Conveyancing Modules 1-4 PDF

COURSE MODULES Course modules You can access each module by clicking on the titles below: Conveyancing: Step-by-step guide Commercial leases: Step-by-step guide Conveyancing units and subdivided property: Step-by-step guide Acting in mortgage transactions: Step-by-step guide 1 2 Professional Develop...

COURSE MODULES Course modules You can access each module by clicking on the titles below: Conveyancing: Step-by-step guide Commercial leases: Step-by-step guide Conveyancing units and subdivided property: Step-by-step guide Acting in mortgage transactions: Step-by-step guide 1 2 Professional Development Conveyancing: Step-by-step guide Welcome to conveyancing. In Victoria, all mainstream settlements are now completed electronically. In this short course, you will learn about the process of conducting an e-conveyance from the vendor and purchaser perspectives. The content of this course is based on the College's comprehensive guide to the sale and purchase of land, Practice Paper P302 Sale of Residential Land [PDF]. This course is designed to take 2 hours, working at a standard pace. You may claim up to 2 CPD units for the completion of this course in accordance with and subject to your local CPD rules. The College of Law acknowledges Megan Thorburn and Lisa J Gaddie for the contribution of their subject matter expertise. What you will achieve At the end of this course, you will be able to: Advise a client on the sale and purchase of a Torrens title residential property in an electronic environment. Explain the process of transfer of ownership of land from both the vendor’s and the purchaser’s perspective. Carry out the steps in an e-conveyance. Draft the documents required to effect the legal transfer of land. 3 Topic 1Getting started with conveyancing 1. Homepage: Conveyancing (1 of 8) 2. Current Page: Topic 1: Getting started with conveyancing (2 of 8) 3. Topic 2: Pre-contract considerations (3 of 8) 4. Topic 3: Drafting, negotiating and signing the contract (4 of 8) 5. Topic 4: Exchange (5 of 8) 6. Topic 5: Pre-settlement (6 of 8) 7. Topic 6: Settlement and post-settlement (7 of 8) 8. Congratulations and Completion: Conveyancing, Assignment (8 of 8) Note: All links open in a new window. What do I need to convey a property in Victoria? Conveying a property in Victoria requires the following essential components: Prerequisites Practising certificate or conveyancing licence. Registration with an electronic lodgement network (ELN), such as PEXA or Sympli (Sympli's online platform currently provides standalone lodgement for certain transactions) as a Subscriber and Subscriber Manager. Documents Draft a vendor statement. Draft a contract of sale of land (if representing the vendor). Verification of Identity (VOI) form Client Authorisation form Resources The VIC Land Registry Services provides rules, regulations and guidance on e-conveyancing. PEXA provides training resources to help you navigate their software. Key Legislation 4 Sale of Land Act 1962 (Vic) Transfer of Land Act 1958 (Vic) Electronic Conveyancing (Adoption of National Law) Act 2013 (VIC) Income Tax Assessment Act 1936 (Cth) Duties Act 2000 (Vic) While IT expertise is not necessary for conducting an e-conveyance, a degree of digital literacy - that is, the ability to use technology effectively, critically and responsibly - is essential, alongside traditional legal skills such as research, interviewing, negotiation, writing and drafting. The conveyancing roadmap Click on the question marks for an overview of each step in the conveyancing process, beginning with Instructions. Quiz: Key terms and principles in property law Before commencing Topic 2, take the quiz to confirm your prior knowledge of general conveyancing and e-conveyancing principles in Victoria. Click Mark as done and Next to continue. 5 Topic 2Pre-contract considerations 1. Homepage: Conveyancing (1 of 8) 2. Topic 1: Getting started with conveyancing (2 of 8) 3. Current Page: Topic 2: Pre-contract considerations (3 of 8) 4. Topic 3: Drafting, negotiating and signing the contract (4 of 8) 5. Topic 4: Exchange (5 of 8) 6. Topic 5: Pre-settlement (6 of 8) 7. Topic 6: Settlement and post-settlement (7 of 8) 8. Congratulations and Completion: Conveyancing, Assignment (8 of 8) Note: all links open in a new window Important tip: Look for the vendor and purchaser icons next to each step to identify the party, or parties, involved. Receiving instructions Whether you are representing the vendor or purchaser, your first client meeting has a full agenda. Here is a summary of what you should cover. Information you need from your client Personal details Property details Known encumbrances Timeframes From the vendor: 6 mortgagee details and approximate amount owing (If the client has a mortgage on the title to be discharged) o instructions as to any other matters that should be disclosed in the vendor statement or in the contract to comply with vendor disclosure legislation (Sale of Land Act 1962 s32) such as building permits issued in respect of the land. From the purchaser: payment methods, mortgagee details, preapprovals, and the amount available for purchase (if the client has an incoming mortgagee). o Documents your client needs to sign Client Authorisation form, available from the ARNECC website > forms. Verification of identity (VOI): It is recommended that the Verification of Identity Standard be followed: see VIC Participation Rules, Rule 6. Advice you must give your client Explain the general process of the conveyance. Confirm instructions and advice given in comprehensive first letter. Make the costs disclosure required by the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW and Vic) for total legal costs in excess of $750. Include amounts for disbursements you will incur as part of obtaining the documents required by the vendor disclosure legislation. For the purchaser: searches and inquiries recommended prior to exchange of contract (and costs associated) For the vendor: advise on agency agreement if instructed. Answering common queries Click the slide show to view some common queries from the vendor client. Select the right response to each question. 7 Initial steps: searches and enquiries After the first client meeting, the solicitor for the vendor will conduct searches and enquiries to ensure all information received is complete and correct. You must: 1. obtain the information required by the vendor disclosure legislation, set out in Sale of Land Act 1962 (Vic) s32 and listed in the vendor statement. This is usually done by performing property searches. 2. perform a title search which will confirm the registered proprietor(s) and disclose any registered encumbrances on title. 3. complete discharge authority (if applicable) usually online or ask the client to complete the authority online or in branch, and forward electronically to the bank. Initial steps: answering common queries The solicitor for the purchaser will usually receive instructions after the purchaser has agreed on the price of a specific property with the vendor. Sometimes, however, the purchaser may seek a solicitor’s advice at an earlier stage, when a general intention to buy a property exists, or the purchaser has found a specific property but not yet agreed on a price. Click through each slide to view and answer common queries from a purchaser. 8 9 10 Need to know more about pre-contract considerations? Consult these useful resources: Practice Paper P301 Contract of Sale of Land ARNECC Model Participation Rules Guidance Note 1 – Client Authorisation [PDF] Verification of Identity (VOI) advice PEXA website Topic 3Drafting, negotiating and signing the contract 1. 2. 3. 4. Homepage: Conveyancing (1 of 8) Topic 1: Getting started with conveyancing (2 of 8) Topic 2: Pre-contract considerations (3 of 8) Current Page: Topic 3: Drafting, negotiating and signing the contract (4 of 8) 5. Topic 4: Exchange (5 of 8) 6. Topic 5: Pre-settlement (6 of 8) 11 7. Topic 6: Settlement and post-settlement (7 of 8) 8. Congratulations and Completion: Conveyancing, Assignment (8 of 8) Drafting the contract The contract of sale of land is the primary document in the conveyancing process. This course examines the Contract of sale of land published by the Law Institute of Victoria (LIV) and the Real Estate Institute of Victoria (REIV) (August 2019 edition). In this course, this document will be referred to as the standard contract. We have been unable to include a copy of the standard contract in this course, however the detail contained in each of the tabs below provides a comprehensive explanation of each of the clauses in the standard contract. The vendor's solicitor must: draft the contract, including any required special conditions draft the vendor statement (Sale of Land Act 1962 (Vic) s 32) attach the due diligence checklist (Sale of Land Act 1962 (Vic) s33A(3)) discuss the draft contract, vendor statement and due diligence checklist with the client Select each tab below and click the crosses to find out more about different aspects of the standard contract. A. Cover sheet and front page The cover sheet contains provision for insertion of the property address and also contains copyright notices. On the reverse side of the cover sheet is a contents page that lists the contents of the contract (without page numbers). The front page of the standard contract contains a warning to estate agents not to use the contract for sales of “off-the-plan” properties unless it has been prepared by a legal practitioner: see Sale of Land Act 1962 (Vic) (SLA) s 2. The front page states the property address and the key statement that the vendor sells and the purchaser buys the property, which is defined to include the land and the goods, for the price and on the terms set out in the standard contract. It also states that the terms of the standard contract are contained in the following documents (in this order): (a) particulars of sale (b) special conditions, and (c) general conditions. This order of priority means that the general conditions are to be read as subject to any special conditions. 12 B;. Signing The standard contract contains a warning that it is a legally binding agreement and that the purchaser should ensure that, prior to signing the contract, they have read the contract and received: a copy of the vendor statement, signed by the vendor, that is required to be given by the vendor under SLA s 32 in accordance with Pt II Div 2 of that Act, and a copy of the full terms of the standard contract The purchaser and vendor sign and date the front page, referred to as the “signing page”. The parties must also print their name and state the nature of the authority under which they sign (for example, “director” or “attorney under power of attorney”). Notice of cooling-off period Section 31 of the SLA provides that a purchaser of land (together with any goods) has a “cooling off” period of 3 clear business days after the purchaser has signed the contract. Note that land used primarily for industrial or commercial purposes, and land that is more than 20 hectares and used primarily for farming, are exceptions to this provision. During the cooling-off period, the purchaser can terminate the contract by providing written notice and obtain a refund of all money paid except for $100 or 0.2% of the purchase price, whichever is greater. This notice must be provided to the vendor or its agent or the vendor’s estate agent, either by hand delivery or by leaving the notice at the address of the vendor or its agent: see SLA s 31A. C. Particulars of sale Details of the vendor Vendor’s estate agent Insert details of the vendor’s estate agent, including name, Australian Business Number (ABN), address, phone number, Document Exchange (DX) number (if any) and email address. If no agent has been appointed, the section should be deleted, or the words “Not applicable” should be inserted. Vendor Insert details of the vendor, including name (all middle names must be included), ABN, Australian Company Number (ACN) (if a company) and address. Vendor’s lawyer or conveyancer Insert details of the vendor’s representative, including name, ABN, and contact details. 