Queensland has been subject to several catastrophic weather events in the past, the most recent of which being the 2022 floods. As we start to rebuild from the havoc wreaked by this event, with the memories of 2011 still fresh in our minds, it is prudent to consider the impact of such devastating events on our contractual relationships. Picture this: you are about to settle on your beautiful new home. Settlement under the contract was due to be completed on 11 March 2022. During the floods that devastated much of the Southeast Queensland, your prospective new house was inundated with water. You are devastated. The Seller is devastated. But the looming question remains – who is responsible, and what can you do?

The Contract

Under common law, and expressly stipulated in the REIQ contracts, the property is at the risk of the Buyer from the date the contract is formed (or the next business day). This means that, providing the contract is valid, the Buyer may be compelled to complete the contract (and potentially rely on any insurance) in the event of loss or damage to the property after the contract date. It is for this reason, and the problems that arise as a result, that we recommend our clients obtain insurance from the date the contract is signed. Whilst the seller is obliged to treat the property with reasonable care until settlement, this type of weather event would be outside that consideration, and there is nothing that compels the Seller to maintain the insurance after the contract is formed.

Statutory Rights from the Property Law Act

All is not lost however, should the hypothetical above be your reality. In Queensland (and Queensland alone, although Victoria does have something vaguely similar) there is statutory provision at section 64 of the Property Law Act that allows a Buyer to rescind the contract in certain circumstances where damage has caused your residential property to become uninhabitable. However, there are several elements that need to be established before rescission can occur pursuant to this provision.

In order to rely on section 64 for relief, the contract for sale must be for a “dwelling house” which includes units in a Community Titles Scheme (your lot must be damaged, not the common property) but currently excludes commercial transactions. The dwelling must be ‘destroyed or damaged’ which means there must be physical evidence rather than a transient impediment to occupation. An event such as a fire, or the Brisbane river running through your living room may not need a thorough investigation. However, water ingress or rising damp from flooding can result in far less obvious physical manifestations (but may still be just as harmful to the property).

Another element that needs to be proved, is the damage must render the dwelling house unfit for occupation, when reasonably considered. This may result from only part of the property being damaged (such as the bathroom). But the damage must render the property unusable in the present condition. Temporary damage such as loss of lights or temporary power outage is unlikely to be sufficient to warrant notice by the Buyer under section 64. Critically, in this writers opinion, the fact that the damage may be rectified by the Seller prior to Settlement does not preclude the Buyer from being able to rescind the contract if, otherwise the Buyer is able to rely on this section. This is huge, and where the Queensland position varies from that of a similar statutory relief in Victoria. Essentially what this means is, if at the time the notice is issued (which must be done prior to the actual settlement date or possession date) the unit is proved to be unfit for habitation, irrespective of whether the seller is willing and/or able to rectify the damage (potentially, even if that can damage can be fixed prior to Settlement) the Buyer may issue a notice in writing to the Seller and effectively rescind the contract. Remember how we said the Seller is not obliged to maintain insurance on the property after the contract date? Should the Buyer effectively rescind the contract at this point (this point being, when Brisbane river is flowing freely through the living room) the Seller then becomes responsible for the property (and the damage). In Victoria, the only other State that has a statutory right akin to our section 64, if the Seller can (and does) rectify the issue prior to the settlement date, the provision can not be relied upon. A seemingly more equitable arrangement in our opinion.

The takeaway: always have a solicitor review your contract prior to signing. Whilst you may not always be able to change the position (section 64, can not be contracted out of), it is crucial that both Sellers and Buyers are aware of the risks they are signing up for.

At Perspective Law, we would love the opportunity to assist you with all your review needs. So, get in touch with Tony Crilly at tony.crilly@perspectivelaw.com or Katherine Blood at Katherine.blood@perspectivelaw.com or Stuart Wardrobe at stuart.wardrobe@perspectivelaw.com before you sign your next contract.

