FRANK ALVARO - Alvaro Edwards Solicitors

NSW Swimming Pool Laws - Just a Temporary Part Only Reprieve

2015-04-26T10:45:00.002+10:00

A continued shortage of inspectors has caused the NSW government to again postpone the requirement for property owners to obtain compliance certificates for their swimming pools. One reported description of botched compliance and registration campaign is that it's been a "dog's breakfast"!

Why is this important to you? From a more selfish incentive, there will come a time, in the not too distant future, a property owner with a pool without a valid compliance certificate won’t be able to offer to sell, sell, sell or lease their property! Oh, plus fines will apply for non compliance.

The more altruistic public policy purpose, of course is to enforce pool safety and save lives.

The extended timetable is that the pool compliance certificates are mandatory from 29 April 2016. It''s not far away, really. I've been informed by one inspector, that based on what he's seen so far, he couldn't see the shortage of inspectors being overcome by next April. The lesson is, arrange to get your swimming pool compliance certificate soon before the inevitable last minute rush in 2016.

Pool registration, on the other hand, is already mandatory - it's easily done here.

Why register? Well, it is the law after all! Also, recently I had some clients selling properties where negotiations and or contracts exchanges were at least delayed because they didn't have swimming pool certificates readily available; all worked out in the end but not before stressing on losing buyers offering good prices.

Got a a pool? Don’t allow it to turn your property into a white elephant!

2014-11-12T22:26:00.002+11:00

Q: What’s a white elephant?

A: a possession which its owner can’t dispose of and whose

cost, particularly that of maintenance, is out of proportion

to its usefulness.

In my previous post on this topic last year, I summarised changes to NSW swimming pool laws that added new obligations on property owners with swimming pools.

There are 2 parts: the requirement to register swimming pools; and the requirement to obtain a valid compliance certificate.

The registration part is relatively simple in that it can be done online. As for obtaining the compliance certificate, the original deadline of 29 April 2014 was earlier this year changed to 29 April 2015. If you’re a property owner with pool, for various reasons, that date will be approaching faster than you think.

From 29 April 2015, all properties with a swimming pool (or spa pool) that’s to be sold or rented to tenants must have a valid compliance certificate or occupation certificate.

There is the cost of compliance, of course, but even for the more diligent pool owners the bigger problem is the reported shortage of both available council inspectors and private certifiers.

Anecdotal feedback from my clients is consistent with media reports, such as the article I just referred to. It can months, some report up to 6 months, to start and finish the process of obtaining compliance certificate!

Why should you care? As it presently stands, aside from the risk of fines, from 29 April 2015, a property owner with a pool without a valid compliance certificate won’t be able to:

lease their property; or
to sell, or offer to sell, their property.

If you intend to sell or lease in 2015, don’t let your pool turn your property into a white elephant! Think about applying for your compliance now.

Put and call options in a booming residential property market

2014-11-09T14:28:00.001+11:00

The Sydney property market, especially the residential property market, is booming. How long this will last, I have no idea, but I know it won’t last indefinitely.

I’ve noticed some increasing trends as a result. One, that’s the topic of this article, is proposed option agreements.

Options agreements are agreements between a property owner and a buyer to enter a contract for the sale of land on a future date if one of the parties (sometimes either) to the agreement wish it.

An increasing trend I’ve seen many of my clients experience, is developers approaching residential landowners, where the land may be attractive for development, proposing to buy the land, sometimes for prices that seems quite flattering to the landowner, but often with certain conditions.

Usually, the residential landowner is inexperienced in these types of approaches and negotiations.

Developers often prefer options to buy land because it suits them. They can use it to defer paying stamp duty on a speculative property purchase, or to avoid the purchase altogether. As there is a delay, sometimes months, in a developer to prepare, lodge and eventually obtain development consent, if a property purchase isn’t delayed the developer sees the money spent acquiring the property so early in the process as dead money, or expensive money. The developer is paying interest on loans and other property ownership expenses during this delay.

An option agreement allows the developer buyer to hold off buying the property until months later and, if it can’t get development consent, to avoid having to buy the property at all.

So, what is an option agreement? There are usually two types:

Call Options

The party holding the call option is the potential buyer of the land. A call option over land is the right of a buyer requiring a seller to sell their land to the buyer for a price at an agreed future date.

Put Options

A put option over land is the right of a seller to require a buyer to buy the seller’s land, again at the agreed price.

Sometimes both put and call options are combined in the one agreement, called a put and call option agreement. Therefore, for example, if the buyer does not to exercise their call option, the seller can exercise the put option to force the buyer to buy the land.

Typically in option agreements:

the buyer pays the seller a fee, often called an option fee, for the right to exercise the option by some future date, and preventing the seller from selling the property in the meantime to anyone else

while there are no hard and fast rules, options fees are often equivalent to 1% of the agreed sale price of the land if the option were to proceed to a contract for the sale of land – I’ve see many agreements where the fee is much higher - if the option is exercised, normally the option fee is treated as being a part prepayment of the price

the option fee is immediately released to the seller, non refundable to the buyer even if the option is not exercised

parties must exercise their option rights within a time limit.

The examples above are not the only ways an option agreement operates, but it does give a sound general idea of how they work.

Seller Beware!

