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A gift for consumers in time for Christmas

November 5th, 2019

With the holiday season quickly approaching, legislation extending the expiry period on gift cards to a minimum of three years provides a welcome gift for consumers across Australia.

The changes will come into effect on 1 November 2019, and as a result, new obligations will be imposed on businesses that supply gift cards (see below implications for businesses).

The key changes are that:

  1. the expiry date must be a minimum of three years;
  2. the expiry date must be clearly displayed on the gift card; and
  3. a majority of ‘post purchase fees’ are banned including activation and account keeping fees.

The expiry date must be displayed as a full date or as a period of time with the date of supply e.g. ‘this card expires 5 years after supply, supply date 01/11/2019” or “valid for 3 years from 11/19″.

These changes will come in force on 1 November 2019 and if the terms and conditions of a gift card purchased on that date do not comply with the new requirements, the terms and conditions will be voided and the new requirements automatically imposed by law.

Cards and vouchers sold before 1 November 2019 will continue to have the same expiry period and applicable fees as stated at the time of purchase.

The three year expiry period does not apply to a number of gift cards or vouchers that are:

  • able to be reloaded or topped up;
  • for goods or services available for a limited time (e.g. for a temporary pop up art exhibition);
  • supplied as part of a temporary marketing promotion (e.g. a voucher valid for one month supplied as a free bonus with a purchase);
  • donated free of charge for promotional purposes (e.g. a voucher supplied on the opening day of a store to be spent on that day);
  • sold for a particular good or service at a genuine discount (e.g. a $50.00 voucher for a service worth $100.00);
  • part of an employee reward scheme;
  • part of a customer loyalty program; or
  • second-hand gift cards.

Implications for businesses

To ensure that businesses comply with these new gift card laws, the Australian Consumer Law Commission recommends that businesses should:

  • update gift card terms and conditions on the cards themselves, any promotional material and websites;
  • update internal systems, training, manuals and policies;
  • place signage on gift card displays and at the counter; and
  • note the changes on the receipt issued with the purchase of a gift card.

Penalties

There are substantial fines for non-compliance of up to $6,000.00 for individuals and $30,000.00 for businesses and companies.

If you have any doubt about your compliance obligations, or whether these new laws will apply to you, please do not hesitate to contact our experienced team on 07 4036 9700.

Happy holiday shopping!

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Lost trust deeds – a forgotten saviour?

August 20th, 2019

Lost, destroyed or missing trust deeds can sometimes lead to tears, misery and heart attacks.  But is the situation as dire as it seems if a document, crucial to organising your financial affairs, disappears?

Maybe it is the advent of trusts as a useful financial planning structure, or the rise of the self‑managed super fund (“SMSF”) (read our previous article on self-managed super funds here), but in recent times, well recent for the law, there have been a number of cases which are resurrecting a seemingly forgotten principle of law, the presumption of regularity.

The presumption of regularity is that deeds and other documents will be presumed to have been validly executed and made, unless there is some contrary evidence.  The cases below illustrate the point, and highlight that the presumption is only applied in very limited circumstances, often where there is a substantial lack of evidence.

Sutherland v Woods[1]

In Sutherland v Woods there was a question as to whether a SMSF had been validly established.  The trust deed could not be located, and because there was no deed, Woods claimed that it was not a valid SMSF.

Sutherland sought to rely upon the presumption of regularity and contended that despite the absence of the deed, the fund was valid.  The subsequent conduct of the parties, including their bank and the ATO, led to the conclusion that the SMSF must have been correctly established, even if the deed was now missing.

Importantly, the parties did all they could to locate a signed copy of the original deed, contacting Westpac, the ATO and titles office to see if any of those entities held a signed copy.  These enquiries were unsuccessful, and the parties were forced to rely upon an unsigned copy of the alleged deed.

The court ultimately agreed with Sutherland, and held that although a true signed copy of the deed was unavailable, that did not prevent the inference that the trust had been validly created.

The missing deed would have been conclusive evidence that the SMSF was established correctly.  In absence of the deed, Sutherland was instead required to prove the validity of the SMSF through other means, such as subsequent dealings.

