The new Property Occupations Act will commence on 1 December 2014. In addition, the legislation passed by the Parliament in September to amend the Land Sales Act and the Body Corporate and Community Management Act will also come into effect on the same day.
The property industry has been anxiously awaiting news about the commencement of the new Property Occupations Act. While the Property Agents and Motor Dealers Act (or PAMDA as it was often referred to) may have been the outcome of good intentions, the overly prescriptive requirements it placed on sellers of residential real estate ensured that it gained an anti-property industry reputation. This reputation was largely the result of provisions that threatened the enforceability of contracts for what would in many instances be matters of minor non-compliance.
While many of the worst excesses of PAMDA were removed in a number of stages as the previous government responded to complaints about how the legislation operated, the new legislation ensures that a seller will no longer face the risk of losing a contract even for the most flagrant breach. Non-compliance with the new legislation gives rise only to a monetary penalty.
Summary of key features of Property Occupations Act
- A Warning Statement will no longer be used in relevant contracts entered after the commencement of the Property Occupations Act. Instead, the seller must include in the contract a prescribed statement about the application of a cooling off period (or words to like effect). The information sheet which was required to be used for the sale of a lot in a community titles scheme will also no longer apply.
- The statutory five business day cooling-off period will remain in place. As is the case under PAMDA, the cooling off period will not apply to contracts formed on an auction sale. Additional exceptions will now apply.
- A buyer may waive or shorten the cooling-off period without the involvement of a lawyer.
- The Property Occupations Act includes a simpler definition of “residential property” than that contained in PAMDA.
- PAMDA will continue to apply to relevant contracts entered into prior to the commencement of the Property Occupations Act. This means that a buyer that has a termination right under PAMDA will retain that right after the commencement of the new legislation.
From 1 December, it will no longer be necessary to attach a Warning Statement to a relevant contract. Instead, the seller must ensure that a relevant contract contains the following words (or words to the like effect) immediately above and on the same page as the place in the contract where the buyer signs:
The contract may be subject to a five business day statutory cooling-off period. A termination penalty of 0.25 percent of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling-off rights, before signing.
Unlike under PAMDA, where a failure to comply with the warning statement requirements may give the buyer a right to terminate a contract, a failure to include the required wording in a contract will not provide a buyer with a termination right. The seller, or the seller’s agent, commits an offence if this requirement is contravened and may be liable to a fine.
Statutory cooling-off period
The Property Occupations Act maintains the statutory five business day cooling-off period for contracts to which it applies.
The cooling off period will not apply to contracts formed on a sale by auction. In addition, the Property Occupations Act provides that a cooling-off period will not apply to contracts entered into within two clear business days following an auction with a registered bidder for the auction. The cooling off period will not apply to contracts where the buyer is a publicly listed company (or a subsidiary of one) or the State or a statutory body or where the buyer is purchasing at least three lots at the same time (whether or not in the one contract).
The requirement under PAMDA that a lawyer’s certificate must be provided to waive or shorten the cooling-off period has not been included in the Property Occupations Act. Under the Property Occupations Act, a buyer who wishes to waive or shorten the cooling-off period may do so by simply providing written notice to the seller to that effect.
The definition of “residential property”
The definition of “residential property” in PAMDA is lengthy and complicated and it has been the subject of disputes and litigation. The Property Occupations Act deals with the issue in a more matter of fact way as follows:
Residential property is real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.
This definition is far more concise than that contained in PAMDA. However, it may still be the cause of debate. For example, how will the intended use of a property be interpreted for the purpose of determining whether property is “residential property”?
Land Sales Act amendments
The most significant changes that will result from the Land Sales Act Amendment Act are:
- All of the disclosure obligations relating to lots in community titles scheme developments will move into the Body Corporate and Community Management Act.
- The Land Sales Act will no longer apply to sales arising from a subdivision or reconfiguration of land into not more than five lots.
- A deposit of up to 20 percent of the purchase price may now be paid for off-the-plan sales without the risk of a deposit of that size being construed as a penalty and without the contract becoming an instalment contract.
Further details of the changes can be found in our alert published on 21 July 2014.
The reforms that will take effect on 1 December will be welcomed by the property industry generally. The Attorney General has declared these reforms to be examples of his government’s commitment to removing red tape.
The above information is a summary of some of the key features of the new legislation. The legislation should be considered having regard to the individual circumstances of each situation.