News

News

BIF Legislation has commenced!

December 20th, 2018

A reminder that chapter 3 and chapter 4 of the Building Industry Fairness Act 2017 (“BIF”) commenced on 17 December 2018.  BIF now applies to all payment claims for construction work, regardless of the contract date.  BCIPA only applies to claims made before 17 December 2018.

Key changes:

  1. No requirement to include the words “This is a Payment Claim under the… Act”; an invoice or a ‘request for payment’ which describes the construction work and states the amount sought will be a valid payment claim.
  2. A respondent who receives a payment claim must either:
    • pay the claim in full by the due date; or
    • issue a payment schedule by the due date.
  1. A fine may be imposed for a failure to respond or pay.
  2. No ‘second chance’ to issue a payment schedule.
  3. New time limits for payment schedules and adjudication applications.

A snapshot of the important timeframes:

Payment schedule

Payment due date

The earlier of the period in the contract or 25 business days.

As provided for in the contract[1] or 25 business days.

Adjudication application1. Payment schedule less than payment claim:  30 business days from payment schedule.
2. No payment schedule: 30 business days from the later of payment due date or payment schedule due date.

3. Failure to pay full amount scheduled: 20 business days after due date.

Particularly around the Christmas period, take care to calculate your dates correctly by checking your contract and the definitions of a business day in BIF.

For further details or assistance with giving or responding to a payment claim, or making or responding to an adjudication application, please contact our Senior Associate, Rowan Wilson on 4036 9700.

[1] Caution : A provision in a construction management trade contract or subcontract providing for payment of a progress payment later than 25 business days (QBCC Act 67U), or a provision in a commercial building contract providing for payment of a progress payment later than 15 business days (QBCC Act 67W) will be void, making the due date for payment under BIF 10 business days.

More

Exclusive use areas in community titles schemes

December 13th, 2018

We have seen a few examples recently of buyers not being aware of the truth about garden areas, balconies and the like which are exclusive use areas associated with their unit or townhouse.  Areas such as these are often overlooked in the negotiation of the sale, or worse still, the buyer assumes that they are included or is given incorrect information by the real estate agent.  They can have a big impact on the use and enjoyment of the property, and its value.

What is an exclusive use area?

An exclusive use area is a part of the common property of the community titles scheme which has been designated for the exclusive use of the owners and occupiers of a particular lot, through the by-laws of the scheme.  The by-laws will usually specify which lot has the benefit of the area, for what purpose, and any conditions or other requirements which apply to the use.  Examples of areas which are often the subject of exclusive use by-laws are:

  • car parks;
  • courtyards;
  • gardens;
  • balconies or patios; and
  • roof top areas.

Such areas are not always exclusive use areas – often they will be “on title”, and form part of the legal, freehold title to the lot.

How do I know whether an area is an exclusive use area, part of the lot, or neither?

You cannot tell, either from a title search of the property or from a physical inspection of the property what areas are included on the title, what areas are exclusive use, and what are just general common property.  It is not uncommon for an area of yard to be fenced off for a particular unit, or even for a deck to be built over it, but with the owner having no legal title or exclusive use of the area.

The only way to know what areas are included in the title to the lot, and what areas are exclusive use for the lot, is to obtain a copy of the registered survey plan and community management statement.  The survey plan will show where the boundaries of the lot are.  The plan may show that the lot is made up of several areas in different parts of the building – such as the residential unit on one level and a car park on another.  The community management statement contains the by-laws for the scheme.  If there are any exclusive use areas, they will be recorded here, in a by-law and on a plan showing the location and boundaries of the area.

Is exclusive use as good as the area being part of the lot?

No, not quite.  An owner of a lot with an exclusive use area does have the right to stop others from using the area, and the exclusive use right cannot be taken off them without their written consent, so it is quite secure, but it is not the same as owning the area.  Here are some of the advantages and disadvantages of exclusive use compared to legal title:

Advantages: 

  • Flexibility – provided the body corporate is co-operative, it is relatively easy to change the size or shape of an exclusive use area, or to transfer it to another owner or swap areas with another owner in the complex (particularly handy in the case of underground car parks).
  • Easy to create – new exclusive use areas can be created and allocated without having to mess around with the title to the lot or pay stamp duty.

Disadvantages: 

  • You do not own it – The area is still common property and still owned by the body corporate, so you will normally need permission from the body corporate to make any substantial changes or improvements – such as installing a storage shed or swimming pool in a yard.
  • You can only use it for the purpose for which it was granted – car parks can only be used as car parks and not for storage or building a shed. Private yards can only be used as yard, and not for adding another room to the villa.
  • You still have to maintain it – ultimately your rights will depend on what the relevant by-law says, but in most cases the person who has the exclusive use of an area is also obliged to maintain it. That will include an obligation to maintain gardens, trees, walls, decks and pergolas etc in the area.