13 If a vendor is not represented by a lawyer or conveyancer, the vendor should insert “Self-representation by the vendor” and the vendor’s contact details. Details of the purchaser Purchaser Insert full name of the purchaser (including all middle names), ACN (if a company), address and contact details. These details are often inserted by the agent on the day of auction or private sale. When acting for the purchaser, ensure the names of the purchaser inserted in the contract of sale match the identity documents received when completing the client’s verification of identity. If the purchaser is borrowing money to purchase the property, loan documentation will be prepared in the purchaser’s full name and must match the name inserted in the contract of sale. Purchaser’s lawyer or conveyancer Insert details of the purchaser’s lawyer or conveyancer, in the same way as for the vendor’s lawyer or conveyancer. If a purchaser is not represented, insert “Self-representation by the purchaser” and the contact details for the purchaser. If goods and services tax (GST) withholding provisions apply, the purchaser must engage a legal representative: GC 25.6. Details of the land Land Insert the title description of the land, including the lot number, plan number, and volume and folio reference. If the land has no title or plan reference or is general law land, insert the description as contained in the copy of the Register Search Statement and the document referred to as the diagram location in the Register Search Statement as attached to the vendor statement or as described in the vendor statement. Note that the land includes all improvements and fixtures. Property address Insert the street address of the property. This can usually be found at the bottom of the Register Search Statement. It is prudent for lawyers to verify the address with their client. Goods sold with the land Insert details of any goods that are sold with the property. If there are any goods to be specifically excluded from the sale, this should be dealt with clearly by way of a special condition. Details of payment, price, deposit and balance Payment Details of the price, deposit and the balance payable at settlement must all be inserted in the “Payment” section of the particulars of sale. 14 Price The “Price” in the particulars of sale is the purchase price for the property. Deposit Insert the amount of the deposit and the date by which it is to be paid. If part or all of the deposit has already been paid, insert the amount that has been paid and the date it was paid. Where the contract is for the sale of land prior to the approval of a plan of subdivision (known as a sale off-the-plan), the deposit cannot be more than 10% of the purchase price; otherwise, the purchaser may rescind the contract at any time before the registration of the plan: SLA ss 9AA and 9AE. For further information about off-the-plan sales, see Practice Paper P302 Sale and Purchase of Land. Where the contract is also a domestic building contract, the deposit cannot be more than 5% of the contract price (unless the contract price is less than $20,000, in which case the limit is 10%); otherwise the purchaser may avoid the contract at any time before it is completed: Domestic Building Contracts Act 1995 (Vic) s 11. Balance The balance of the purchase price is the amount due after the deposit is deducted from the purchase price. The time for the payment of the balance is at settlement. There are two check boxes, titled “deposit bond” and “bank guarantee”. These will apply only if the vendor has agreed to the deposit being paid in one of those ways. If checked, then either GC 15 or GC 16 will be included in the contract. Goods and services tax The sale of land is a supply and may attract GST. The sale of residential premises is generally not subject to GST where those premises are not new. The price includes GST unless the contract provides otherwise. If the first box under the “GST” heading is checked, then GST is payable in addition to the price as GC 19 of the contract will apply. Settlement The due date for settlement must be specified. Normally, that date will be when the purchaser pays the balance of the price and is entitled to take possession of the property and a transfer of the title. If the land being sold is a lot on an unregistered plan of subdivision, settlement will be on the later of the specified date or the 14th day after the vendor gives written notice to the purchaser of registration of the plan of subdivision. Lease The purchaser will commonly take possession of the property on settlement and the vendor will provide vacant possession. If the property is instead being sold subject to a lease or tenancy, then the relevant box must be checked. 15 Terms contract A “terms contract” is a contract under which the balance is paid by a number of instalments over time and/or the purchaser takes possession of the property before the balance is paid. Such contracts are not common but you should be aware of the legislative restrictions that apply to them: see SLA ss 29A–29W. If the contract is a terms contract, and the relevant box is checked, GC 30 will apply. Loan The contract is not conditional on the purchaser obtaining approval of finance unless the relevant box is checked and the particulars are completed. Information required to be inserted in the particulars includes the lender to whom the application for finance is being made, the amount of the loan and the date for approval. If the contract is subject to a loan, this will trigger GC 20. Reports Some purchasers request time to obtain reports about the buildings on the land, or pest infestation. Checking these boxes can make the contract conditional on the purchaser obtaining satisfactory building and/or pest inspection reports invoking either GC 21 or GC 22 (depending on which box is checked). D. General Conditions Contract signing Electronic signature – GC 1 The purpose of GC 1 is to avoid the need for physical signing of a paper contract. It provides for an electronic signature, which is defined as a digital signature or a visual representation of a person’s handwritten signature, placed on a physical or electronic copy of the standard contract by electronic means: GC 1.3. The contract may be electronically signed in any number or counterparts which together constitute one document, and the exchange of such counterparts by email or other electronic means may be agreed in writing: GCs 1.4 and 1.5. Each party must, upon request, promptly deliver a physical signed counterpart of the contract: GC 1.6. However, failure to comply with this request does not affect the validity of the contract. Liability of signatory – GC 2 General condition 2 renders an individual signing on behalf of a proprietary limited company purchaser personally liable under the contract. Guarantee – GC 3 The vendor may require one or more directors of the purchaser to guarantee the purchaser’s performance of the contract if the purchaser is a proprietary limited company. The condition does not specify a form of guarantee. This is often done by way of a special condition. 16 Nominee – GC 4 The purchaser may, no later than 14 days before the due date for settlement, nominate a substitute or additional person to take a transfer of the land; however, the named purchaser remains personally liable for the due performance of the purchaser’s obligations under the contract. There is no need for words such as “and/or nominee” to appear after the purchaser’s name in the contract. The nomination is effectively no more than a direction to the vendor as to who should be named as transferee in the transfer of land – it does not change the parties to the contract. Title Encumbrances – GC 5 General condition 5.1 provides that the purchaser buys the property subject to: any encumbrances shown in the vendor statement other than mortgages or caveats any reservations in the Crown Grant, and any lease referred to in the particulars of sale. If the property is sold subject to a lease, the purchaser indemnifies the vendor against all obligations to be performed by the landlord after settlement: GC 5.2. Vendor warranties – GC 6 General condition 6 contains a number of warranties by the vendor, which are in place of any right of the purchaser to make requisitions on title. The warranties are subject to any contrary provisions in the contract and disclosures in the vendor statement. The vendor warrants that GCs 1–35 are identical to the general conditions in the standard contract. This is an important warranty in conveyancing practice as it obviates the need to read the general conditions. Further, the vendor warrants that the vendor (GCs 6.3 and 6.4): has the right to sell the land is not under a legal disability is in possession of the land, personally or through a tenant has not created another proprietary interest in the land that has priority over the purchaser’s interest at settlement, will be the holder of an unencumbered estate in fee simple in the land and the unencumbered owner of any improvements, fixtures, fittings and goods, and has no knowledge of any public rights of way, easement, leases or other possessory agreements, notices or legal proceedings affecting the land. General condition 6.6 sets out the statutory warranties relating to domestic building work by an owner-builder required if Building Act 1993 (Vic) ss 137B and 137C apply. 17 Identity of the land – GC 7 General condition 7 provides that any omissions or mistakes in the description, measurements or area of the land will not invalidate the sale. The purchaser is precluded from making any objection to or claiming compensation for any alleged mis-description of the property or deficiency in its area or measurements, or requiring the vendor to amend title or pay any costs of such amendment. This condition will be subject to the common law principle that a significant discrepancy will justify avoidance of the contract. Services – GC 8 The vendor statement must include a list of services (electricity, gas, water, sewerage, telephone) and indicate whether each is connected to the land. However, the vendor does not represent that those services are adequate for the purchaser’s proposed use of the property, nor that they will be in the same condition at settlement as they were on the day of sale. The purchaser should make their own enquiries and is responsible for the connection of all services to the property after settlement. Consents – GC 9 It is the responsibility of the vendor to obtain any consents or licences required for the sale. If any such consent or licence is not obtained by settlement, the contract will end and all money must be refunded. Transfer and duty – GC 10 The vendor must promptly initiate the Digital Duties Form (or other form) required by the State Revenue Office in respect of the transaction, and both parties must complete it as soon as practicable: GC 10.2. Release of security interest – GC 11 General condition 11 operates in addition to the warranty in GC 6.3(e) that provides that the vendor will, at settlement, be the holder of an unencumbered estate in fee simple in the land. Where the property (or part of it) is subject to a security interest to which the Personal Property Securities Act 2009 (Cth) applies and that interest is registered on the Personal Property Securities Register (PPSR), at settlement the vendor must provide the purchaser with one of the following documents: a release from the secured party a statement detailing that the amount or obligation that is secured is NIL at the date of settlement, or a written approval or correction indicating that the personal property included in the contract is not, or will not be, property in which the security interest is granted. It is the purchaser’s obligation to notify the vendor of any security interest that it requires to be released. This request must be made in writing at least 21 days prior to settlement: GC 11.1. 