A landowner may consider there are benefits, including:

the delay in selling may be suitable, knowing there’s a buyer committed to buy by a certain date

the option fee immediately belongs to the seller, regardless if the sale occurs

less stress in the selling process as there’s already a (somewhat) committed buyer and the price is known

Downsides to consider include:

the seller is locked in!

until the buyer exercises their option, if there’s no put option available to the seller, the seller can’t make plans, for example to move, to buy another property before the buyer is committed to complete the purchase

the seller can’t agree to sell to a subsequent buyer who makes a more attractive and/or higher offer

the market may change dramatically and suddenly – by far one of the worst possible outcomes. If property prices were to fall, the buyer/developer may never exercise their option, so when the option period expires, the seller may have not only lost an opportunity to sell for a good price in a previously buoyant market, but the property’s value may have also significantly reduced

So, what to do?
My advice, particularly for a seller, is simply to ensure you really understand what option agreements are – they’re not all the same.

Know the advantages, disadvantages, as well as the possible consequences. Realise it may not even suit your circumstances.

By far the best advice I can offer if you’re a seller approached by a buyer, a buyer’s agent, or a real estate agent, talking about options or delayed settlements, is don’t agree to anything, and certainly don’t sign anything, before you consult your own solicitor who will advise you and help you protect your interests.

Do-it-yourself car brake service could be less risky than a homemade will!

2013-07-12T19:47:00.000+10:00

When I was still studying, when I had more free time and less life responsibilities, or said another way... “back in the day....” I had no aspirations to becoming a mechanic or a passionate car tinkerer. I did enjoy repairing and mechanically maintaining my cars though. I had the books, the manuals and many of the tools.

Sure, saving money was a big motivating factor for a student, but so was the sense of achievement from doing it yourself.

Engine tuning, changing the oil and various filters, repairing or replacing worn parts, bodywork repairs, it was what many young blokes did. I changed the head gasket on a Mini, but it took me more than 3 days though! I mean, I had to keep referring to the manual, then source a torque wrench, interpret the manual again, buy another new gasket after damaging the first one I bought, and so it went.

One day, the brake pads needed replacing. Referred to the manual again, followed the instructions - it took me what seemed forever, but it was the bleeding the brakes that stumped me! I just couldn’t get the brake pedal to firm up. I asked friends for help, we checked the manual, followed it to the letter, but the soft pedal persisted.

I wanted to save money, but I wasn’t about to gamble on such a fundamental safety risk. The mechanic was retained, paid, and all was fixed professionally – firm brake pedal again and the confidence that it had been done right.

When it comes to home made wills, will kits and the like, when I last looked prices ranged from around $30 up to around $70. I’ve read the instructions included in most. Some are just 2 pages, others are in a comprehensive in booklet form. The instructions are quite good and accurate.

Generally its appears to be an inexpensive way to get yourself a will. But is it?

In my career as a solicitor, I guess I’ve personally helped clients in deceased estate matters where there was a DIY, or home made, will perhaps a couple of dozen times, maybe more. In all of those cases – note I say all - there was a problem. Some small, many were significant. In the worst one, the will maker inadvertently gave a huge part of his modestly valuable estate to a religious organisation where it was clear it was never his intention.

In all cases, it caused additional stress and various degrees of additional expense. Family disagreements resulted in many others.

I know my figures are just anecdotal, but it surely raises a serious issue.

From a cynic’s perspective, DIY and home made wills can be great for lawyers! Given their high problem rate, it results in even more work and fees for lawyers retained to try to untangle the mess.

I began writing this almost a week ago. It was timely that the Don't risk a DIY will article was published this week in the Sydney morning Herald. Rather than have me reiterate how DIY wills can be more problematic, have a read of the article. It’s quite succinct and to the point.

Bleeding the brakes just didn’t work for me, no matter how many times I read and followed the manual’s instructions. Finally, the need to get a mechanic became obvious, I couldn’t get that brake pedal to work properly and, though totally mechanically unqualified, I knew there was a huge risk if that job wasn’t done properly.

Unlike brake pedals that don’t work properly, a DIY will even after following instructions, problems in it are not so obvious to the unqualified and in my experience, far too often the problem only becomes apparent when it’s too late.

Whether making your first or your next will, to protect and distribute your assets you’ve worked hard to build up, forget the DIY risks, and instead see the best person who is qualified and best able to help you, your solicitor.

Latest franchising review likely to lead to more improvements

2013-06-10T15:09:00.004+10:00

Last month the Australian Government publicly released a report detailing the independent review into the franchising sector in Australia. The background that led to the commissioning of the report, and links to the report itself, can be found here.

The report makes 18 recommendations. The aim being to recommend ways of simplifying and improving the clarity of regulations governing franchising.

