The Queensland government has announced the engagement of property law experts to conduct an independent review of Queensland’s property laws, with a view to ‘reducing red tape, regulation and property law duplication’1 and ‘improving how Queenslanders buy, sell and manage property’.2
Existing legislation including the Property Law Act 1974 (Qld), Land Sales Act 1984 (Qld) and the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) is to be reviewed as part of the overall property review.
Attorney-General Jarrod Bleijie has released the first two issues papers as part of the review, the first dealing with the current seller disclosure regime and the second with setting and adjusting lot entitlements for Community Titles Schemes.
Links to each of the issues papers are below:
Seller Disclosure in Queensland
http://www.justice.qld.gov.au/__data/assets/pdf_fi le/0009/224874/property-law-review-ip1- seller-disclosure.pdf
Lot entitlements under the Body Corporate and Community Management Act 1997
http://www.justice.qld.gov.au/__data/assets/ pdf_file/0010/224875/property-law-review-ip2- lot-entitlements-bccm.pdf
Interested parties, including property professionals, bodies corporate, property owners and the wider community have all been invited to provide their input.
Issues Paper 1: Seller Disclosure Regime in Queensland
This issues paper considers the current seller disclosure regime in Queensland in the context of residential, commercial and community titles conveyancing practice and examines how effective the existing regime is for the purposes of the sale and conveyancing process, and whether reform is required.3 It notes that the three main contracts generally used in conveyancing practice in Queensland are the REIQ contracts for the sale of:
- Houses and Residential Land;
- Residential Lots in a Community Titles Scheme; and
- Commercial Land and Buildings.4
Why is there a need for review?
The paper highlights the main issue with the existing seller disclosure regime – the fact that sellers are subjected to a wide range of disclosure obligations which arise from several different sources (common law, contract statutory and local government laws).5
As part of the analysis, the review team pits Queensland’s current regime against jurisdictions which have enacted statutory disclosure regimes and concludes that ‘Queensland’s seller disclosure system is complicated, cumbersome and without any guiding principles underpinning its development’.6
The issues paper is the only first step towards a complete review of body corporate laws in Queensland
This should be a surprising conclusion, but on reflection for those of us involved in the property industry, is perhaps not. Particularly when it is considered that while the consequences of failure to disclose information or inaccurate disclosure are potentially fatal to a contract, (varying from outright termination to termination on grounds of material prejudice), sellers and their solicitors are forced to navigate through the maze of common law, statutory and contractual obligations to accurately determine not only what disclosure obligations the seller must comply with in the event of a potential sale, but also the correct form and the required timing of the disclosure.
The issues paper seeks responses to the different queries raised to try to achieve the objectives of the reform including:
- Clarifying sellers’ disclosure obligations;
- Requiring a transparent and effective form of disclosure;
- Providing information of value to Buyer’s decisions to purchase; and
- Balancing the information cost between seller and buyer.7
Issues Paper 2: Setting and Adjusting Lot Entitlements for Community Titles Schemes in Queensland
This issues paper addresses the contentious issue of setting, adjusting and reviewing lot entitlements under the Body Corporate and Community ManagementAct 1997 for community titles schemes in Queensland, and considers options for dealing with the controversial issue of adjusting lot entitlements of existing community titles schemes.8
The paper indicates that it is only the first step towards a complete review of Queensland’s body corporate laws and that more discussion papers are to be released in 2014, ‘proposing options for improving governance of schemes, including a review of body corporate committee governance, by-laws and the potential for transitioning all schemes from BUGTA9 to the BCCM Act’.10
Why is there a need for review?
A new system is needed to set and adjust lot entitlements, given the demise of the reversion process11 in 2013, as a result of the amendment of the BCCM Act pursuant to the Body Corporate and Community Management and Other Legislation Amendment Act 2013 (Qld).
It is cruicial to get the new system right because lot entitlements are used to allocate expenses and liabilities to each lot owner within a Community Titles Scheme and govern owners voting rights. Any change to those entitlements can seriously impact lot owners’ ability to continue to pay levies and could also affect the lot value.12 They therefore play an important role in the ‘effi cient and harmonious operation of a community titles scheme’.13
The issues paper explores the following options for allocating costs in a Community Titles Scheme, and includes arguments for, and against each option:
- Equally – where lot owners pay the same regardless of the size of their lot or any other factor, allowing for minor variations such as when it would not be just and equitable to charge equally;14
- Differentially – where different owners contribute different amounts, perhaps based on the value or area of the lot (in floor space);15
- Combined – where lot owners pay for some costs equally and some, differentially.16
It also highlights the requirement to consider factors such as mixed use schemes (containing a combination of residential, commercial or retail lots)17 and who should set lot entitlements18 (developers, government body or independent certification).
The paper also examines how any changes to the adjustment of lot entitlements could practically be dealt with, that is:
- For new schemes which are established after new statutory princples commence;
- For existing schemes (being those currently in operation) or which are established before new statutory principles commence;
- For existing schemes, if the government decides not to adopt new statutory requirements for setting lot entitlements after the review.19
While the paper does not set out any recommended or preferred position, it does canvass the various issues and alternatives, and poses a number of questions on which specific feedback is sought.
So where do we go from here?
Feedback in relation to Issue Paper 1: Sellers Disclosure in Queensland is required to be submitted by 21 March 2014, while the deadline for feedback in relation to Issue Paper 2: Lot Entitlements under the Body Corporate and Community Management Act 1997 is 14 March 2014.
As Attorney General Jarrod Bleijie has indicated that both issues papers are just the start of the review, it will be interesting to see what other aspects of the existing property laws are to be examined, and whether the Queensland government will decide to make any changes to the relevant legislative provisions following completion of the review.
Carter Newell will issue further updates, as developments occur.