18 A diligent purchaser should request a release from a secured party for all types of security interest, including a mortgage, charge or lien. The purchaser may request the vendor provide the vendor’s date of birth to enable the purchaser to search the PPSR for any security interests affecting any personal property for which the purchaser is entitled to a release, statement, approval or correction: GC 11.2. The vendor must comply with this request at least 21 days before the due date for settlement: GCs 11.2 and 11.3. Builder warranty insurance – GC 12 The vendor is required to provide, at settlement, details of any current builder warranty insurance, which is in the vendor’s possession and relates to the property, if a written request is made at least 21 days before settlement. General law land – GC 13 General condition 13 applies if the land being sold is not under the Transfer of Land Act 1958 (Vic). Most land in Victoria is Torrens title; general law land is not common. The vendor is required to complete the conversion if there is a provisional title. This general condition goes on to set out the rights and obligations of parties in a general law conveyancing transaction. Money Deposit – GC 14 The purchaser must pay the deposit: to the vendor’s licensed estate agent, or where there is no estate agent, to the vendor’s lawyer or conveyancer, or if the vendor directs, into a special purpose account in an authorised deposittaking institution in Victoria specified by the vendor in the joint names of the purchaser and the vendor. In the absence of any special condition in the contract, interest earned will be added to the deposit. General condition 14.2 is applicable where the land is a lot on an unregistered plan of subdivision. It is designed to ensure compliance with SLA s 9AA, by providing that the deposit must: not exceed 10% of the purchase price, and be paid to the vendor’s estate agent, lawyer or conveyancer and held by that person on trust for the purchaser until the registration of the plan of subdivision. Section 27 of the SLA provides a mechanism for the early release of the deposit where: the vendor has given the purchaser written notice setting out specified particulars of any mortgages or caveats, and the purchaser has either: 19 – given the vendor a notice in writing that they are satisfied with the particulars provided, or – failed to give the vendor written notice within 28 days of receiving the particulars stating that they are not satisfied with the particulars and providing reasons. Under GC 14.3, the deposit must be released to the vendor if: SLA s 27 has been satisfied it is more than 28 days since the notice was given to the purchaser, and the vendor has provided proof to the reasonable satisfaction of the purchaser that there are no debts secured against the property, or that the total amount of such debts does not exceed 80% of the sale price. When the deposit is released, settlement takes place or the contract ends, the stakeholder who has been holding the money must pay the deposit and any interest to the party entitled to the deposit: GC 14.4. Alternatively, the stakeholder may pay the deposit and any interest into court if it is reasonable to do so: GC 14.5. A purchaser is deemed to have accepted title where they have been deemed to have authorised release of the deposit under SLA s 27(7): GC 14.6. Deposit bond – GC 15 General condition 15 allows for payment of the deposit by way of a deposit bond as an alternative to a cash deposit. This is available only if the vendor has agreed by checking the relevant box in the particulars of sale. Deposit bonds are not very common in Victoria. Bank guarantee – GC 16 A purchaser’s bank can provide a bank guarantee as an alternative to payment of a deposit: GC 16. The vendor must have agreed by checking the relevant box in the particulars of sale. A bank guarantee is made by a bank on behalf of a purchaser and given to the vendor’s legal representative, to ensure that an amount will be paid by the bank if the purchaser fails to do so. Bank guarantees for deposits are also uncommon in Victoria. Settlement – GC 17 At settlement, the purchaser must pay the balance of purchase money due in accordance with written directions of the vendor or the vendor’s legal practitioner or conveyancer: GC 17.1. The vendor must: do all things, including delivering all documents, necessary to enable to purchaser to become the registered proprietor of the land, and give the purchaser either vacant possession of the property or entitlement to receipt of the rents and profits. 20 Unless the parties otherwise agree, settlement must be conducted between 10am and 4pm: GC 17.2. Electronic settlement – GC 18 Settlement and lodgment must be conducted electronically in accordance with the Electronic Conveyancing (Adoption of National Law) Act 2013 (Vic). Among other things, electronic settlement requires that: a party must give immediate written notice if they believe settlement cannot be conducted electronically: GC2 a party must open the electronic workspace as soon as reasonably practicable: GC 18.4 the vendor must nominate a time of day for locking the workspace at least 7 days before the due date for settlement: GC 18.6, and each party must do everything reasonably necessary to assist the other party to trace and identify the recipient of any missing or mistaken payment, and to recover that payment: GC 18.9. General condition 18.9 deals with the delivery of physical items that do not form part of an electronic settlement, including keys. GST – GC 19 General condition 19 implements and expands on the GST provisions in the particulars of sale. The purchaser does not have to pay the vendor GST in addition to the purchase price if the particulars of sale specify that the price includes GST (if any): GC 19.1. A purchaser is not obliged to pay any GST until a tax invoice has been given to the purchaser: GC 19.3. Loan – GC 20 General condition 20 applies if the particulars of sale specify that the contract is subject to a loan being approved. This condition gives the purchaser a right to terminate the contract if: a lender, loan amount and approval date are nominated in the particulars of sale the purchaser has made immediate application for the loan the purchaser has done everything reasonably required to obtain approval of the loan the loan is not approved by the approval date the purchaser serves written notice ending the contract on the vendor within 2 clear business days after the specified approval date or any later date allowed by the vendor, and the purchaser is not in default under any other condition of the contract when the notice is given. 21 If the contract is ended under GC 20, all money paid must immediately be refunded to the purchaser. This condition is only useful if the purchaser has the information required to complete the loan condition in the particulars of sale. It may be that the purchaser requires a special condition containing a more detailed “subject to finance” clause. The two most common issues encountered when drafting a subject to finance clause are: the clause is void for uncertainty, and the clause is a condition precedent or subsequent. Building report – GC 21 If the relevant box in the particulars of sale has been checked, the purchaser may end the contract within 14 days of the day of sale if a registered building practitioner provides a written report disclosing that a structure on the land has a major building defect. A registered building practitioner has a right of entry onto the land for the purposes of preparing the report. Pest report – GC 22 If the relevant box in the particulars of sale has been checked, the purchaser may end the contract within 14 days of the day of sale if a licensed pest control operator provides a written report disclosing a current major pest infestation on the land. A licensed pest control operator has a right of entry for the purposes of preparing the report. Adjustments – GC 23 All periodic outgoings (such as council and water rates, land tax and owners corporation fees) payable by the vendor and any income (such as rent) received in respect of the property must be apportioned between the vendor and the purchaser at settlement. The vendor is liable for the outgoings and entitled to the income up to and including the day of settlement. The purchaser must provide copies of all certificates and relevant information used to calculate the adjustments upon the vendor’s request: GC 23.3. For the purposes of adjusting land tax, the property is treated as if it is the only land owned by the vendor and the vendor is taken to be a resident Australian beneficial owner. Foreign resident capital gains withholding – GC 24 Under the foreign resident capital gains withholding regime, a purchaser is required to withhold an amount from the proceeds of sale (being 12.5% of the purchase price) and pay it to the Australian Taxation Office (ATO) if the vendor is a foreign resident. All vendors are deemed foreign residents unless they provide a clearance certificate from the ATO. This regime applies to real property in Australia valued over $750,000, to mining, quarrying or prospecting rights, and to interests in Australian entities that 22 predominantly have such assets, such as shares in a private company with real property as its main asset. GST withholding – GC 25 Purchasers of new residential premises or potential residential land are required to withhold GST from the purchase price at settlement. Further to the statutory scheme regarding GST withholding, GC 25 sets out certain requirements. Transactional Time and co-operation – GC 26 General condition 26.1 provides that time is of the essence of the contract. This means that contractual obligations must be performed in accordance with the timelines specified in the contract. Service – GC 27 A demand, notice or document required to be served under the contract may be served by or on a legal practitioner or conveyancer acting for the parties. Cooling-off notices may be served on the estate agent even where the agent’s authority has expired. The method of service and deemed dates of service are specified in GCs 27.3 and 27.4. Notices – GC 28 The purchaser is responsible for complying with any notices, orders, demands or levies imposing liability on the property that are issued or made on or after the day of sale. The purchaser is entitled to enter the property to comply with notices if action is required before settlement. General condition 28 does not apply to rate notices or other requirements relating to periodic outgoings – these are adjusted at settlement. Inspection – GC 29 The purchaser and/or a person authorised by the purchaser is entitled to conduct a final, pre-settlement inspection of the property at any reasonable time during the 7 days preceding and including settlement day. Terms contract – GC 30 The particulars of sale contain a box to be checked where the contract is a terms contract, although this does not necessarily need to be checked for GC 30 to apply. A terms contract is a contract that either: obliges the purchaser to make two or more payments to the vendor (other than the deposit or final payment) after the date that the contract is signed but before the purchaser is entitled to take a transfer of land: SLA s 29A(1)(a), or 23 entitles the purchaser to possession or occupation of the land before the purchaser is entitled to take a transfer of land: s 29A(1)(b). Further information as to terms contracts is included in Practice Paper P302 Sale and Purchase of Land. Loss or damage before settlement – GC 31 At common law and in equity, as soon as a contract of sale is unconditional, the property is at the purchaser’s risk and it is the purchaser who bears any accidental loss or deterioration in value. General condition 31 reverses this position by providing that the vendor carries the risk of loss or damage to the property until settlement and that the vendor must deliver the property to the purchaser at settlement in the same condition as at the day of sale. It is good practice for the purchaser to obtain insurance over the property. It is often a requirement of the mortgagee to have their interest as mortgagee noted in the certificate of currency. Breach – GC 32 A party who breaches the contract must pay the other party compensation and interest for any reasonably foreseeable loss resulting from the breach. Default Interest – GC 33 Interest is payable on any money owing under the contract during the period of default. The rate of penalty interest payable under the standard contract is currently 12%, being the rate for the time being fixed by Penalty Interest Rates Act 1983 (Vic) s 2 (currently 10%) plus 2% per annum. Default notice – GC 34 Except for the right to receive interest under GC 34 and any right to sue for money owing, a party to the contract is not entitled