So, what does the report recommend? Some recommendations are:

amending the Code so franchisors when informing a franchisee of its decision to renew or enter a new franchise agreement, the franchisor must also provide a disclosure document at the same time
modifying parties’ obligations to act in good faith (this also includes during negotiations as well as during the term of the agreement).
additional and tighter controls on marketing funds, including such funds be held in trust (many franchise agreements require franchisees to make regular financial contributions, additional to other franchise fees, to a central marketing fund controlled by the franchisor that’s meant to be applied for that purpose)
the Code be amended to require franchisors to provide prospective franchisees with a short summary of the key risks and matters they should be aware of when going into franchising (generally, would seem to be a good idea, providing it doesn’t result in generic and convoluted overly technical disclaimers that is likely to discourage prospects from reading these, rather than to take the time to aware of and consider the usual business risks so an informed decision is made)
amending the Code so franchisors are prohibited from imposing unreasonable significant unforeseen capital expenditure on franchisees (I’ve seen this happen far too often over the years, even cases where a prospect was “assured” there was no foreseen capital expenditure required, only to be hit with such requirement within weeks, or less, of entering a franchisee agreement)
amending the Code so that franchisors are prohibited, in the absence of a court order, from making franchisees being responsible for certain legal costs in a dispute resolution process and, interestingly, requiring franchisees to conduct their court case outside the jurisdiction, or State, in which the franchisee’s business operates.
amending the Code regarding the transfer, renewal or end of a franchise agreement so that a franchisee must provide all information reasonably required by the franchisor when making the request for consent to transfer/sell or renew, but franchisors will not be deemed to have consented until 6 weeks after receiving all such information to enable it to properly evaluate the request (without more clarification I’m unsure here; this could enable a franchisor , intentionally or not, to delay or frustrate a franchisee’s request using the excuse the franchisee hasn’t yet provided all the required info).

The Franchising Code of Conduct and Australian franchising has been reviewed several times since the Code first came into existence in 1998. Overall, it appears to have resulted in a highly regulated framework in the Australian business format franchising system relative to comparable other counties.

Then again, it’s probably fair to say too, that it’s likely why we have a world leading regulatory but successful and balanced framework for such. If you’re interested in reading more about previous comments I’ve made on this subject, click here.

Meanwhile, let’s see what recommendations from this latest review will be implemented by this or the next Australian government.

Swimming pool NSW law changes - attention property owners

2013-06-03T13:37:00.000+10:00

Recent changes to NSW swimming pool laws impose new added obligations on property owners with swimming pools.

Property owners must, before 29 October 2013, register swimming pools on their property with their local council and obtain certification, or face a fine. If this applies to you, you can register, now, online on the NSW Swimming Pool Register, here.

Will you be selling your property, with a pool? You will... one day. Note the following new requirement.

From 29 April 2014, contracts for the sale of land on which there’s a swimming pool, must have attached to them:

A copy of either: a valid certificate of compliance; or an occupation certificate less than 3 years old authorising the use of the swimming pool; and

Evidence that the swimming pool is registered – this will be a new additional compulsory prescribed document. While this is a topic for another article, if a compulsory prescribed document is not attached to a contract at the time it’s entered, the buyer has additional rights to get out of the contract, even if the buyer’s cooling-off period has expired.

Is your property an investment property and you’re not selling? From 29 April 2014, you won’t be able to lease it without first providing a valid compliance certificate.

A major reason for the tightening up of swimming pool laws, of course, is to further combat children drownings and near drownings.

There's still a little time but if you're a pool owner, don't be complacent.

No funds? Don’t buy. Simple.

2013-06-01T14:36:00.000+10:00

You know how that saying goes... “I’ve said it once, I’ve said it a thousand times...”

Buying and selling real estate is serious. It’s seriously legal stuff. It’s one area where contract law issues can cause big problems for ordinary folk. Not unlike when one hears of businesses having a legal fight over breaches of contract.

In simple terms, if two parties validly enter a contract and one party breaks the contract, that party is liable to the innocent party for the loss the innocent party suffers as a result.

Like most lawyers, when acting for a property buyer, one the first questions I ask is whether they have the funds, either cash or an unconditional loan approval, to pay for it. If they don’t, either don’t buy, or at least don’t commit to the contract before funds are secured.

It’s not uncommon for buyers intending to finance, at least in part, their property purchase from the proceeds from their sale.

The premise is, always ensure you have binding sale contract with your buyer (eg. where your buyer’s cooling-off rights have expired) before you’re committed to your purchase. Otherwise, if you commit buy in the expectation your sale is about to happen and it doesn’t, you could be left with a financial disaster on your hands.

Sounds logical, doesn’t it. Yet it happens far too often reported in this high profile case involving actor Toni Collette and her husband. Their breach is reported to have cost them $800,000. They reneged on their purchase contract when they couldn’t sell their own home. The seller suffered huge loss when they couldn’t re-sell their property for the amount Collette had originally contracted to buy it

The numbers in that case were big. Even so, even when we’re talking of more typical average Sydney outer suburban home prices, a $10,000, $20,000 or $50,000 liability can cause financial pain.

As the reporter states:

“...get your finances approved before you buy, and if you’re selling and buying in the same market have a contingency plan.”

There’s often much pressure when trying to get the timing right when dealing with simultaneous sale and purchases. More reason, I say, to ensure you have your solicitor on board to help you though these minefields.

Is your franchised business falling behind? You CAN fight back!

2013-01-14T14:03:00.000+11:00

Business format franchising in Australia has proven to be a reliable pathway for many, especially those with little or no experience in running a business, to own and successfully run their own small business.

Australia has a world leading regulatory framework, policed by the ACCC. Unscrupulous and unprincipled franchisors do get caught and prosecuted by the ACCC - I’ve written about some such cases from time to time in this blog.

