Rouse Lawyers

-The Law Firm For Business Owners and Entrepreneurs-

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Joint Tenants or Tenants in Common?


In every conveyancing matter where there are two or more buyers, we are required to ask the question “will you be joint tenants or tenants in common?” Commonly, when we poise this question the response is usually a short silence followed by “what’s the difference?”

Regardless of whether the buyers are a married couple, family members, or friends, it is very important to ensure that the type of ownership agreement you have in place is the right one. If everyone understands the type of ownership applicable to them and its effects, this may help to prevent any problems down the track if one of the owners wants to relinquish their share, or the unforeseeable happens and an owner/s passes away. ...

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Family transfers & primary production – New duty concessions

Intergenerational Transfers Affected by Changes to the Duties Act 2001 (Qld)
New transfer duty concessions will now be available for transferees, particularly in relation to intergenerational transfers of prescribed and primary production businesses, pursuant to the Queensland Government’s welcomed changes to the Duties Act 2001 (Qld) .
How does this affect eligibility?
Transfer duty concessions are now available for primary production businesses or prescribed businesses. A primary production business is a business of agriculture, pasturage or dairy farming. A prescribed business solely involves one of the following business activities:
- excavating and earthmoving
- picture framing
- gunsmithing
- locksmithing
- manufacturing
- processing and packaging
- printing and publishing
- boot and shoe repairing
- retailing and wholesaling (whether or not it involves repairing or installing goods sold)
- upholstering
- undertaking or funeral directing
- other (being beauty salon or barber shop, bus service, cinema, crematorium, engineering workshop, laundry or laundrette, newsagency, travel agency or real estate agency, repair and service workshop, rental business, restaurant or café, service station, sports complex or gymnasium, warehouse or bulk storage complex).
Concessions
If eligible, no transfer duty is payable if the business property carries on a primary production business. If residential land, which is adjacent to the land used to carry on a primary production business, is transferred under the same transaction then no transfer duty is payable. Unfortunately, transfer duty on water allocations still must be paid.
If the business is a prescribed business, transfer duty rate must be applied to any purchase. Here, transfer duty is payable on business property worth $500,000 or more. For example, if a property is worth $750,000, duty is payable on $250,000 (being the amount above $500,000). A list of transfer duty rates is available at the Queensland ...

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Need Body Corporate Management Advice? This Case Study Is A Must-Read

Body Corporate Management Case Study: The Most Expensive Balcony In Queensland?
The High Court has recently overturned a Queensland Court of Appeal decision to find in favour of a body corporate, which was fighting an owner’s attempt to use common property airspace to expand two balconies in his apartment.[i] The essential issue before the High Court was whether the body corporate had acted reasonably in refusing the owner’s request.

Always get advice from a reputable property lawyer if you face challenges with body corporate management.
Body corporate case study – background
An owner at Viridian Noosa Residences wanted to join his two existing balconies, and the space in between them, to create one deck. To do so, he required the exclusive use of common property airspace - 5m2 - between the two balconies.

To proceed with the extension, the owner needed a resolution without dissent at a general meeting of the Body Corporate. In August 2012, the owner put his motion at an extraordinary general meeting, however some lot owners voted against it.

The owner then applied to the Commissioner for Body Corporate & Community Management arguing that the Body Corporate acted unreasonably in voting against the motion. In September 2013, the Commissioner found that the Body Corporate had acted unreasonably and allowed the owner to proceed with the work.

In response to the Commissioner’s decision, two of the dissenting owners appealed the decision to the Queensland Civil and Administrative Tribunal (QCAT). In October 2014, QCAT overturned the Commissioner’s decision stating that the decision of the Commissioner’s had the effect of “overriding the will of a substantial majority of owners”.[i]

The owner appealed QCAT’s decision to the Queensland Court of Appeal who found, in November 2015, that the Commissioner’s decision was not wrong in law and QCAT should not have set it ...

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Have You Heard About Pending Changes To The Retail Shop Leases Act?

How Will Pending Changes To The Retail Shop Leases Act Affect Your Business?
In November 2016 some important changes to the Retail Shop Leases Act 1994 (Qld) (the Act) will take effect, impacting on both tenants and landlords.
When is a retail lease legally entered into?
According to commercial law in Australia, a retail lease is legally considered ‘entered into’ on the earlier of two important dates: the date the lease becomes binding on the parties, or when the tenant takes possession of the premises.

The changes to the Act now provide that a lease is entered into the earlier of:

1. when the lease is signed by all parties
2. when the tenant takes possession of the premises or
3. when the tenant first pays rent (other than a deposit to secure the premises).
Leases covered by the Act
In order to be covered by the Act, a lease must be for a retail shop situated in a retail shopping centre or used predominantly for carrying on a retail business. There are further detailed conditions which apply to meeting these criteria.