to exercise any rights arising from the default of the other party until the defaulting party has been served with a written default notice and has failed to comply with that notice: GC 34.1. Default not remedied – GC 35 General condition 35 provides what is to happen if a default under the contract is not remedied within the 14 days. If the default is made by the purchaser, all unpaid money becomes immediately payable. The contract will end if provision for this was included in the default notice, but this does not affect the rights of the offended party as a consequence of the default: GC 35.5. If the contract ends by a default notice given by the purchaser, all money must be repaid along with any interest and costs: GC 35.3. These amounts constitute a charge on the land until paid. 24 If the contract ends by a default notice given by the vendor as the offended party, the deposit up to 10% is forfeited to the vendor, who may retain the property and sue for damages or resell the property and claim any shortfall from the purchaser: GC 35.4. Conflict between conditions There is no general condition for resolution of a conflict between two or more conditions contained in the contract, but the terms and conditions take priority in the order listed on the front page of the contract. A special condition will usually prevail over a general condition, but you should carefully check and resolve any possible inconsistencies before the contract is signed. E. Special conditions The general conditions of the standard contract are comprehensive such that additional special conditions may not be required. Nonetheless, each conveyance should be carefully assessed on the facts and special conditions should be inserted if required. Special conditions take priority over general conditions, so it is important when drafting special conditions to ensure that they will not inadvertently override a general condition that applies. It is recommended, when adding special conditions to the contract, that: each special condition is numbered the parties initial beside each special condition (if the special condition is added after the contract has been signed by one or both parties) a line is drawn through any blank space remaining on the special conditions page, and additional pages are attached if there is not enough space. Negotiations After receiving the draft contract, the purchaser's solicitor should: discuss the draft with their client and point out onerous or undesirable conditions and obtain instructions for amendments, or the inclusion of special conditions, if required advise client to check the area of the property against the plan of the property ensure the contract is consistent with the client's instructions and the client's understanding of the agreement reached, and advise and take instructions as to any precontract searches, enquiries and inspections (as to quality). 25 If the purchaser requests amendments to the draft contract, the vendor's solicitor must refer these amendments to the vendor for instructions, as well as give appropriate advice. Quiz: Drafting special conditions The standard contract covers most aspects of the conveyance, but sometimes special conditions will need to be drafted and attached to the contract on A4 annexure pages. The vendor's lawyer will draft any special conditions required by the vendor at the drafting contract stage. The purchaser's lawyer will draft any required special conditions following its review of the contract and during the negotiation stage. Beware: inserting special conditions unnecessarily causes confusion and may lead to severance of clauses contained in the standard contract. Need to know more about preparing the contract? Consult these useful resources: Practice Paper P301 Contract of Sale of Land [PDF] Due Diligence checklist 26 Topic 4 1. 2. 3. 4. 5. 6. 7. 8. Exchange Homepage: Conveyancing (1 of 8) Topic 1: Getting started with conveyancing (2 of 8) Topic 2: Pre-contract considerations (3 of 8) Topic 3: Drafting, negotiating and signing the contract (4 of 8) Current Page: Topic 4: Exchange (5 of 8) Topic 5: Pre-settlement (6 of 8) Topic 6: Settlement and post-settlement (7 of 8) Congratulations and Completion: Conveyancing, Assignment (8 of 8) Note: All links open in a new window. What happens at Exchange? When does exchange occur? Exchange occurs once the terms of the contract are agreed, both parties have signed the contract and the purchaser has the deposit available. Where does exchange occur? Exchange occurs at the real estate agent's office, online or at auction. What happens at exchange? Solicitors representing each party check the copies are complete, identical and signed, date the copies and exchange them so each receives the copy signed by the other party. Purchaser's solicitor provides cheque in favour of the deposit holder (usually the agent) for the deposit (or deposit balance of the deposit) or confirmation of receipt of deposit. How is exchange recorded? Exchange provides a note or memorandum in writing signed by or on behalf of the other party to comply with. The real estate agent informs lawyer that exchange has occurred. Purchaser's solicitor informs purchaser and advises insurable risk passes on earlier of possession or completion; and if the purchaser has a cooling off right, the time when that right expires. Searches and Enquiries The purchaser's solicitor will need to conduct post-exchange searches and enquiries promptly to be able to effectively exercise any right of rescission that may be available to the purchaser under the Sale of Land Act 1962 (Vic) s 32. 27 Reporting to the client After exchange, the purchaser's solicitor should write to the client. The letter should address: that exchange of the contract has occurred and the property’s inclusions that the contract as signed overrules any verbal representations made by the vendor and the agent whether there is a cooling off period, and, if so, whether the cooling off period applies and, if so, when it expires recommended enquiries during any cooling off period so as to preserve the purchaser’s rights and all other recommended searches and enquiries to be ordered before settlement whether the deposit is to be invested, and, if so, where that finance must be unconditionally approved as soon as possible, along with the purchaser’s banker or financier’s contact details if there is more than one purchaser, that the purchasers consider whether they are purchasing as joint tenants or tenants in common the amount of transfer duty required to be paid, and when if GST applies, the amount of GST required to be paid, and that the risk of damage to the property passes on the earlier of possession and completion, and recommend that the purchaser insure the property, both for the protection of the purchaser and to fulfill the mortgagee's requirement to have its interest noted on the Certificate of Currency. Reporting to the mortgagee Following exchange of contracts, the purchaser's solicitor should contact the incoming mortgagee (or their solicitors if known) to: advise of exchange of contracts advise of the settlement date provide sufficient information to enable the mortgagee to prepare the loan and security documents, and confirm the mortgagee's requirements for settlement, provide the PEXA workspace if known. Discharging the mortgage If there is a mortgage on the title to be discharged, the vendor's solicitor should: contact the discharging mortgagee advise that the mortgagor intends to discharge and the anticipated date of settlement and forward any required discharge authority signed by the client, and 28 ask the mortgagee to prepare a discharge of mortgage in anticipation of settlement and to advise a payout figure. Quiz: vendor correspondence after exchange Need to know more about exchange? Consult this useful resource: Practice Paper P302 Sale and Purchase of Land [PDF] 29 Topic 5Pre-settlement 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Conveyancing (1 of 8) Topic 1: Getting started with conveyancing (2 of 8) Topic 2: Pre-contract considerations (3 of 8) Topic 3: Drafting, negotiating and signing the contract (4 of 8) Topic 4: Exchange (5 of 8) Current Page: Topic 5: Pre-settlement (6 of 8) Topic 6: Settlement and post-settlement (7 of 8) Congratulations and Completion: Conveyancing, Assignment (8 of 8) Note: All links open in a new window. Accessing PEXA and creating a new workspace Select the tabs and the buttons to learn about different aspects of the PEXA dashboard and workspace, including workspace creation. PEXA dashboard PEXA Workspace summary screen 30 Lodgement: Preparation stage On the PEXA workspace summary screen are two status bars: Lodgement Status and Financial Settlement. These status bars will update as settlement tasks are completed. Lodgement Status In Preparation Prepared Ready Lodging In the preparation stage, the purchaser's solicitor creates and populates the following documents in PEXA. Transfer of Land. Create and populate the Transfer of land in the PEXA workspace at least 7 days prior to the date of settlement. The transfer is not dated until settlement. Notice of Acquisition. Prepare and sign in PEXA a notice of acquisition by the settlement date. A purchaser is required to lodge a notice of acquisition of an interest in land within 1 month of the settlement date with the local council, water authority and owners corporation (when applicable). Payment of duty. Have duty assessed using the SRO duties online. This facility is located outside of the workspace; however, payment of duty is entered into the stamp duty section of the workspace and cross-verified by PEXA. Stamping of the contract and transfer will likely take place via PEXA at settlement. 31 Lodged Payment of tax. Request a GST withholding notice from the vendor's solicitor, if not already provided. Note the amount of GST to be forwarded to the ATO at settlement (withheld from the vendor's funds) and include as a destination financial line item in PEXA Financial Settlement Schedule. FRCGW. Consider whether the FRCGW regime applies. If it does apply and a clearance certificate has not been received from the vendor, then withhold 12.5% of the contract price at settlement and include as a destination financial line item in the Financial Settlement Schedule. The vendor’s solicitor must then review and sign the documents, by inserting their secure USB token and providing the PIN. Once each party signs the documents, Certifications are created and provided in the workspace. The lodgment status will change to “Prepared” when the documents have been prepared and signed. Financial Settlement: Preparation stage Financial Settlement In Preparation Signed Ready Settling Settled During the "In Preparation" stage, each party's representative will update and balance the financial settlement schedule. Destination accounts can be made to any Australian bank account or BPAY facility. In e-Conveyancing, destination accounts are the equivalent of preparing cheque directions. The financial status remains as “In Preparation” while edits are still required to the Financial Settlement Schedule. To complete the process, the purchaser Subscriber will enter the total funds required to settle. Purchaser and vendor destination line items, as well as source funds, will need to add to this amount. Both parties must sign the Financial Settlement Schedule to enable settlement and transfer of the funds. Quiz: settlement statement and adjustments Learn more about populating a settlement statement, including calculating adjustments. 