It was apparent that through the actions of the parties, and third parties, relying upon the existence of the deed, the trust had always been intended as a superannuation fund and had been validly created as such.

The absence of the missing document did not invalidate the fund, and indeed the evidence in the circumstances led to the presumption that the establishing deed must have existed at some point.

Re Thomson[2]

In Re Thomson, the deed establishing the trust was not an issue.  Instead, there were two subsequent amending deeds, one was missing and the other unsigned.

The first deed, which was missing entirely, purported to remove two of the original trustees.  The second deed, which was unsigned, referred to the first deed and amended the trust so that if both of the remaining trustees were to pass away, the trust would vest in the estate of whomever survived the longest.

The dispute arose around the validity of the two amending deeds. If they were not valid, then the two trustees who were allegedly removed would be entitled to the property of the trust.  If both were valid, then the trust would vest in the estate of Thomson.

Such matters around the validity of documents when it comes to the administration of an estate are not uncommon, and is the context in which the presumption is commonly applied.

In determining the validity of the irregular deeds, the court again looked at similar factors as in Sutherland.

In particular, the court relied on the fact that since the removal of the trustees, only the two remaining trustees had been signing off on the trust’s financial reports, indicating that the deed existed, and the parties had been acting as if it were the true state of affairs.

The court found that the two irregular deeds could be presumed to be regular because the evidence indicated that was probably the correct and true situation.  The executor was therefore entitled to include the trust property in the deceased’s estate.

So what is the presumption?

So now that we have reviewed a couple of examples of the presumption, when should you be considering relying upon it?

The presumption will only apply in limited circumstances, it should not be considered a cure-all for any trust problems you have.

The courts have held that before applying the presumption:

  1. a considerable amount of time must have passed since the event happened;
  2. there is no other way to prove the existence or validity of the missing deed;
  3. there is some other extrinsic evidence indicating the deed, or missing instrument was valid and people have since acted as if it were valid; and
  4. the presumption must only be applied to a procedural or formal detail.

Point 3 above is clearly identified in the two cases.  The evidence from the bank, the ATO, and financial reports all indicated the legitimacy of the actions being undertaken, even where the deed was not located.

The presumption should not be thought of as applying in all situations, indeed, its limited application throughout the last 50 years suggests it should only be thought of as a last resort.

In many circumstances, simply claiming the deed is lost, without exhausting all possibilities will not be enough.

Before relying on the presumption, consideration should be given to some of the following alternatives:

  1. preparing a deed of rectification;
  2. relying on the trustee powers in the Trusts Act;
  3. for a SMSF, where practicable, rolling the assets over to another SMSF which does not have any issues with documentation; and
  4. last but certainly not least, no effort should be spared in locating the original deed.

Of course, these options are not always available, some may rely on the original trustees still being available, or simply be inapplicable in the circumstances.

Lost or irregular trust documents often have circumstances unique to each case.  For that reason, when irregularities are detected, efforts should immediately be made to correct them.

In most cases involving the presumption, it is not raised until there is a crisis, for example the breakdown of a marriage or the administration of a deceased estate.  By taking proactive steps, most of these situations, and possibly expensive litigation, can be avoided.

The experienced team at Miller Harris can help you, or your clients in dealing with lost or irregular deeds.  Many situations will require a bespoke solution, and our experience across many areas of the law enable us to come up with the right solution to your problem.

Should you have any questions or enquiries, please do not hesitate to contact Ashley Jan on 07 4036 9700, or ashleyjan@millerharris.com.au.

[1] Sutherland v Woods [2011] NSWSC 13 ( http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWSC/2011/13.html ).

[2] Re Thomson [2015] VSC 370. ( http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSC/2015/370.html )

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Online business and retail shop leasing – is it a retail shop?

March 26th, 2019

If a tenant conducts an online retail business, but uses premises predominantly for producing or storing goods, is it a retail shop?  The Victorian Civil and Administrative Tribunal (“VCAT”) recently considered this question.