The changes to the Act now exclude the following from the definition of a retail shop lease:

1. premises with an area over 1,000 square meters
2. premises used for a non-retail business, which are located within:
a. a multilevel retail shopping centre where the proportion of retail businesses on that level is less than 25%
b. a single level building and the retail area of the building is less than 25% of the total lettable area of the building
3. ATMs and
4. vending machines.
Other key changes to note in the revised Retail Shop Leases Act
Outgoings
At the end of each period for which a tenant pays outgoings, a landlord must provide an audited statement that details the outgoings. These statements must now provide a breakdown of centre management costs. Outgoings will also now exclude excess paid by landlords on insurance claims.
Promotion funds
If a tenant is required to contribute towards a promotion fund, then the ...

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Selling Property? Be Sure You Know The New Withholding Tax Regime

Australian Sellers Beware! 3 Things You Need To Know About The New Withholding Tax Regime
From 1 July 2016, new legislation requires Australian residents selling real estate and other assets with a market value of $2million or more to obtain a clearance certificate from the ATO by settlement. The aim of the new withholding tax regime is to protect the integrity of the foreign resident capital gains tax regime, by ensuring that foreign sellers do not escape their liability to pay capital gains tax.
What is the new law?
The new law applies to certain assets worth at least $2million, including:
• real property (land, buildings, residential and commercial property)
• lease premiums and mining, quarrying or prospecting rights
• indirect interests in an entity that hold such assets
• an option or right to acquire such assets.

Should each seller within a transaction fail to provide a valid clearance certificate by settlement, the buyer is required to withhold 10% of the purchase price which is payable to the ATO immediately after settlement.
How does it work?
At the crux of this new legislation is the requirement that anyone selling property or assets in this cost bracket must obtain a clearance certificate, which confirms that the withholding tax is not to be withheld from the transaction. A seller must apply to the ATO for a clearance certificate and provide it to the buyer by the settlement date of the transaction. A seller’s failure to meet this deadline will cause a deduction in the sale proceeds, as 10% of the purchase price will be paid to the ATO.

A seller may apply for a clearance certificate at any time they are considering the sale of property, even before the property is listed for sale. The clearance certificate will be valid for 12 months and must be valid at the time the certificate is given to the buyer prior to settlement.

There are a number of forms, in relation to the clearance certificate, which are available from the ATO’s ...

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The Right Structures For Property Development Mean Tax Advantages For You

Structures For Property Development
The choice of structures adopted for any property development project often has a key bearing on the tax implications and commercial viability of that particular project. Capital gains tax (CGT) is an important consideration for investment property or development projects in Australia, as is the relationship between property development and company tax rates.

In this article we consider structure options for:
1. landowners that have held land for investment (e.g. farm, lifestyle property or family home) now suitable for development
2. property developers.

In particular, the following special advantages will be achieved with proper documentation of the development arrangements:
1. Landowners - ensure the unrealised gain at commencement is taxed as a capital gain (which may be eligible for concessions including the exemption for pre-CGT assets and the CGT discount for post-CGT assets) rather than as ordinary income, without incurring tax restructure costs.
2. Property developers - offsetting the profit of one project against expenditure of the next project (providing a tax deferral).
Advantageous structures for landowners
The circumstance we are dealing with is where a landowner has held a property on capital account (for example, a farming property or family home) which is now suitable for development.

A simple sale of the property may be eligible for capital gains tax concessions in Australia, including the CGT discount and small business concessions.

If the landowner undertakes a development activity, the activity will usually comprise the carrying on of a business or a profit-making undertaking in respect of which the profit will be taxed as ordinary income (not as capital gains).

To avoid this result, the usual recommendation is to transfer the property to a developing entity. ...

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5 Key Tips for Property Developers

It's amazing how many apartment complexes have sprung up around Brisbane over the past few years! Here's a few key things to remember for those looking to get into the game.
1. The Legislation
Like all good things in life, property is governed by an ungodly amount of legislation. For developers selling "off the plan" (selling an apartment before it's built), the most important of these is the Body Corporate and Community Management Act 1997 QLD (‘BCCMA’). This Act covers, amongst other things, your requirements to potential buyers.
2. Contracts and Disclosure Documents
You're going to have to plan your developments carefully. This will require a number of consultants, which is good news for everybody except the person picking up the bill (i.e. you). One area you need to pay close attention to is the disclosure documents, which tell the buyer all the relevant facts about the property.

Why's this so important? Simple -- if you don't comply with the BCCMA, your buyer can terminate the contract at any time up until settlement. Since reaching settlement can take many months or even years, you could be faced with a very long stretch of uncertainty.

Your disclosure statement should include the following:

(i) Identification of the proposed lot and disclosure plan;

(ii) Annual contributions payable to body corporate for each proposed lot; and

(iii) Proposed community management statement including by-laws.

