this case, Jobema, the defendant, purchased a development site from Xycom, who had exchanged a number of off-the-plan contracts with a sunset date for the registration of the strata plan of 31 December 2015. As part of the purchase, Jobema would assume Xycom’s obligations under the exchanged off-the-plan contracts, one of which was with Mr Wu.

Xycom had carried out minimal work on the project before it had been sold. While Jobema commenced work immediately, the project was not completed by the sunset date. As required by the new legislation, notice of the proposed rescission was served on Mr Wu and the notice cited several reasons for the delay and the proposed rescission. Mr Wu did not consent to the rescission and Jobema subsequently applied for leave in the Supreme Court under the Conveyancing Act.
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Property Law changes to Off-the-Plan Contract

As of 2 November 2015, property law in New South Wales has changed in relation to off-the-plan contracts, giving purchasers increased protection which make it harder for developers to enact sunset clauses to cancel contracts. This applies to all contracts for sale, even those already entered into.

A sunset clause is traditionally included in an off-the-plan contract in order to allow a buyer or developer to rescind if completion has been delayed. However, some developers have been using abusing these clauses, intentionally delaying a project in order to cancel existing contracts and then resell to new buyers at a higher price to reflect the current market.

With the Conveyancing Amendment (Sunset Clauses) Act 2015 introducing s66ZL into the Conveyancing Act, developers must now provide purchasers with written notice of their intention to rescind no later than 28 days before the sunset date and specify why they are proposing to rescind the contract and the reason for the delay in creating the subject lot.
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New South Wales moving towards a paperless conveyancing future

The introduction of Version 2 of the Conveyancing Rules means that any discharge of mortgage signed on or after 1 March 2017 must be lodged by the discharging mortgagee or its representative, except where the discharge is to be lodged with any other dealing affecting the same folio(s) of the Register (e.g. a transfer of land and/or a mortgage).

Providing a stand-alone discharge to the registered proprietor to lodge at the Land and Property Information shall no longer be allowed

In addition to the above, if the mortgagee is an ADI (authorised deposit-taking institution under the Banking Act 1959 [Cth]):

  • A mortgage or discharge of mortgage to which the National Credit Code applies, signed on or after 1 March 2017 must be lodged electronically, except where lodged with any other dealing affecting the same folio(s) of the Register.
  • If an incoming mortgagee in a refinance transaction is also an ADI, any combination of mortgage and discharges of mortgage signed on or after 1 August 2017 must be lodged electronically, except where they are to be lodged with any other dealing affecting the same folio(s) of the Register
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Immediate review of discretionary trust deeds required in light of NSW duty and land tax changes

Article by Mimi Su, Senior Associate

As a result of the 2016 NSW State Budget the NSW Government has introduced two measures aimed at foreign investors purchasing or holding NSW residential land.

Firstly, a surcharge duty of 4% has been effective from 21 June 2016 and will apply to acquisitions of NSW residential land by foreign persons.  This surcharge is payable in additional to any other stamp duty payable on the transaction.

Additionally there is a 0.75% surcharge land tax that applies to foreign persons who are owners of NSW residential land as at 31 December in each calendar year and to commence from the 2017 land tax year.

Specific issue that it creates for discretionary trusts
The definition of who constitutes a “foreign person” for the purposes of these new measures are quite wide and takes the definition in the Foreign Acquisitions and Takeovers Act 1975.

The test applicable to whether a trust will be a foreign person for the purposes of these measures is to determine whether any foreign beneficiary of the trust holds a ‘substantial interest’ in the trust.
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Strata committee powers and obligations

The new strata legislation imposes a high standard of care and diligence on the strata committee when it carries out its functions, such that individual strata committee members can be personally liable for their actions. However there are powers which are afforded to the strata committee, which include orders to dispose of abandoned goods left on common property, the power to make orders for payment of contributions (which operates as an enforceable judgment), and the power to dismiss applications for mediation if frivolous or lacking substance. To learn more about your rights as members of a strata committee please do not hesitate to contact one of our qualified strata lawyers in Sydney. Accessing executive committee legal advice from an experienced Owners Corporation Solicitor will ensure that every executive committee member is aware of their obligations and responsibilities.

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Repair and Maintenance

There was a statutory duty on the Owners Corporation to repair common property (section 62(1) of the Strata Schemes Management Act 1996 (NSW)) but no automatic right to damages. Damages for breach of this statutory duty under the new legislation are now automatic. The Owners Corporation will not be under an obligation to repair if it has commenced proceedings against the owner for damage to the common property. For further Owners Corporation Legal Advice please contact a specialist strata lawyer at Matthews Folbigg.

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Owners Corporation and Financial Management

An Owners Corporation can enter into a payment plan for the recovery of unpaid levies (which are non-binding) and can also, within 3 years, make an application to recover the difference from the original owner. If you are unsure about your rights and obligations as part of an Owners Corporation please contact us to speak with one of our professional strata lawyers who can advise you on various strata schemes issues.

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Financial Management

Money from the Owners Corporation enforcing penalties will be paid into the strata scheme administrative fund, while amounts paid from the building bond are to be paid to the capital works fund. The 10 year capital works plan (sinking fund) is to be reviewed every 5 years. Owners Corporation legal advice can be obtained from one of our experienced Owners Corporation solicitor Sydney.