The Retail Shop Leases Act in Queensland and its equivalent across other states in Australia (“Retail Shop Legislation”) imposes additional tenant protections in leases of retail shop premises.  These additional protections do not apply to premises that are not considered retail shops under the legislation.  The concept of what is a retail shop is not always a straightforward determination to make, as illustrated in the decision of VCAT in Bulk Powders Pty Ltd v Seicon Pty Ltd (Building and Property).

Bulk Powders Pty Ltd v Seicon Pty Ltd (Building and Property) [2018] VCAT 2000

Bulk Powders Pty Ltd (the tenant) leased premises in an industrial area in Victoria where it developed and produced sports nutrition and supplement products.  While the tenant sold the items it produced as a retail business, the sales were mostly online, except in limited circumstances where some customers could collect products by appointment.  The tenant sought a declaration from VCAT that the premises was a retail shop.  The reason the tenant did this was that the lease included outgoings which would not be permitted to be recovered by the landlord if the premises were a retail shop.

The Retail Shop Legislation defines retail premises as premises that are “used wholly or predominantly for the sale or hire of goods by retail or the retail provision of services”.

Upon reviewing the law on this point, VCAT considered that to be retail premises, it was necessary that the premises have a retail characteristic of being open to the public, which in this instance, it was not.  The premises were used for predominantly production and storage of products and even though those products were sold online, that did not make the premises retail premises.

With so many businesses being conducted online today, this is an important clarification for both landlords and tenants about when the Retail Shop Legislation will apply to a leasing arrangement.  The consequences of the Retail Shop Leases Act applying to a lease are significant, for example, as illustrated in this case, the inability of the landlord to recover certain types of outgoings and charges.  There are also further disclosure obligations on the landlord that, if not complied with, can give the tenant extensive rights to terminate a lease.  This decision also goes to show that what does constitute a retail shop is not always a straightforward answer and there are a number of considerations in making a determination about this.

You can access the full decision of VCAT here.

Our team at Miller Harris Lawyers has extensive experience in commercial and retail leasing in Cairns and surrounding areas.  We would be happy to assist you with all of your leasing requirements.  Please contact our office on 07 4036 9700.

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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.

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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.

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A gift for consumers in time for Christmas

October 23rd, 2018

In a win for consumers, the Commonwealth government passed legislation on Thursday providing for greater consumer protections in relation to gift cards.  It is expected this legislation will come into force on 1 November 2019.

The new laws provide that gift cards will now be required to have a minimum expiry period of three years and also ban most ‘post-supply’ fees for gift cards and vouchers.

What is a gift card?

While many of us would expect that laws on gift cards will only impact big business, the definition used in the legislation potentially creates a much broader application.

A gift card is defined to mean ‘an article that is commonly known to be a gift card or gift voucher, whether in physical or electronic form and is redeemable for goods or services.’

While this definition is quite broad and uncertain, future clarification is expected to be provided through regulations.* In the meantime, parliament has provided the following comments in relation to interpreting gift card:

“Gift cards may be redeemable in a single store or across multiple different businesses. They are generally defined with reference to a dollar amount or as being redeemable for a specific good or service and cannot have additional value added to them after they have been supplied. Gift cards are also generally not redeemable for cash beyond a minimal amount in change.”

As these provisions have a broad application, you should consider carefully whether they apply to you or your business.  It is not necessary for a card to be purchased and given to someone else – a card used by the purchaser can still be a gift card.   It is possible that ‘gift card or voucher’ will apply to most pre-paid services such as pre‑purchased passes for entry to a venue, or provision of services such as classes at a gym.

The new laws

The most significant change is that gift cards must now have a minimum expiry period of three years.

The expiry information must be prominently displayed on the card itself.  This can be either the expiry date itself, or the supply date and a statement about the period of validity.  Even where a gift card has no expiry date, this must be displayed on the card or voucher.

The new laws additionally prohibit charging of certain fees after the card is supplied.  Again this provision is drafted broadly and currently forbids all post-supply fees except those prescribed by the regulations.

The draft regulations currently allow the following fees or charges:

  1. for making a booking;
  2. for disputing a transaction;
  3. for exchanging currencies;
  4. for replacing a stolen, lost or damaged card; and
  5. payment surcharges.

While this is only a draft list, it seems parliament only intends to allow administrative fees. Monthly fees or other fees that are deducted automatically without explicit communication of the request or demand are prohibited.