32 Dispursing 33 34 35 36 Financial Settlement: Signed stage Financial Settlement In Preparation Signed Ready Settling Settled Each party must: at least 1 business day before settlement (although this commonly occurs on the settlement day): o digitally sign all necessary documents o ensure all eCTs are provided to ensure that all Certifications required by the ECNL are properly given, and complete all other fields for settlement. at least 1 hour before settlement, digitally sign the Financial Settlement Statement confirming that funds are available. The financial status will be identified as “Signed” when the Financial Settlement Schedule is balanced and has been signed. Once all source funds have been verified, the financial status will change to “Ready”. Title activity checks. As PEXA is integrated with Land Use Victoria, it will automatically perform routine title activity checks (TAC) while the workspace remains open and at increasing intervals leading up to the settlement time. A TAC is an automated check between PEXA and Land Use Victoria for any activity on a land title in the workspace. The TAC can return either a negative result (indicating no activity) or a positive result (indicating activity). Where a TAC returns a positive result, PEXA will immediately notify all parties if a new dealing or other activity has occurred on the title. This gives the parties the options to proceed with settlement or delay settlement. The TAC does not substitute for a final search. The vendor’s 37 Dispursing solicitor will then need to undertake a title search to find out what activity has occurred on the title. How you choose to proceed will depend upon the terms of the contract and whether the vendor can still deliver the title in accordance with the contract. Pre-settlement letter Having made the settlement calculations and settlement arrangements, the purchaser’s solicitor should write a pre-settlement letter to the client. The letter will generally confirm earlier advice given to the purchaser. This period is the last practical opportunity the purchaser has to raise matters in issue with the vendor when both parties would feel a strong inclination to settle their differences and get the transaction finalised. Need to know more about the pre-settlement stage? Consult these useful resources: Practice Paper P302 Sale and Purchase of Land [PDF] Workspace Basics Help Centre PEXA, 19 January 2022 38 Topic 6 Settlement and post-settlement 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Conveyancing (1 of 8) Topic 1: Getting started with conveyancing (2 of 8) Topic 2: Pre-contract considerations (3 of 8) Topic 3: Drafting, negotiating and signing the contract (4 of 8) Topic 4: Exchange (5 of 8) Topic 5: Pre-settlement (6 of 8) Current Page: Topic 6: Settlement and post-settlement (7 of 8) Congratulations and Completion: Conveyancing, Assignment (8 of 8) Note: All links open in a new window. What happens at settlement? At settlement time, the Lodgment status will change from “Ready” (meaning all documents have been signed and verified), to “Lodging” (lodging with Land Use Victoria), to “Lodged”, then to “Complete”. Lodgement Status In Preparation Prepared Ready Lodging Lodged At the same time, the financial settlement status will change to “Settling”. At the appointed settlement time, the system will lock down and settlement will proceed, and the financial status will progress to “Settled”, “Disbursing” and “Disbursed”. Financial Settlement In Preparation Signed Ready Settling Settled PEXA sends payment instructions and, simultaneously, settlement money is transferred by electronic funds transfer from the nominated source account (trust account or PEXA source account) into a holding account of the Reserve Bank of Australia. The status will change to “Settled” (financial settlement is complete), to “Disbursing” (money is disbursed to the nominated destination accounts), then to “Disbursed”. Lawyers are not allowed to use the PEXA source account as the PEXA source account is not a trust account. The Subscribers are notified by PEXA that settlement has occurred. What happens in PEXA after settlement? Following settlement, the purchaser's solicitor will forward the Notice of acquisition to authorities and any owners corporation (if applicable) levying periodic amounts on the land, or with some special relevance to the land. Land Use Victoria scans the Notice of acquisition and electronically transmits the information to government authorities involved in provision of water supply (including local councils, water corporations and county councils), Local Land Services, the Valuer General and Revenue VIC. 39 Dispursing Your costs and the resulting equity belonging to the vendor will have been transferred to your client in PEXA at settlement. Quiz: addressing problems Every sale and purchase of land can have its own problems that may require the taking of additional steps, or a variation of the order, in which steps are taken. Sending notices to authorities A vendor’s solicitor: may send a separate notice to an owners corporations (if applicable). sends a separate notice to any authority not covered by the Land Use Victoria notice, if the authority can levy rates or charges or is otherwise relevant. The vendor’s solicitor can either access a copy of the Notice of acquisition in PEXA and forward a copy to the authorities, or forward a notice in the form of a letter 40 advising of the sale. The appropriate notification is important – until it is received by the authority, the vendor will remain liable as a ratepayer and the purchaser will not receive notices in respect of the land. Advising the Agent The vendor's solicitor must notify the Agent in writing that settlement has occurred. Then the purchaser is able to collect the keys to the property. Writing a final letter to the vendor After completion, the vendor's solicitor should write to their client, advising: that the matter has been completed the details of the amount received and how it was calculated that you have forwarded to the agent the authority to account for the deposit, along with directions for payment of the balance of that deposit, together with a copy of the Agent's account sales the vendor to cancel or transfer any insurances over the property and possibly obtain a refund of unexpired premium, and the vendor to disconnect any utilities. Enclose with the final letter a tax invoice for costs and disbursements for acting in the matter, and furnish a trust account statement if appropriate. If there is a mortgage that has been discharged: notify the client of the pay-out figure, and attach the settlement completion record. Writing a final letter to the purchaser After completion, the purchaser's solicitor should write to their client, advising: that the matter has been completed the details of the payments made registration of transfer (and mortgage if applicable) interest on the investment of deposit the purchaser to obtain insurance, and the implications of land tax, CGT, succession and estate planning and income tax matters. Enclose with the final letter the statement of adjustments and the PEXA settlement completion record. Need to know more? Practice Paper P301 Sale of and Purchase of Land [PDF] provides a range of sample letters (see Appendixes). 41 Commercial Leases: Step-by-step guide Welcome to Commercial leases. In this short course, you will learn about commercial leases; that is, leases of premises used for commercial purposes (for example, shops, factories and offices) as distinct from residential leases. This course is confined to leases of land under the Transfer of Land Act 1958 (Vic) (TLA). The terms and conditions of leases of land under the general law system of title, Crown land and reserved Crown land are substantially similar to leases of land subject to that Act. The content of this course is based on the College's comprehensive guide, Practice Paper P305 Commercial Leases [PDF]. This course is designed to take 2 hours, working at a standard pace. You may claim up to 2 CPD units for the completion of this course in accordance with, and subject to, your local CPD rules. The College of Law acknowledges Michael Redfern and Megan Thorburn for the contribution of their subject matter expertise. What you will achieve At the end of this course, you will be able to: Advise a client on entering into a commercial lease from both landlord’s (lessor) and tenant’s (lessee) perspectives. Determine whether the Retail Leases Act 2003 (Vic) will apply to the transaction. Carry out the steps in a commercial lease starting from receiving instructions through to registration. Determine if the client's instructions may require negotiations or further information. Click Next to continue. 42 Topic 1Getting started with commercial leases 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Current Page: Topic 1: Getting started with commercial leases (2 of 8) Topic 2: Receive instructions (3 of 8) Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Topic 4: Prepare and submit the lease (5 of 8) Topic 5: Negotiate and amend the lease (6 of 8) Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Note: All links open in a new window. What do I need to prepare a commercial lease in Victoria? Conducting a commercial lease requires the following essential legislation: Building Energy Efficiency Disclosure Act 2010 (Cth) A New Tax System (Goods and Services Tax) Act 1999 (Cth) Property Law Act 1958 (Vic) Retail Leases Act 2003 (Vic) Retail Leases Amendment Act 2020 (Vic) (as made) Retail Leases Regulations 2013 (Vic) Transfer of Land Act 1958 (Vic) 43 The commercial lease roadmap The following recommendations, made by the Council of the Law Society in the Law Society Journal (November 1989), focused on the manner in which lease transactions should be conducted between solicitors. Although these recommendations are quite old and are not binding, they reflect prudent leasing practice. We have grouped these into four broad steps and are applicable for Victoria. Click the information button to read a brief summary of each step. These recommendations reflect prudent conveyancing practice in Victoria. Note, however, for Victoria: the lease transactions for which duty will be payable, and the different practice on registration of leases. In addition to the above recommendations, two other matters are recommended: the lease (or agreement for lease) should contain, if registration is required, an undertaking by the landlord to register the lease within a specified reasonable time, allowing sufficient time for registration and endorsement (or execution) of the mortgagee’s formal consent, and either the formal, or at least the informal (but binding), consent of each mortgagee should be obtained before the tenant enters into possession or expends any money with reference to the premises. Whether acting for landlord or tenant, it is also recommended that you refer to the Legal Practitioner’s Liability Committee risk booklet Looking After Leases. 44 Key terms and principles quiz Before commencing Topic 2, take the quiz to confirm your prior knowledge of general commercial leasing key terms and principles. Click across the slides to complete each of the three questions. Click Mark as done and Next to continue. 45 46 Topic 2 Receive instructions 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Topic 1: Getting started with commercial leases (2 of 8) Current Page: Topic 2: Receive instructions (3 of 8) Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Topic 4: Prepare and submit the lease (5 of 8) Topic 5: Negotiate and amend the lease (6 of 8) Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Receiving instructions For landlords, a commercial property is an investment, and the gross and net return on the property is relevant for its success as an investment. For landlords, secure and successful tenants, under long-term leases, render management of the property easier and enable the property to be sold or mortgaged more easily when required. For tenants, the lease is an asset that is an integral part of their business. The obtaining of a sufficiently lengthy and satisfactory lease is relevant for the tenant’s ability to continue to trade in the premises and to sell the business in the future. There are some preliminary questions you will need to consider when acting on a lease transaction from both the perspective of the landlord and the tenant: 1. Will the lease be subject to the retail tenancies legislation? 2. Should there be a lease or only an agreement for lease? 3. What formal requirements are required in respect of the documentation, including registration? 4. In respect of leases subject to the retail tenancies legislation, what compliance requirements are placed on the parties and particularly the landlord? 5. When acting for a landlord, what enquiries must be made of the tenant? 6. When acting for a tenant, what enquiries must be made in respect of the landlord, the land, and the improvements on the land and what protective measures must be put in place? 