What can go wrong?

As mentioned above, exclusive use rights are quite secure, so the main area where things can go wrong is where the reality of them does not match up with a buyer’s (or owner’s) intentions and expectations.  For example:

  • Is a fenced off yard around a unit or townhouse actually exclusive use for that unit or townhouse?
  • Is the car park being used by the seller the correct car park allocated to the unit? Sometimes car park numbers do not correctly correlate to the exclusive use allocations in the by-laws.
  • Is that nice, big garden around the unit exclusive use for the unit, or can anyone use it? If it is exclusive use, are you prepared to maintain it (including any large trees), or do you expect the body corporate to do so?
  • If you want to put a pool, shed or garage in the yard, can you do this, or will you need body corporate permission?

Not having exclusive use of an area which you thought would be included can adversely impact on your ability to use and enjoy the area, as well as the privacy of your lot, and ultimately its value.  On the other hand, being saddled with the care and maintenance of an exclusive use area which you do not really need can be an unwanted burden.

There is nothing in the standard contract used for community title lots which identifies whether there are any exclusive use areas allocated to the lot, or the extent of them.  At Miller Harris, we always do a search of the survey plan and community management statement to identify exclusive use areas.  Some other lawyers do not.  However, even if the searches are done, a lawyer is not going to know what you expect to be included unless you tell them, and it can be difficult to terminate a contract due to an unmet expectation with regard to exclusive use areas, except in very clear cases.  It is better to check them out and get it right before the contract is signed.

What should buyers do?

The old principle of “buyer beware” applies, so:

  • ask questions of the selling agent about what is included in the lot, and any exclusive use areas, when you inspect the property;
  • be aware that agents do not always get it right, so ask to see the plan and community management statement, or better still, get your solicitor to check these out before you sign;
  • if you have specific plans for the property, such as making extensions or additions to it, discuss these with your solicitor before you sign; and
  • even if you have already signed a contract, tell your solicitor if you expect any exclusive use areas to be included with the lot, especially if they were important to your decision to buy the property.

If you are looking at purchasing a unit or townhouse and need advice about exclusive use areas please contact Nigel Hales, Accredited Property Law Specialist and partner at Miller Harris Lawyers on 4036 9700.

More

Self managed super funds – not just another trust

December 4th, 2018

Self managed superannuation funds (“SMSF”) have become quite popular investment vehicles in recent years.  It is, however, important to remember that they are not a “set and forget” investment, nor are they like other investments or even other trusts such as family discretionary trusts. The superannuation legislation imposes stringent restrictions on what a SMSF can and cannot do, and also requires a much higher degree of record keeping, auditing and reporting than other forms of trusts.  It is important that trustees of SMSFs keep on top of these obligations and seek professional support to ensure compliance with them.

A recent example of SMSFs trustees not paying any regard to his obligations, essentially treating the SMSFs as his own (or at least as being a financial resource for his family), and coming spectacularly undone as a result is the case of Hart v Commissioner of Taxation.  That case involved a review of a decision by the Commissioner to disqualify Mr Hart from acting as a trustee, investment manager, custodian or officer of a trustee of a superannuation entity. The Commissioner was alerted to the issues by the fund’s auditor issuing a contravention report to the Commission in relation to one aspect of the SMSFs conduct.  The list of the contraventions of the superannuation legislation which were alleged by the Commissioner, and upheld by the Administrative Appeals Tribunal, were extensive and included:

  • failure to lodge annual tax returns for four years;
  • mixing super assets with personal assets;
  • transferring a property from related parties in circumstances where it was not permitted;
  • transferring the property at less than market value;
  • failing to register the property in the name of the trustee;
  • transferring the property subject to an existing mortgage;
  • making several cash payments to super fund members;
  • granting a rent free lease over the property to a related entity;
  • a dodgy investment in an overseas company, related to the tax payer;
  • providing money to allow a related entity to build a shed on the property;
  • the fund ceasing to be a SMSF because it at one stage had five members, when only four are permitted;
  • failing to ensure that the SMSF had the sole purpose of providing retirement benefits to members.

The tribunal found that the breaches were established, and the Commissioner’s decision to disqualify Mr Hart was correct.  We shudder to think what the tax implications of all this might have been, but it no doubt involved reassessments of tax payable by the fund and by the beneficiaries of it, with significant additional tax, and probably penalties payable.

The lesson to heed from this is that if you have a SMSF, do not treat it like your own money, or even like any other trust, ensure that your accountants are on top of the reporting requirements, and seek advice before you enter into any significant transactions, even if (or perhaps especially if) they are only “in house” transactions with related parties.

For more information, speak with our SMSF legal expert Nigel Hales.

More