Most successful small businesses are such because of hard work. Running a reputable franchise system business doesn’t guarantee success, however, but it does reduce the chance of failure.

Even in a successful franchised business, sometimes things go astray, or aren’t working as well as they should. If this sounds like you, here’s a Sydney Morning Herald article by David Wilson with some useful tips that may be just what you need to help you. Together with help from your willing franchisor, your accountant and your solicitor, you still can get back your mojo!

Are you a landlord? Does your rental property have a pool? Double check its safety!

2013-01-04T23:24:00.000+11:00

A news story yesterday reported on the rescue by their father of his 2 toddlers from a Sydney suburban backyard swimming pool. Thankfully, that family averted a near tragedy.

News reports also stated that the home was a rental property and, importantly, that the pool’s gate lock was faulty, and section of the pool’s fencing was loose.

It’s a timely reminder for all home-owners to effect and maintain their pool safety equipment and to always supervise children playing in or near water.

Property owners too have a legal responsibility, and owe a legal duty to their tenants to eliminate defects in their premises. See the post I wrote almost a year ago for more on this very topic.

Have a happy, and safe, holiday!

Is Santa real?

2012-12-23T19:36:00.000+11:00

A question that to me seems to be asked more often each year. A common theme accompanying that question is whether it’s fair to “lie” to our kids.

Our two youngest were so genuinely excited after receiving their personally addressed letters from Santa a few days ago. Their excitement and reaction differed little to how our two older ones reacted when they were a similar age, whether sure they saw Rudolph and the sleigh in the early hours’ night sky, or the reindeer hoof prints leading to the house. The older two made sure they did nothing to spoil the younger siblings’ wonder.

I don’t believe the same childhood experience of the two older children, or myself has had any detrimental effect on our upbringing, nor has it taken away our Christian identity or the true recognition of Christmas as celebrating the day of Jesus’ birth and all that symbolises for many.

Santa is probably a valid and powerful symbol inspiring the generosity of spirit that is also Christmas; that generosity is real and transcends all ages, and dare I say, all belief systems

If one believes in that generosity of spirit, then it’s not drawing such a long bow to also say that in that case, Santa is indeed “real”, and encouraging that is not “lie”.

Merry Christmas everyone!

So, will minority strata owners be forced to sell?

2012-11-24T12:52:00.001+11:00

While the officially the opportunity to make submissions and comments for the Review of strata and community scheme laws has now closed, according to the NSW Fair Trading site, comments and submissions are still currently being accepted.

One issue raised in the review process concerns the question of whether minority strata owners can be forced to sell to make way for development. I’ve commented on this before; I believe the issues I highlighted remain pertinent.

Leesha McKenny in her SMH article today encapsulates the issue by asking can you fairly balance the rights of owners who want their ageing apartment building redeveloped with those of an owner refusing to sell?

Information about the Review is on the NSW Fair Trading site, and a good resource, with online comments and links to submissions, can be found on the Open Forum site here.

According the NSW government's indicative timetable, drafting of new laws is to occur by about June next year, with a release of an exposure draft bill in about July next year. Let's wait and see.

Buying into a franchise? Here's one bit of essential, and free advice!

2012-11-23T15:56:00.002+11:00

According to the Franchising Australia 2012 report, published by Griffith University, in Australia there are currently about 1,180 business format franchisors, and about 73,000 operators of business format franchises. These are big numbers.

For many years I have advised and continue to advise franchisee clients, both long time operators and first timers.

With new intending franchisees, there’s much to discuss, advise, explain, check, re-check, and so on. Particularly for newcomers, usually advice ought to be sought from their solicitor, accountant and business advisor.

Are you thinking about, or have decided to buy a franchise business?

Here’s what I think is probably the best early advice, and easiest to follow and understand by newcomers:

Before committing, talk to and ask as many questions as you can to as many current franchisee operators and owners in the system as possible.

That’s how you often get a real-world sense of how the system actually works with real franchisees, how much real or worthwhile support is provided by franchisors, and if the rewards are actually there to be earned.

Unfortunately, sometimes this can reveal that the reality doesn’t quite match the claims in the glossy brochures. The time to find this out is before committing to buying into a system.

A compulsory document that must be provided by franchisors to prospective franchisees before franchise documents are signed, is a Disclosure Document. One of the may types of information it contains is the names and contact details of other franchisees, at least in your state, if not nationally.

Use it!

NSW first home buyers' benefits and stamp duty exemptions: make sure your advice is up to date

2012-11-16T15:35:00.001+11:00

I’ve had the unpleasant experience recently in having to explain to a number of clients who have shopped for property, experienced the usual anxiety and excitement, seen their finance adviser & assured of finance, that the entitlement or benefit their finance adviser explained they’d receive, that they actually won’t. Even though it was someone else who provided incorrect or out of date advice, I’m made out to feel like the Grinch because I provided the correct advice as what the current law is!

So, here is what I hope is a quick and simple statement of what the NSW situation is regarding stamp duty exemptions and first home owners’ benefits for contracts made on or 1 October 2012 to date.

First home buyers
Current scheme is the First Home Owner Grant (New Homes) Scheme.

Where the property is $650,000.00 or less, a first home buyer who buys or builds a new home is eligible for a $15,000.00 grant.