The disclosure plan must be prepared by a surveyor and show details such as the number of the lot, area, dimensions and boundaries and proposed orientation. These can be prepared by a surveyor based on the architect’s drawings.

The annual contributions are generally set out in a set of budgets and table of levies for each lot and are prepared by a strata manager. The strata manager will consider the facilities and layout of the complex and can be of great assistance in the up-front structuring of the development.

As for the community management ...

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Property Co-ownership – Tips and Traps

Do you co-own property with another person or are you considering such a purchase?

There are many things to consider when determining whether you should purchase property with another person but one of the most important, and often overlooked, considerations is what should occur when one party wishes to sell the property and the other does not.

Section 38 of the Property Law Act 1974 (Qld)anticipates such a dispute and provides that a co-owner may make an application to the court seeking to appoint a statutory trustee to sell the property whether the other co-owners agree or not.

The application is accompanied by a supporting affidavit and the consent of a statutory trustee (usually a solicitor or accountant), and is traditionally difficult to oppose.  If the application is granted, the property in question may be sold either by auction or private treaty.

Proceeds from the sale will be divided between the co-owners in the proportion of their ownership, after mortgagee loans, solicitor’s fees, real estate agents commission and other costs have been paid.

As the decision to buy and sell property is often determined by an individual’s personal and financial situation and strategies, the decision as to whether to sell is something you want to ensure you have control over.

To ensure that you have control and certainty when purchasing property as a co-owner, we recommend entering into an agreement with the other owners outlining how the property is to be dealt with and eventually sold. Examples of what the agreement should anticipate are:

  • how the property purchase is to be funded (ie initial funding vs ongoing costs);
  • the proportions in which the property is to be owned;
  • how the property will be used, maintained, managed etc.;
  • whether there is to be a first right of refusal and at what price;
  • how long the property must be owned before  it can be sold and conversely, the maximum amount of ...

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Repeal of the PAMDA – What will it mean for you?

A move welcomed by those within the industry, the Property Agents and Motor Dealers Act 2000 (PAMDA) is set to be repealed and replaced later in 2014.  Passed on 7 May 2014, the Property Occupations Bill 2013 (the Bill) will allow for the removal of complexities and unnecessary red tape associated with the PAMDA, and implements a more modern and streamlined process within the property industry.

A number of key changes are highlighted below:
The Residential Property Sale Process

  1. The buyer no longer needs to be directed to the PAMDA warning statement and the Body Corporate and Community Management Act (BCCM) information sheet prior to signing the contract.
  2. The PAMDA warning statement will be replaced with a short warning added to the contract signing page.
  3. The warning will not be required for counter offers by a seller so long as the particular property and buyer do not change.
  4. A BCCM information sheet will no longer need to be provided to buyers purchasing a property in a community title scheme.
  5. Buyers will no longer have termination rights if the warning is not included, rather the seller will risk a fine of up to $22,000 for individuals or $110,000 for corporations.
  6. A lawyer’s certificate will not be required to waive or reduce the cooling-off period.
  7. The cooling off period will not apply to ‘sophisticated party transactions’ where the buyer is:
    1. The government or a statutory authority;
    2. A listed public company or its subsidiary; or
    3. Buying more than three lots at a time.
  8. Real Estate Agents will no longer be required to give prospective buyers a notice if the vacant land being sold is not zoned for residential purposes.
  9. The definition of ‘residential property’ contained in PAMDA ...

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Improvements to super fund property

Property held outside of superannuation is generally able to be geared and asset improvement can be funded by debt.

However, these options are generally not available to superannuation funds due to the prohibition against borrowing.
Limited Recourse Borrowing Arrangements
An exception to the borrowing prohibition was introduced in September 2007 in the form of limited recourse borrowing arrangements. In July 2010, the rules relating to these arrangements were further clarified.

Such arrangements are subject to a number of restrictions. Some of the restrictions are:

  1. The borrowing must be limited recourse; namely, the lender’s right of recourse is limited to the underlying assets subject to the borrowing. In other words, the lender does not have any recourse against the other assets of the superannuation fund. In some circumstances, this causes the bank to require a lower LVR or higher interest rate;
  2. Borrowings are permitted for the acquisition of an asset and for making repairs to the asset, but cannot be applied to make improvements to an asset;
  3. Where borrowings are applied to acquire an asset, the superannuation fund cannot make significant improvements to the asset, even if those improvements are made with cash reserves and borrowings are not required.

There are other conditions that must be satisfied for limited recourse borrowing arrangements, however these are outside the scope of this article.
Options for consideration
Option 1: Ungeared Trust as an alternative to limited recourse borrowing arrangements

A client may be looking at alternatives to a limited recourse borrowing arrangement, perhaps because their own bank does not offer those arrangements or imposes stringent conditions.

Nevertheless, they may have a sum of money in their superannuation fund which they wish to utilise for an acquisition and would also like the option of their superannuation fund increasing its interest ...

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