47 interest and require separate and independent representation and advice. The conflict is not always apparent but it does exist (for example, a lease by A to a company whose directors and shareholders are A and B). Formal requirements of a lease A commercial lease is an agreement between the owner of commercial property and a third party regarding the occupancy of the premises by the lessee. A commercial lease sets out the rights and obligations of each party under the commercial lease. There are important requirements and considerations that the solicitors must be aware of to advise their clients. Click through the slides to read about the formal requirements of a lease. 48 49 Quiz Test your understanding by taking the quiz below. You can take this quiz multiple times. Click across the slides to complete each of the three questions. Click Mark as done and Next to continue. 50 51 Topic 3Retail Leases Act 2003 (Vic) 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Topic 1: Getting started with commercial leases (2 of 8) Topic 2: Receive instructions (3 of 8) Current Page: Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Topic 4: Prepare and submit the lease (5 of 8) Topic 5: Negotiate and amend the lease (6 of 8) Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Note: All links open in a new window. Retail Leases Act 2003 (Vic) A retail lease is an agreement between a landlord and tenant for use of premises where the tenant operates a retail premises. If the agreement for lease is governed by the RLA, the procedures applicable to transactions subject to that Act must be complied with. Application of the RLA The RLA established a system of regulation for retail leases entered into after its commencement and amended the RTA and the RTRA. The RLA applies to all leases of retail premises that are entered into or are renewed on or after 1 May 2003. Click on the information symbols to read some relevant provisions from the RLA. Section 3” “Lease” is defined as a lease, sub-lease or agreement for a lease or sub-lease, and may or may not be in writing: s 3 definitions. 52 A “retail shopping centre” is defined in s 3 (definitions) to mean: … a cluster of premises that has all of the following attributes— (a) at least 5 of the premises are retail; (b) the premises are all owned by the same person or have (or would have if leased) the same landlord or the same head landlord; (c) the premises are located— (i) in the one building; or (ii) in 2 or more buildings that are— (A) adjoining; or (B) separated only by common areas or other areas owned by the owner of the retail premises; (C) separated only by a road; (d) the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade. Section 4 Retail premises at s 4(1) means premises that, under the terms of the lease, are used or to be used either wholly or predominantly for – o the sale or hire of goods by retail or the retail provision of services; or o carrying on a specified business or a specified kind of business as determined by the Minister under section 5... Section 4(3) sets out the premises which are excluded from the s 4(1) definition of “retail premises”. Section 7 A lease is entered into on the earlier of when signed by all parties, when the tenant begins to pay rent or when the tenant enters into possession under the lease: s 7 Section 12 The RLA does not apply to a retail premises lease for a term of less than 1 year: s 12(1). However, if the term is less than 1 year and the tenant is continuously in possession of the premises for 1 year or more under the lease as a result of the lease being renewed and/or continued, the Act will apply to the lease on and from the day on which the tenant has continuously been in possession of the retail premises for 1 year: s 12(2). If the RLA applies to a lease because of s 12(2), the landlord must provide the tenant with a disclosure statement pursuant to s 26: s 12(3)(b). 53 Section 15 For new leases, the landlord must provide the tenant with a copy of the proposed lease, a disclosure statement, a further copy of the proposed lease and an information brochure prepared by the Small Business Commissioner (Commissioner): RLA ss 15 and 17. The copy of the lease and the information brochure must be given to the tenant as soon as negotiations are commenced, and failure to do so will be an offence: s 15. Section 16 A landlord or a tenant must not enter into a retail premises lease that is not in writing and signed by all of the parties to it. Doing so is an offence. However, a failure to comply with the terms of the section does not make the retail premises lease illegal, invalid or unenforceable: see s 16. Exclusions The Victorian Small Business Commission, Premises Not Covered by the Act, lists the following RLA exclusions: Storeys: Victorian Government Gazette, S75-03 Barristers’ Chambers: S99-04 15-year leases: S184-4 Melbourne Market Authority: S175-05 Premises used for community or charitable purposes: S362-14. Applies to leases entered into after 1 January 2015 Bodies corporate (and their subsidiaries): S259-16 Premises used for farming or agricultural purposes: S435-19. Has effect from 29 October 2019. Quiz Test your understanding by taking the quiz below. You can take this quiz multiple times. Click across the slides to complete each of the three questions. 54 Topic 4Prepare and submit the lease 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Topic 1: Getting started with commercial leases (2 of 8) Topic 2: Receive instructions (3 of 8) Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Current Page: Topic 4: Prepare and submit the lease (5 of 8) Topic 5: Negotiate and amend the lease (6 of 8) Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Note: All links open in a new window. Step 1: Prepare and submit the lease We begin by looking at step one in more detail which largely concerns the landlord and their solicitor. Client instructions 55 It is usual for the leasing agent to provide the particulars of the lease as agreed between the parties to the landlord or to the landlord's solicitor. When the lease is for a premises in a shopping arcade or large commercial building, there is often an established form of lease. It remains essential that clear instructions are received from the client regarding the lease terms that have been agreed with the other party. Lease provisions Lease content The entire lease requires both solicitors’ attention. The following only covers some aspects of particular importance relating to the process of negotiating and amending a draft lease. Click on the panels below to read more about these. Parties Subject matter Lease term Option to renew Rent and review Use Rates, taxes and operating expenses Assignment, subletting and mortgage over lease Parties There may be taxation considerations in deciding who, or which entity, should be the tenant. These must be considered before the lease is entered into, as that will also determine who conducts the tenant’s business and has taxation and other liability aspects. If there is more than one tenant, it must be decided whether they will take as joint tenants or tenants in common (and if as tenants in common, in what shares), and the lease must indicate that. If a party is a company, their Australian Company Number (ACN) or Australian Business Number (ABN) must be indicated in the lease. The ABN of the underlying entity is generally best used if the party is acting as a trustee of a trust for tax purposes, to avoid confusion as to which entity is responsible for the tax and entitled to any deductions or other concessions. Subject matter The premises must always be accurately described. Where it is part of a title, a surveyed plan attached to the lease is desirable. Where the premises is part of a building then all access ways and rights of entry must be described, as well as common areas that may be used by the tenant in conjunction with other users of the premises. 56 The parties’ lawyers must take a wide approach to the subject matter of a commercial lease. It is suggested that the following must be adequately specified in the lease: entitlements of access and use by the tenant, its employees and customers, of common portions of the building the tenant’s entitlements to services and facilities provided by the landlord the tenant’s entitlement to service pipes and connections that pass through the landlord’s property or other leased premises, and the landlord’s entitlement to use service pipes and connections traversing the leased premises the landlord’s fixtures and chattels that may be used by the tenant and are included in the lease the landlord’s rights of access and interference with the leased premises and rights reserved to the landlord that may infringe on the tenant’s use and enjoyment of the leased premises or facilities provided by the landlord the definition of the lease boundaries, and the quality of the services provided, such as the hours of operation of security and access, the normal hours of operation of air-conditioning, maintenance response times, and rent relief for longer outages. Lease Term The lease term, including its commencement, duration and end, must be clearly specified in the lease, as must any options for renewal, their duration and conditions for exercise. The tenant’s lawyer must seek instructions (and provide advice to the client) on the adequacy of the lease term and option, having regard to the nature of the business, costs of installation and fit out, and the difficulty and costs of relocation. These factors are important for security of tenure and in the event of a sale of the tenant’s business. The tenant’s lawyer, subject to instructions, can negotiate: to secure a longer lease term or additional options for renewal, and when the lease covers the whole property or a substantial portion of it, or one or more lots on a plan of subdivision, to seek a right of pre-emption (that is, a right of refusal if the landlord desires to sell the property) and, less frequently, an option to purchase the property. Option to Renew The duration and preconditions of an option for renewal must be clearly specified. The preconditions are usually a period during which to exercise the option and compliance with lease obligations by the tenant. The period must be sufficiently long and prior to the end of the lease term so that each party knows in advance whether the tenant intends to continue in the premises (usually 12 to 6 months or 6 to 3 months before the end of the lease term). Compliance by the tenant with the precondition relating to lease covenants depends on the precise terminology of that requirement as expressed in the option. The option must specify the terms of the renewed lease. Usually the terms will be the 57 same as the terms of the original lease. For options to renew leases under the RLA, see Pt 4 Div 2. The RLAA introduces a 3-month lead time (previously 6 to 12 months) for landlords to give tenants written notice of the last date that an option to renew the lease must be exercised. The notice must include the following information: date by which an option to renew must be exercised; rent payable for the first 12 months of the renewed lease; availability of an early rent review under the RLA; availability of a cooling off period under the RLA; and any changes to the most recent disclosure statement provided to the tenant (other than changes in relation to the rent). If the landlord fails to provide this information, the option period is extended to the date that is 3 months after the notice is given (previously 6 months). If the extended date is after the expiry of the lease, the lease will be extended until 3 months after the notice is provided, unless the parties otherwise agree. Rent and review There is usually no difficulty in specifying the rent and when and how it is payable. However: any lease incentive, in terms of rent-free period, must be carefully documented if there is a turnover or percentage rent, that requires a very carefully drafted provision and there may be several matters requiring amendment which must be sought by the tenant’s lawyer, and the lease must include adequate provisions for abatement of rent, to cover periods when the premises are rendered wholly or partly unusable through, for example, damage or destruction such as by fire, flood, lightning, storm, tempest, earthquake or land contamination. Rent review has given rise to considerable problems in lease drafting and litigation. Some important aspects are: the frequency of rent reviews, usually each 2, 2.5 or 3 years and not annually, unless there is an objective review such as CPI the presence or absence of a “ratchet” clause, that is, the rent cannot reduce below the existing rent. “Ratchet” clauses are prohibited under the RLA and must be resisted by tenants’ lawyers that the implementation of the rent review is not at the landlord’s discretion, that the tenant has an independent entitlement to implement a rent review and that the rent may decrease as a result of the review, and appropriate mechanisms and criteria for the rent review. 