This grant reduces to $10,000.00 for contracts made from 1 January 2014.

In addition, there is an exemption from paying stamp duty when buying a new home, or vacant land where a new home is to be built. This applies for homes priced up to $650,000.00, and vacant land up to $450,000.00.

Non first home buyers

There is now the NSW New Home Grant Scheme.

Non first-home buyers are entitled to a grant of $5,000.00 if they buy a newly built home (including "off the plan" purchases), priced up to $650,000.00. If the duty normally payable happens to be less than $5,000.00, the difference is given as a grant.

Non first-home buyers who buy vacant land priced up to $450,000.00 with the intention of building a new home on it are also receive the grant.

Regional Relocation Grant

The RegionalRelocation (Home Buyers Grant) is about helping previous owners of a metropolitan property with the cost of relocating to a regional home with a one-off grant of $7,000.00.

The price of the regional home must not exceed $600,000.00 (or $450,000.00 for vacant land). There are other requiremnets, but these are the major ones.

That’s it!

There’s no more $7,000.00 first home owners grant, no more reduced stamp duty, no more new home buyers’ supplement, no more first home owner boost.

If you’re in the process of buying now and you’re advised differently to what’s above, or there is a question mark about what benefits exactly you might be entitled to, or just to check your eligibility, see your solicitor first.

Where there’s a will... So, where’s your will?

2012-05-25T13:41:00.000+10:00

I’m referring to testamentary wills, not willpower. A will is a legal document where the will maker (the “testator”) sets out what is to happen to his or her property after they die. For example, who is get the money, the property, the assets.

It used to be that a will had to be made precisely following certain requirements. While in my view it’s a safer bet to have your will formally and professionally prepared, the law has caught up with alternate and more modern ways a will can be made. I’ve briefly referred to this here.

But what happens to you will after it’s made? Most, though not all, will makers who've made their will using a solicitor, have their solicitor store their original will on their behalf. Most solicitors don’t charge for this service. Some store the original of their will in a bank safety deposit box, although I’ve seen a steep decline in this, and I understand most banks now charge for this service. And others keep them at home, sometimes in a safe, but often just “with their other papers”.

I just want to focus on the importance of ensuring you simply know where your will is, and to confirm that from time to time.

A client couple recently explained their wills, made at the same time over 10 years’ ago, was stored at their then solicitors’ office. They had photocopies. On their behalf and at their request, I asked for those wills to be sent to me. I only received one! In a follow up inquiry to the sender’s office, they insisted they only ever had the one copy and have no record of ever having the other.

My clients were puzzled, as like many married couples, they made their wills at the same time, signed them at the same solicitors’ office at the same time, and were given the photocopies they now have. This anomaly was quickly fixed by making a new will to replace the missing one.

This situation could’ve been worse had the missing will been required following the death of the will maker.

These clients’ experience got me thinking. I suggest that if you have a will (and every adult should have one) not only do you keep a record of where the original is, but to regularly audit it to check that it’s there. Whether it be in your office, bottom drawer (not ideal!), bank, trustee or solicitor’s office, check that it’s there. I’d suggest every 2 years is probably reasonably regular. I wouldn’t mind if my clients were to check and confirm that I still hold their wills. Every two years is also the same period I suggest to most of my will clients is a good time to review their wills to ensure their wills still contain their intentions.

Oh, by the way. I also suggest you should always let your executors know (of course, you’ve already let them know that you’ve so appointed them, haven’t you?) how they can retrieve your will for when that time comes.

Friends in business, should be friends "in deed"...

2012-05-21T19:08:00.000+10:00

Mark Bouris, executive chairman of a wealth-management company and small business adviser, but probably more recently widely known as the host of last year's TV’s Celebrity Apprentice Australia also writes articles in the small business section of the Sydney Morning Herald (well, I don’t really know if he actually writes it or whether he instructs another writer to do it for him, but that’s besides the point!). Today he gives some advice to someone looking at starting a business together with a friend.

Mark gives sound advice about starting or running a business with a friend. These include the need to (this list isn’t exhaustive):

separate business from pleasure;
create a plan and sticking to it;
not letting personal relationships get in the way of professional goals.

He also makes another important point that I particularly emphasise when I’m advising friends who consult me when they’re starting a business venture:

put it in writing!

As Mark says, Contracts and agreements made between friends can be awkward but they are vital. It may be awkward but the best time to negotiate and agree on the required documents, normally a deed, is right at the beginning while you’re still friends! It could apply to partnership agreements, shareholder agreements, and trust deeds.

People and friends don’t start business on the basis they expect to have a falling out. If something should go wrong, even if the friendship is stretched or falters, at least there’s a roadmap, or a set of pre-agreed rules on how to best deal with the issue, or even end the business relationship.

A quick example. If two people enter into a business partnership, if there’s no express agreement stating otherwise, in NSW that business relationship is governed by the Partnership Act.

Under that Act, in the absence of a prior agreement, a partner can dissolve the partnership by just giving formal Notice to the other partner(s) and the dissolution of the partnership is effective from the date that Notice is communicated.

This is quite serious; think about it. You’re in a partnership business, you’re handed a Notice and it’s over. No lead in time, no time to work-out any buyout or secure finance, maybe no time to secure the firm’s bank accounts. There’s great potential for arguments as who’s to get what plant and equipment, or who gets to “keep” which customers or clients.