Final thoughts

Business owners will not know exactly what they need to do to prepare for these new laws until the regulations are finalised and registered, which should be prior to 1 November 2019.  However, it will be worthwhile considering how this requirement might potentially change you business and what administrative changes might be required, so that you are ready to comply once the laws come into force.  In many instances the changes required for businesses may be minor.  The new laws will apply to all gift cards issues on or after 1 November 2019.

A failure to comply with these new laws carries significant financial penalties.  In the case of a corporation it could be up to $30,000, while individuals face penalties of up to $6,000.

If you have any doubt about your compliance obligations, or whether these new laws will apply to you, please do not hesitate to contact our commercial team on 07 4036 9700.

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Construction Law Update

September 27th, 2018

In our last construction law update we informed you that the changes to the Building and Construction Industry Payments Act 2004 (BCIPA) being introduced by BIF (the Building Industry Fairness Act 2017), were to be delayed until December 2018.  A summary of the changes to be introduced was detailed here.

It remains to be seen whether the legislation will commence operation in December in its current form or if it will be ‘tweaked’ once again.  One prospect is that the recommendations of the “Murray Review” will be implemented in new legislation.

Murray Review

Mr John Murray, a lawyer and adjudicator, was tasked by the Commonwealth Government to review the disparate security of payment laws in all states and territories.

The headline recommendation from the Murray review is for an Australia-wide harmonised model for security of payment to be adopted, based on the “East Coast Model”.

Specific recommendations for the harmonised security of payment scheme include:

  1. extending the regime to the residential housing sector to enable a builder to make a progress payment claim against an owner-occupier;
  2. abandoning ‘reference dates’, and simply allowing one claim for every named month, or more frequently if the contract provides;
  3. enabling a builder to make a claim where a contract is terminated, for work carried out up to the date of termination;
  4. requiring a claimant to identify that the claim is made under the Act (an existing requirement in Queensland which will not be required if the BIF reforms take effect in December 2018);
  5. requiring a claimant to include a supporting statement with any payment claim stating that all subcontractors have been paid (and a false or misleading supporting statement constitutes an offence);
  6. giving a payment schedule within 10 business days or as the contract provides (the same as the existing legislation);
  7. a claimant serving a notice of intention to adjudicate if the respondent does not give a payment schedule (the same as the existing legislation, but this second chance step is to be removed if the BIF reforms take effect in December 2018); and
  8. a review mechanism for adjudications where the adjudicated amount is $100,000 or more higher than the scheduled amount, or $100,000 or more lower than the claimed amount.

Consistent laws throughout Australia would certainly be a welcome change and provide clarity to the area.  It is a significant difficulty for lawyers and clients that decisions made by adjudicators and Courts cannot necessarily be applied outside the state in which they are made, and that there are very few decided cases on particular issues.

Watch this space for further updates on the proposed changes to Queensland’s BCIPA regime; either some or all of the Murray Review recommendations, or the changes intended by the BIF legislation.

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Reforms to combat illegal phoenix activity

August 30th, 2018

Illegal phoenix activity is a means by which unscrupulous company directors seek to avoid payment of a company’s creditors.  It typically involves the transfer of a business (or assets) from one company shell to another, without properly recognising the value of the assets transferred.  It leaves company creditors, often including employees, with claims which cannot be satisfied from company assets.

In the 2018/2019 budget, the Commonwealth Government announced a package of reforms to the corporations and tax law to combat illegal phoenix activity.  The government has now released an exposure draft of proposed legislation.  The proposed reforms include:

1.  introducing new phoenix offences which target both those who conduct and advisors who facilitate the illegal phoenix transactions including:

1.1.  making it an offence for company directors to engage in creditor defeating transfers of company assets;

1.2.  making pre-insolvency advisors and other facilitators of illegal phoenix activities liable to both civil and criminal penalties; and

1.3.  extending and enhancing the existing liquidator “callback” powers;

2.  preventing directors from resigning in some situations;

3.  extending Director Penalty Notice provisions to include GST and related liabilities; and

4.  restricting the voting rights of related creditors at meetings considering the appointment or removal of an external administrator.