58 The RLA controls rent review provisions in respect of the type of review that may be conducted: see ss 35–38. Use An important issue, when a lease is negotiated, is that the premises are legally and physically suitable for their intended purpose. It is essential that the intended use of the premises is described accurately. Provision must also be made to enable some changes of permitted use that may be required by the tenant to alter or expand its business or to render the premises acceptable to a prospective assignee or subtenant. Such provisions may be conditional. Rates, taxes and operating expenses Usually the tenant is required to contribute to the landlord’s expenses in connection with the property. Those may be confined to rates and taxes or may extend to other operating costs. There is relatively little contention with rates and taxes, apart from determining the tenant’s proportion of the liability. However, there are some difficult questions as to when the tenant should share the landlord’s outgoings. Those outgoings can be a relatively large percentage of the rental income and constitute a substantial additional financial obligation apart from rent. These costs also tend to increase over the years. Furthermore, unless a tenant obtains a long-term lease of an entire building, with full repair and management responsibilities and subletting rights, it must be queried why a tenant should reimburse the landlord’s costs of, for example, structural repairs to the building, repairing inherent defects and statutory charges for providing kerbs and gutters outside the property. The instructions and drafting must focus on three aspects: to include in the lease a fairly comprehensive list of operating expenses to which tenants should contribute with some general provision that will cover other similar operating expenses which may occur in the future or are not expressly referred to to ensure that those items for which tenants are not responsible are very clearly specified in the lease, and to ensure whether the tenant does (or does not) reimburse the landlord for GST payable on operating expenses. Assignment, subletting and mortgage over lease When a lease contains no restriction on assignment, it is generally freely assignable by the tenant. That is unsatisfactory for landlords, who need to keep some reasonable control over the transfer of leases and the quality and financial reliability of the persons who occupy and are responsible for the premises. Conversely, for tenants the ability to assign leases during the continuance of the lease term is important in a variety of circumstances. The premises may become unsuitable for the tenant’s purposes or business, or the tenant may want to sell the business or 59 relocate. It is essential for tenants to have a reasonable entitlement to assign the lease, even if subject to some limitations. A lease usually permits assignment, subletting or mortgaging with the landlord’s consent, but some landlords will require an absolute covenant against these dealings so that they can have more precise control over who is to be their tenant. Such an absolute prohibition must be resisted by tenants’ lawyers. However, when there is some possibility of assigning the lease, an absolute prohibition on subletting may be acceptable to tenants. If a lease prohibits an assignment without consent: in the case of a lease subject to the RLA, consent can be withheld only in certain circumstances under s 60, or in the case of a lease not subject to the RLA, consent cannot usually be unreasonably withheld: PLA s 144. If a lease prohibits subletting or mortgaging without consent: in the case of a lease subject to the RLA, unlike assignment, there are no controls in respect of consent, or in the case of a lease not subject to the RLA, consent cannot usually be unreasonably withheld: PLA s 144. Preparing the lease Click through the slides to read about important lease considerations and completing the lease form. There are implied covenants in TLA s 67 60 These are rarely used as they are not sufficiently detailed and their content does not reflect current leasing conditions and practice. It is preferable to rely on express lease covenants relating to each topic covered in the lease. The lease should cover every topic in express terms and in sufficient detail There is very little room for the implication of terms in a commercial lease.’ If using a standard form of lease such as the Law Institute of Victoria commercial lease... Note that: o the standard lease will contain provisions commonly found in commercial leases, whether the RLA applies to the lease or not o the standard lease will need to be considered and, as appropriate, amended to consider specific client requirements and, where relevant, the provisions of the RLA, and o many of the matters referred to in this course will be covered by specific provisions in a standard lease and reference should be made to the LIV commercial lease to note how that matter is covered in that standard form. Landlord solicitors should attempt to use lease documents that are not unduly lengthy and complex. However, the documents need to cover adequately the rights and obligations of each party, and the length and complexity is governed by the nature and size of the transaction. The lease should use plain and clear language that can easily be understood by all parties. A lease transaction will be finalised more rapidly and satisfactorily if relatively plain and comprehensible language is used, and the document is organised into sections covering separate topics. The lease provisions should be fair and reasonable to both parties, at all times reflecting the agreement that has been reached between the parties. The provision of lease provisions that are not wholly biased towards the landlord, but that are fair and reasonable to both parties and provide adequate protection for the tenant, should be encouraged. Searches and enquiries It is important that the landlord’s solicitor search the property title to reveal matters such as: whether the landlord is the registered proprietor on title whether there are any restrictions on use of the premises, and whether any mortgagee’s consent is necessary. 61 There may also be expired leases shown as registered or caveats for expired leases which need to be removed. The landlord’s lawyer must conduct searches relating to the tenant and guarantors to confirm that they are not subject to bankruptcy or winding up orders. These searches may be carried out after submitting the lease but prior to the lease being entered into. Disclosure statements New leases Leases of less than a year Franchise licences New leases For new leases, the landlord must provide the tenant with a copy of the proposed lease, a disclosure statement, a further copy of the proposed lease and an information brochure prepared by the Small Business Commissioner (Commissioner): RLA ss 15 and 17. The copy of the lease and the information brochure must be given to the tenant as soon as negotiations are commenced, and failure to do so is an offence: s 15. At least 14 days before the lease is entered into, the landlord must give to the tenant a disclosure statement and the completed proposed lease that includes particulars of the tenant, the rent and the term: s 17(1). If the landlord gives the disclosure 62 statement and proposed lease less than 14 days before the lease entry date, the lease will start 14 days after the disclosure statement and proposed lease are given to the tenant: s 17(1C). The form of the disclosure statement is provided for in the regulations made under the RLA. Under the RLR Schs 1–4, there are four separate disclosure statements for use. The Law Institute of Victoria (LIV) and the Commissioner have published four disclosure statements that comply with the disclosure requirements. The disclosure statement for a new lease of premises located in a retail shopping centre is set out in RLR Sch 2. Leases of less than a year The disclosure statement required on the renewal of a lease (see s 26) is also required where a lease of less than 1 year is renewed one or more times, or is continued, so that the tenant is continuously in possession of the retail premises for 1 year or more under the lease after the commencement of the RLA: s 12. In that situation: the disclosure statement must be provided within 60 days after the Act begins to apply to the lease the notice of the tenant that it has not received the disclosure statement is to be given no earlier than 7 days and no later than 90 days after the Act begins to apply to the lease, and the right of the tenant to terminate where information provided by the landlord in the disclosure statement is misleading, false or materially incomplete is to apply for the 28 days after the Act begins to apply to the lease: s 12(3)(b). Franchise licences A franchisor tenant of retail premises must provide to a franchisee licensee of the premises a copy of any disclosure statement given to the tenant: s 96. The disclosure statement must include the details of any changes of which the tenant is aware or could reasonably be expected to be aware. Quiz Test your understanding by taking the quiz below. You can take this quiz multiple times. Click across the slides to complete each of the three questions. Click Mark as done and Next to continue. 63 Topic 5Negotiate and amend the lease 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Topic 1: Getting started with commercial leases (2 of 8) Topic 2: Receive instructions (3 of 8) Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Topic 4: Prepare and submit the lease (5 of 8) Current Page: Topic 5: Negotiate and amend the lease (6 of 8) Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Note: All links open in a new window. Step 2: Negotiate and amend We now look at step 2 where the parties negotiate and make amendments to the lease. Upon receipt of a draft lease from the landlord’s lawyer, the tenant’s lawyer must review the lease and any accompanying bill of costs. A lawyer must be familiar with the terms of the lease and be able to recommend to the tenant provisions that must be modified. 64 Negotiations and amendments The lawyers for both parties, on the instructions of their respective clients, negotiate the terms of the lease and settle the final draft of the lease. This may require redrafting some clauses and/or drafting new clauses. After a draft lease or agreement has been submitted, the main objectives of the discussions and correspondence between the parties’ lawyers is to: ensure that the draft, as altered, covers the parties’ agreement ensure that foreseeable problems or matters are covered adequately and fairly in the interests of each party, and negotiate some matters (because that has not occurred) or to renegotiate some matters (to remove some potential problem or an unfair provision). If the matters at issue cannot be resolved rapidly after some initial correspondence, a conference must be held between the lawyers and representatives of the client with authority to negotiate and reach binding decisions. If the lease requires amendment as a result of the tenant’s lawyer’s review and the tenant’s instructions, the lawyer will write to the landlord’s lawyer setting out the amendments the tenant requires and negotiate the final form of the lease. This may require redrafting or rewording the lease. It is prudent for the tenant’s lawyer to redraft clauses the tenant requires to be amended, rather than saying “Clause 4 should be limited to minor repairs only”. The tenant’s lawyer must redraft the clause as the tenant requires and seek the other lawyer’s approval. A clear method, such as returning an electronic version with tracked changes, has the advantage of making it easier for the landlord’s lawyer to see at a glance the amendments sought and exactly where they appear in the lease. Making negotiations In seeking amendments to a draft lease, the tenant’s lawyer is usually guided by two principles: that the client is getting the deal the client bargained for, and that the terms under which the client will occupy are not unreasonable or too onerous; and that every effort is made, when appropriate, to improve the bargain reached by the client, which is conditional on agreement being reached on the lease conditions. The lawyers for each party must ensure that the negotiations, and any matter agreed on during the negotiations, are recorded in diary notes and (preferably) in correspondence. 