I’ve seen this happen far too often. It creates havoc, stress and ultimately costs that could’ve otherwise been avoided.

A typical formal partnership agreement, on the other hand provides a for minimum notice period, be it 3, 6 or even 12 months. In other words, there’s a sound exit strategy already in place.

Of course friends can go into business together; they should however treat it as such and remember that business is business.

Quality Practice, certification continues...

2012-04-26T17:53:00.000+10:00

Alvaro Edwards Solicitors is and has been a quality endorsed legal practice since April 2005. The firm is one of the earliest NSW law firms (licence number LAW20005) to achieve this standard.

An outside independent auditing and certification structure for quality systems is required to ensure compliance with international quality standards. Auditing, consulting and accreditation of ISO standards are provided by independant organisations such as SAI Global.

Today, SAI Global completed its 2012 surveillance audit of Alvaro Edwards Solicitors' quality management systems.

I'm proud to announce we have again maintained our quality standards certification to Legal Best Practice ISO 9001/LAW 9000. This can’t happen without the support of all management and staff.

Comments in the report include:

The firm continues to maintain the quality management system to meet the requirements of the business and LAW9000. There were no nonconformances raised during this audit... The firm’s approach to continual improvement is well established... Continual improvement continues to be a focus of the firm...

Why does Alvaro Edwards Solicitors bother with this quality system process? Simple. It benefits the way we run our business, which imprtantly translates into a commitment to better serving our clients.

Westmead pips Liverpool to top first home owner grants list

2012-04-15T15:32:00.001+10:00

According to the NSW Office of State Revenue (OSR), Liverpool has consistently been at or near the top, on a yearly basis by postcode, in receiving the most first home benefits in NSW in terms of total grants and total value of grants. I’ve previously commented on this here in 2009, and here in 2010.

According to the latest figures though, Westmead tops that list for the most recent 12 month period to 31 March 2012. During that period there were 776 first home grants received in the Westmead area (Liverpool 733), totalling over $5.8m. The first Home Plus benefits for Westmead are respectively 701 by number (2 less than Liverpool) and $9m by value (Liverpool, $8m).

The OSR’s pdf summary sheet is here.

Liverpool, however, easily tops the “all-time” NSW list for 1 July 2000 to 31 March 2012, in both total number of grants and by value of first home benefits. Interestingly, Westmead comes in at second place. The OSR’s figures for these are in this pdf summary here.

NSW OSR releases video summarising available first home buyers' benefits

2012-04-12T23:03:00.000+10:00

Just a little while ago, I started preparing, and checking, for a post I expected to publish on this blog within about a week from now.

The subject was about what benefits, including firt home owner's benefits, are presently still available for home and land buyers in NSW.

I've just learnt that my work's been cut out for me!

The NSW Office of State Revenue has just released a YouTube video it describes as providing a "summary of the first home benefits available from the NSW Government".

Rather than me ramble on, have a look at the "video". Well... it's more of a slide show with lots of text really but hey, if you're an intending first home buyer, the real vaue is in the content, not the presentation.

There are some other limited concessions available for property buyers, but more on those later.

Signing a contract outside of your solicitor's office? Be wary of last minute added clauses

2012-04-06T17:16:00.000+10:00

In NSW, real estate agents are authorised by law to exchange contracts for the sale of residential property. That authority is not unlimited however.

The law provides, paraphrased, that a real estate agent may, presumably after a buyer has been found and a sale negotiated between the buyer and seller:

complete parts only of a proposed contract (usually one that’s already been prepared by the seller’s solicitor or conveyancer) by inserting details of the buyer’s name and address, the name and address of the solicitor/conveyancer acting for the buyer, the price, and the date;
insert in or delete from a contract description of any furnishings or chattels to included in the sale; and
as stated, and providing they’re authorised by the seller or their solicitor/conveyancer “participate in the exchange or making of contracts”.

Despite these clear and limited provisions, it isn’t uncommon to find agents that regularly do more, sometimes much more, than this.

It’s also not uncommon for contracts ending up in court litigating the meaning of clauses apparently quickly drafted and added very late to contracts; though well intended, ended up being difficult to understand or to make workable.

Regardless of their outcome, court cases are expensive and stressful. If you find yourself in a situation negotiating the buying or selling of a property and clauses being drafted and added to a land sale contract by anyone other than through negotiations via the parties’ lawyers, think about what’s stated above. You need to be aware of the risks. If in doubt, it may be easier to just not sign, and to consult your lawyer.

First time property investor? Beware; ensure the premises are safe!

2012-03-31T19:00:00.000+11:00

Buying a residential property is a popular investment strategy for many Australians. In my experience it continues to be a first time venture for the many buyers I meet.

Properties range from old to brand new, from “studio” or “bachelor” units to multi-bedroom houses. No matter. If you’ve bought, or are just about to buy, your first residential investment property, even if you’re a landlord already, take care!

Your managing agent and your accountant can advise you on the business side of things, but as a landlord, the law imposes duties on landlords that they must still take reasonable care concerning the dangers that might exist on premises they rent out, even hidden ones that aren’t readily apparent on inspection.