An exposure draft of the proposed legislation has been released for public consultation.  The final text of the reforms is yet to be revealed.  The draft legislation can be accessed here.

For more information, please contact partner Tim McGrath.

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Don’t get bitten by a Zombie DA

April 26th, 2018

A recent High Court case has highlighted that development approvals are not dead and buried once a development is substantially complete.

In Pike v Tighe, some land was subdivided pursuant to a development approval which included a condition requiring an easement to be granted over part of one lot (lot 1) in favour of another (lot 2) for access, on site manoeuvring, services and utilities.  The development approval was issued in May 2009, and an easement was lodged with the council along with the plan of subdivision, but it did not comply with the condition because it did not provide for on site manoeuvring or connection of services and utilities.  Despite this, the council sealed the plan and the easement and plan were registered.  Lot 1 was sold to the Tighes in 2011.  Lot 2 was sold to the Pikes in 2012.

A dispute evidently arose between the two lot owners about whether the Pikes were entitled to an easement which included rights to manoeuvre and connect to services and utilities, and whether the council could force the Tighes, as the owners of lot 1, to grant such an easement.

Section 245 of the Sustainable Planning Act (which was then in force) provided that a development approval attaches to the land and binds successors in title and any occupier of the land.  A similar provision can now be found in section 73 of the Planning Act 2016.

The High Court ruled that the condition of a development approval obtained by the original developer did bind the current owners of the land, despite the site having since been subdivided, and the present owners (the Tighes) could be forced to grant the easement.  By failing to comply with the condition of the development approval within a reasonable time after they had become the owners of the property, they committed a development offence.

The case was somewhat unusual in that the council involved had sealed the plan without the condition having been properly complied with, but this can occur from time to time for a variety of reasons.  It is not uncommon for a property owner or occupier to have failed to comply with development conditions.  For example, this can be the case where there is a material change of use approval, and the council has no “hold point” such as plan sealing to ensure compliance before the use starts, or perhaps the condition was originally complied with but circumstances have since changed so that the property is no longer compliant.

Development conditions for commercial properties in particular can have a substantial impact on the owner of the property by, for example, requiring a substantial easement to be granted over the land, or requiring the owner to upgrade the road providing access to the property.  It is certainly worth having your lawyer check the planning position out thoroughly as part of your due diligence process before you complete a purchase.  If you do not, an approval which you thought was finished off by a previous owner or occupier might just come back to bite you.

For more information about this issue and all commercial property matters please contact our partner and accredited property law specialist, Nigel Hales on 07 4036 9700.

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Beware Before Consenting to Development Approvals

April 24th, 2018

In a recent case, a property owner was stuck with a $400,000 infrastructure charges bill because he consented to a development application without paying proper attention to the possible consequences.

An infrastructure charge is something which councils can impose for new development.  They are usually triggered by a development application, and become payable when the rights under the development approval are exercised, such as when the change of use occurs.   Although the planning legislation in its various recent forms has not specified that infrastructure charges run with the land, it has for some time said that they are recoverable as rates.

In the case, an owner consented to a tenant making a development application to use his land as a refuse transfer station.   The use had actually already, unlawfully, commenced.  The application was approved by the council, and council issued an infrastructure charges notice to the tenant (not the owner) for $356,718.84.  The tenant did not pay it, and presumably was insolvent because it was not joined in the proceedings.  Four years later the council issued a rates notice to the owner for $400,574.94, which included the infrastructure charges.   Ultimately the Court of Appeal held that council could do this, and the owner had to pay.

In my experience property owners are often fairly flippant in granting consent to tenants, purchasers and option holders to enable them to make development applications.  Often in the case of contracts and options, there is no real description of what it is that the owner is required to consent to  – just a development application of some sort.  It is worth remembering though that development approvals, and their conditions, run with the land and so will bind the owner.  As this case shows, infrastructure charges are treated similarly.  Owners should be cautious about what they are consenting to, especially if there is a prospect of the development commencing while they are still the owner of the land, thus triggering the need to comply with conditions and pay infrastructure charges.

For more information, please contact Partner, Nigel Hales.

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