65 Negotiated provisions Further examples of commonly negotiated lease terms that are critical to the tenant are: Provisions to protect the tenant's covenant for quiet enjoyment of the premises. A reasonable provision for abatement of rent. Default provisions that are fair and reasonable, bearing in mind the provisions of Conveyancing Act s 129 in relation to relief against forfeiture. The tenant’s obligation to repair and make good the premises excludes reasonable wear and tear and structural and inherent defects (which is the landlord’s responsibility). No clauses hinder or impede the operation of the tenant’s business. Ensure that the tenant is not responsible for structural repairs to the premises by including a clause similar to the following: “the lessee’s obligations will not extend to repairs, additions, improvements, alterations or other things of a structural nature”. Searches and enquiries The tenant’s lawyer must conduct searches and enquiries relating to: the title, the landlord and the premises, including planning, zoning and environmental matters. The title search will show whether the landlord described in the lease is the registered proprietor of the property and, if not, the lease may be a sublease, or another explanation will be required to be provided by the landlord’s lawyer. The title search will also show any restrictions on use and whether there is a mortgage which will need the mortgagee’s written consent to the lease will be required. If the landlord is a company, an ASIC search must be made of the company to confirm it is not in administration. Frequently, the name of the company as registered does not accord with the name in the lease and an amendment is required to be made to the name in the lease. Quiz Test your understanding by taking the quiz below. You can take this quiz multiple times. Click across the slides to complete each of the three questions. 66 Topic 6Execute and register the lease 1. 2. 3. 4. 5. 6. 7. 8. Homepage: Commercial leases (1 of 8) Topic 1: Getting started with commercial leases (2 of 8) Topic 2: Receive instructions (3 of 8) Topic 3: Retail Leases Act 2003 (Vic) (4 of 8) Topic 4: Prepare and submit the lease (5 of 8) Topic 5: Negotiate and amend the lease (6 of 8) Current Page: Topic 6: Execute and register the lease (7 of 8) Congratulations and Completion: Commercial leases, Assignment (8 of 8) Steps 3 and 4: Execute and register the lease We are now at the stage where the parties are ready to execute and agree on the lease. 67 Click the information buttons below to read about the closing stages of a commercial lease transaction. Tenants executes documents The tenant’s lawyer arranges for the lease to be executed (signed) by the tenant, and by any guarantor. The tenant’s lawyer must ensure that such execution is witnessed by a person who is not a party to the document. Tenant’s solicitor returns signed docs and cheques to landlord’s solicitor The tenant’s lawyer arranges for the lease to be executed (signed) by the tenant, and by any guarantor. The tenant’s lawyer must ensure that such execution is witnessed by a person who is not a party to the document. Landlord’s solicitor checks and pays into trust account Once the landlord's solicitor receive all copies of the signed lease and cheque for costs and estimated disbursements from the tenant’s lawyer, they should check that all copies are properly signed and then forward them to the landlord for signing. Tenant is given keys and access premises A critical step in finalising a leasing transaction matter, is that the tenant is given the keys and access to the premises. This occurs when all of the landlord’s requirements have been met. Landlord executes documents When the landlord returns all the copies of the lease signed, the signing is again checked. If duty is payable ensure that the instrument is stamped accordingly. The fully signed copies of the lease are dealt with as follows: o a copy is sent to the tenant 68 o o o a copy is sent to any guarantor a copy is returned to the landlord for its records, and a copy is held on the firm's file for future reference. Mortgagee executes consent If a mortgagee’s written consent to the lease is required, the draft lease should be sent to the mortgagee (or the mortgagee’s lawyer), asking for consent and the conditions of consent. It is a matter of judgment as to when the mortgagee is approached. Generally, it is preferable for that to occur when the lease terms have been fully negotiated and there is an agreed lease document. However, obtaining at least the mortgagee’s firm approval in principle to the lease will delay entry into the lease, as that should not occur until the mortgagee’s attitude is known. Often, mortgagees will only provide their consent to the lease after it has been executed and is binding upon all parties, in which case the lease can be entered into subject to obtaining the mortgagee’s consent. Mortgagees tend to seek to impose new terms and even onerous terms of compliance upon tenants; again, it will be a question of judgment whether the tenant proceeds with the lease if such terms are not able to be renegotiated. Where registration of the lease is required, it is the obligation of the solicitor acting for the party having the carriage of the stamping, registration and obtaining the consent of any necessary consenting party, to seek to attend to all such matters with due expedition. The draft lease should have contained an undertaking by the landlord to register the lease within a specified reasonable time, allowing sufficient time for registration and endorsement (or execution) of the mortgagee’s formal consent. Registration (if applicable) Where registration of the lease is required, it is the obligation of the solicitor acting for the party having the carriage of the stamping, registration and obtaining the consent of any necessary consenting party, to seek to attend to all such matters with due expedition. The draft lease should have contained an undertaking by the landlord to register the lease within a specified reasonable time, allowing sufficient time for registration and endorsement (or execution) of the mortgagee’s formal consent. Report to the tenant Report to the client At the conclusion of a lease transaction, the lawyer for each party must provide confirmatory advice to the client regarding the transaction with details of rent review, rates, operating expenses and options for renewal. 69 A letter of advice, whether to the landlord or to the tenant, is necessary to draw the client’s attention to important matters and future dates, and to confirm advice given to the client relating to particularly important matters. Such letters can have a significant relevance if subsequent allegations of professional negligence are made by the client. It is common practice of lawyers to forward to their clients a summary of the RLA if it applies to the lease and the steps that need to be taken during the term of the lease. The checklists in Appendices 1 and 2 are frequently used for this purpose. Quiz Test your understanding by taking the quiz below. You can take this quiz multiple times. Click across the slides to complete each of the three questions. 70 Conveyancing of units and sub-divided property: Step-by-step guide Welcome to Conveyancing of units and sub-divided property. In this short course we will outline the steps and procedures that are particular to the sale and purchase of lots on plans of a subdivision. The content of this course is based on the College's comprehensive guide to Conveyancing of Units and Subdivided Property P303 [PDF]. This course is designed to take up to 2 hours, working at a standard pace. You may claim up to 2 CPD units for the completion of this course in accordance with and subject to your local CPD rules. Topic 1Getting started with conveyancing units and subdivided property 1. Homepage: Conveyancing units and subdivided property (1 of 6) 2. Current Page: Topic 1: Getting started with conveyancing units and subdivided property (2 of 6) 3. Topic 2: Acting for the purchaser (3 of 6) 4. Topic 3: Acting for the vendor (4 of 6) 5. Topic 4: Management and administration of the owners corporation (5 of 6) 6. Congratulations and Completion: Conveyancing units and subdivided property, Assignment (6 of 6) Note: All links open in a new window. Introduction 71 Legislation Building Act 1993 (Vic) Domestic Building Contracts Act 1995 (Vic) Owners Corporations Act 2006 (Vic) Owners Corporations Regulations 2007 (Vic) Planning and Environment Act 1987 (Vic) Sale of Land Act 1962 (Vic) Subdivision Act 1988 (Vic) Subdivision (Procedures) Regulations 2021 (Vic) Subdivision (Registrar’s Requirements) Regulations 2021 (Vic) Resources Land Use Victoria Forms of subdivision When acting for a vendor or purchaser of a unit or other lot on a plan of subdivision it is important to have a general understanding of the basic concepts and the various forms of subdivision. Although historically the most common form of subdivision has been for multi-storey residential units or apartment buildings, the use of subdivision has since become more diverse. The legislation can be used for: townhouses and villa units, either freestanding or attached retail shops commercial offices industrial warehouses retirement villages wineries, and farms. 72 In addition, the legislation accommodates a combination of uses within a single development, known as mixed-use subdivisions. It is not unusual to find developments comprising two or more of the following components: residential serviced apartments or hotel retail, and offices. Key terms and principles It is essential to understand the terms that are commonly used when discussing unit conveyances and sub-divisions. Interact with the cards below to learn more about these key terms. Before you turn each card, think about how you would define the key term. Then turn the card to check your response. Establishing ownership A. Subdivision The concept of subdivision includes the subdivision (by a registered plan) of land, a building or airspace into lots, with or without common property. The boundaries of the lots can be defined on the plan of subdivision and the common property is the remainder (being that part of the land, building and airspace which is not comprised in the lots). Lots are cubic airspace (and can be above and below the ground), meaning the subdivision can be perceived as horizontal and vertical in nature. B. LOT A lot is defined as a part (consisting of one or more pieces) of any land (except a road, a reserve or common property) shown on a plan of subdivision, which can be disposed of separately: Subdivision Act s 3. A lot may comprise cubic spaces on various levels of a building (which are not contiguous). For instance, part of a lot can be an apartment on an upper level of a building, another part of that lot can be a car space in the basement, and the remainder of the lot can be a storage space on ground level. Alternatively, the lots can be individually marked. C. COMMON PROPERTY The boundaries of the lots can be defined on the plan of subdivision and the common property is the remainder (being that part of the land, building and airspace which is not comprised in the lots). The common property is not restricted to the remainder of the surface area of the land but may include any depth underground and all airspace above the building and ground, depending on the registered plan. ………………………………………………………………………………… D. Plan of subdivision 73