For example, is there safety glass installed where it’s required that meets current standards? Is there any defective electrical wiring?

Real court cases emphasise the need for landlords to carry out detailed inspections before properties are rented out – it’s usually not enough to just leave it to the agent.

It’s also not enough to claim that a tenant accepted the property “as is”, or that you just bought the property and “didn’t know” of a defect.

The High Court stated the landlord is in the best position to control the state in which premises are let and therefore owed a duty to tenants to eliminate defects in the premises before tenants move in. So, inspections are necessary before the new tenants move in. Ensure full records are kept showing that obligations have been met regarding these inspections.

Here’s a curly one. You just bought an investment property and your first tenant is the seller of that property, certainly not an unusual occurrence. Who’s responsible if a short while later your new tenant has an accident falling through the glass front door suffering severe injuries because the door was fitted with the wrong glass? You don’t want find out then that perhaps your insurance policy doesn’t cover you!

This case emphasises the necessity of landlords carrying out detailed inspections before premises are let.

With judgments of in the order of $1.2m and over $840,000 in these types of cases, don’t chance it! They highlight the necessity of landlords to carry out proper inspections before properties are rented out. If in doubt, have a chat with your lawyer.

Business franchising can be good, but is it all good?

2012-03-24T15:30:00.000+11:00

As a method of getting a foothold into starting, owning and running a business, business format franchising is a well regarded and popular method. Indeed, on a per capita basis, Australia is said to be the “franchise capital of the world”, even more so than the USA.

There are plenty of good-news stories and guides about the advantages of business format franchising. A timely article in today’s Sydney Morning Herald, however, highlights what many consider an often neglected downside, for franchisees, in many franchising systems. Even after allowing for any rights to renew for additional terms, most franchise agreements have a final end date, be it 5, 10 years or even 20 years from the start date, for example.

Once the franchise term is at an end, typically there is no right for the franchisee to obtain a new agreement from the franchisor. Or as the article puts it, if you’re at the end of your franchising contract, the franchisor can do whatever it wants.

Unlike typical non-franchise businesses, towards the end of the franchise contract, the franchisee can find themselves with no rights, no asset... you have nothing at all; there’s no goodwill, there’s nothing. You pick up your kit bag and go home.

Metaphorically, and possibly quite literally, once you lock the doors for the last time, the keys are just simply handed back to the franchisor. No reward, no payment and no return for the goodwill that was probably built up over years of hard work.

On the other hand, if one has an independant, non-connected and successful small business enterprise, the owner usually has a valuable asset to sell; the years’ worth of built up goodwill adding value and hopefully providing a decent return when the business is sold.

It’s not all bad. If you’re thinking about starting or buying a franchise business, it's vitally important you just need to be aware of these sort of issues. As always, make an informed decision after obtaining professional advice, particularly from your accountant and your solicitor.

Buying and “cooling off” – know this

2012-03-17T14:27:00.000+11:00

Well first, why have this? It mostly results from attempts to reduce the practice of gazumping in real estate transactions. More on this practice in a previous post.

If you’re a buyer, there is information here that may be useful to you but always seek the advice of your own solicitor or conveyancer when looking at your own particular circumstances.

The law requires sellers of residential property to have a copy of the proposed contract available for inspection by any purchaser (link to relevant NSW law here). The proposed contract here means the full proposed contract will all relevant documents, not a “draft” that’s still waiting for compulsory attachments yet to arrive.

Take a situation where, typically through a real estate agent, a buyer has negotiated a purchase of a house, the seller agrees to price and perhaps other terms. The buyer hasn’t yet consulted their solicitor, they’ve heard something about pest and building inspections, and the bank loan still has to be organised.

Say you’re the buyer and you’re keen on the house – dare I say, you love it! Understandably you’re also worried about signing a contract with these other things still to attend to. Importantly, you’re also worried about losing the chance, especially because you’ve worked out that the sales agent, and other in his/her office are keen to sell to anyone else, even though you’ve done a deal while you’re off doing the other important things.

Where a buyer signs the contract with a real estate agent and the agent does the exchange of contracts, by law the buyer has a minimum 5 clear business days cooling off period – so weekends and public holidays are excluded. If contracts are exchanged on a Tuesday afternoon, the cooling off period expires at 5.00pm on the following Tuesday; if the agent exchanged on a Sunday, the cooling off period expires at 5.00pm on the following Friday.

Now the buyer is meant to do what they have to do, for example consult their solicitor, arrange pest and building inspections, and ensure they obtain their unconditional loan approval for the funds they’ve applied to borrow.

The buyer is entitled to pull out of, or rescind, the contract for any reason whatsoever anytime during the cooling off period. There is a relatively small cost; if the buyer exercises their right to withdraw from the contract, they forfeit 0.25% of the agreed sale price – typically this amount has already been paid to the agent at the time of signing. The seller however, can’t rescind for any reason, even if they receive a better offer – see the same earlier post.

These days, many lenders are taking somewhat longer to approve loans. If the 5 day cooling off period is too short and the buyer needs more time, before the cooling off period ends, the buyer can request and extension to the cooling off period. To ensure problems are minimised, this is probably best done by the buyer well before the expiry time, and through your solicitor.

The cooling off gives buyers some peace of mind and a period of time to attend to and finalise matters relating to contract, secure in the knowledge sellers can’t change their mind or accept other offers, and goes some way in minimising gazumping.

Beware too. Once the cooling off period comes and goes, unless the buyer has rescinded before the expiry time, the contract becomes binding and unconditional.

Are there any disadvantages? Yes, there are some. The first one is the cost of rescinding. There are legal, inspections and other like fees the buyer incurs. In addition, the buyer forfeits the 0.25% of the price to the seller. On a $600,000 price, that’s $1,500 – it’s form of compensation to the seller.

Another disadvantage is that while terms of the contract can still be negotiated during the cooling off period between the parties’ solicitors, the bargaining advantage remains with the seller. They know they have a keen buyer – the buyer has already committed a part deposit and incurred expenses.

With this knowledge, sellers are generally less inclined to negotiate away terms compared to if the negotiations were taking place before contracts are exchanged and the seller wants to encourage a buyer to commit. In my experience, I have found that there are now many more contracts drafted for sellers with numerous additional generic clauses to cover many contingencies in favour of the seller, sometimes even taking away or changing already very reasonable clauses in the “standard” contract.

Selling through a real estate agent? Talk to other agents first!

2012-01-16T16:32:00.001+11:00

Most people who sell real estate do so using the services of a real estate agent. For many of us, the buying and selling of real estate property is something that we do very few times; for that and other reasons, the process can be daunting.

This post is not another on “how to sell your house” or “… how to sell without an agent…” article; you find plenty of those elsewhere.

I’m still consulted by seller clients who choose an agent at random and then don’t even consider speaking to more than one!

If you’re a seller, my advice simply is: speak to more than one agent! At least two, preferably a few more.

Some years ago a client couple retained an agent to sell their home, agreeing to the agent’s commission of 6%!! I asked why they hadn’t at least contacted another agent, if only to compare charges. Their reply was that “…but he was so nice to us”! At that time, other agents in that area were typically charging commission of around 2.5%.

More recently another seller client was quoted a commission charge of 4.1% plus GST!! Unlike the other one, this client did talk to other agents and in the end, the first agent reduced his commission to 2.2% inclusive of GST. The typical agents’ charge in this seller’s area is between 2 to 2.5% inclusive of GST.

Think about it. On a $500,000 sale, the commission difference, coming straight out of the sellers’ pocket can be around $11,000 or more!

Obviously these are not common cases. If you’re inexperienced or unsure, the best advice is that you first speak to your professional advisers. As an absolute minimum, talk to more than just one agent, shop around, compare charges and sale methods, ask questions. It’s only a small precaution when we’re talking of figures like $11,000.

First homebuyer? Stressed? Trust your solicitor.

2011-12-04T20:30:00.000+11:00

In recent weeks I’ve noticed a spike in first home buyer related inquires, sales and purchases, which appeared to have some connection with the stamp duty exemption benefit ending soon that I’ve referred to recently.

This article yesterday reports a surge in recent auction sales for the same reason, consistent with my office’s experience.

First home buyers range from the well prepared to the no so well prepared. The common trait though is stress, anxiety and sometime anger – not uncommon emotions in the home buying experience.

No wonder, as a fair proportion of this results from the different advices, sometimes contradictory, buyers receive from numerous others, including from real estate agents, from families and friends, and from finance brokers.

My advice: trust your own solicitor, above all others, that have some connection with your transaction. Your solicitor is the one person that always offers unbiased help, guidance and advice.

If you’re feeling the pressure during your home purchase roller-coaster-like ride, your solicitor is the only professional that’s retained by you specifically to guide you, advise you, especially to protect you and your interests. Remember that.

Tick, tock... the NSW first home buyer’s clock!

2011-11-05T15:18:00.003+11:00

Are you a first home buyer in NSW? If so, remember a major benefit ends at the end of 2011. That’s just 8 weeks away. After you factor in the usual Christmas/New Year closures or winding down of staff in the offices of many lawyers, real estate agents, mortgage brokers, conveyancers, property inspectors, and banks, not to mention your own holidays, there’s even much less time to act.

In addition to the Commonwealth’s $7,000 grant, in NSW since 2004, eligible first home buyers have been entitled to some additional very valuable stamp duty benefits under the First Home Plus Scheme.

These included exemption from paying any stamp duty on homes up to $500,000, and a sliding scale of discounts on stamp duty for homes from $500,000 to $600,000. Even for vacant land on which you intended to build a home, stamp duty exemptions applied to such land up to $300,000 and the concessions on land between $300,000.00 and $450,000.00.

On a $500,000 house, that’s a saving on nearly $18,000. Even for a $350,000 house, the saving is more than $11,240.

This about to change in a major way.

For contracts made from 1 January 2012 in NSW, all that will be replaced by the First Home – New Home Scheme.

Essentially, eligible first home buyers will only be entitled to the stamp duty exemption and concession benefits when buying a first home that is a new home, or a vacant block of land intended to be the site of a first home. The benefit will no longer be available when purchasing an existing home.

If you’re a first home buyer, or soon will be, consider not only the above, but also whether the clock ticking away, as well as the recent official interest rate reduction, could combine to add a little heat in this market over the next few weeks. If you're under a little under pressure, unsure about different advices you're getting from many people, think about seeing your solicitor.