As of 1 January 2022, all homes or units that are being sold, or leased will require interconnected smoke alarms that are connected to the dwelling’s electrical supply.

All parties involved in a residential transaction should be aware of the following practical changes going forward.

Property Sale – REIQ Contract for Houses

The REIQ Contract for Residential Properties, updated on 20 January 2022, includes new provisions in line with the smoke alarm rules. Clause 7.8 of the Standard Terms of Contract requires any residential houses to comply with the new smoke alarm rules by the Settlement Date.

The Seller

As the Seller, the party must declare whether compliant smoke alarms are installed in the property as part of the Contract. False or misleading declaration under the Contract (or the Queensland Titles Form 24) may lead to penalties under the Fire and Emergency Services Act 1990.

However, under the Standard Terms of the REIQ Contract, the Seller has no further obligation under the Contract to provide evidence or records that compliant smoke alarms have been installed.

The Buyer

It is the responsibility of the Buyer to verify whether the smoke alarms are compliant with the updated rules.  If the property was found to not have complied with the new smoke alarm rules, the Buyer can request an adjustment of 0.15% of the Purchase Price. This is the only remedy that the Buyer can seek, and they cannot use the findings to request further discounts or to terminate the Contract.

While the remedies available to the Buyer are minor, ensuring that compliant smoke alarms are installed would be an important part of a property inspection and due diligence. This is especially important if the intent of the Buyer is to rent out the property after purchase.

Residential Tenancies

Unlikely the sale of a property, an owner seeking to rent out their residential property is not required to provide specific notices to tenants regarding smoke alarms. The latest General Tenancy Agreement (as of June 2021) contains no provisions related to smoke alarms. Nevertheless, a lessor must comply with Smoke Alarm rules, including the additional requirement to clean and test the smoke alarms within 30 days before the start of a new (or renewed) tenancy.

The tenant in the residential tenancy will be required to clean and test the smoke alarms every 12 months and must inform the landlord if the smoke alarm needs replacement.

If you have any questions about how the latest smoke alarm rules may affect your transaction, please feel free to contact Jake Cho at Jake.Cho@Perspectivelaw.com or Perspective Law on 07 3839 7555.

We have many clients that ask for recommendations about the control clauses in their family trust and how they can shape that as part of their overall succession plan.

The exact terms of the Deed must be read carefully to determine what will happen if the trustee needs to be replaced, or if the controlling individual loses capacity,  dies or becomes bankrupt (and therefore poses a risk to the trust assets).

There are a few basic points that should be kept in mind when a review is made of the trust terms for an estate or succession plan.

What is an “appointor”?

Most discretionary trust deeds will include clauses that provide a mechanism to give a person the power to change the trustee by “appointing” them. In most trust deeds they are referred to as the ”appointor” or guardian”. This is usually the person for whom the trust was established and the Primary Beneficiary of the trust. If the “controller” of the trust considers that a change of trustee is required,  notice can be given and a deed appointing a new trustee signed. This might be because there is a change in the relationship status of the appointor, a dispute with a creditor has arisen, or changes to the family succession plan have been requested.

It is important to note that cases have recognised the appointor can, depending on the terms of the deed, have fiduciary duties to act in the best interests of the beneficiaries of the trust.  The role should be taken very seriously as there may be consequences for breaching the fiduciary duty. Do I need an appointor for my trust?

There is  no necessity for having the role of appointor in a family trust. In practical terms, the trustee (and, in the case of a corporate trustee, the directors of that company) has the day-to-day operating control for the trust, which includes managing money, bank accounts, buying and selling shares or property and using the income of the trust for the benefit of the chosen beneficiaries. The appointor is the person who has the power to change the trustee. This means, if a trustee is not acting in a manner that is in accordance with the purpose of the trust, which appointor expects that they will do, then the appointor has the power to remove that person or company and appoint a replacement. This might be for example where the trustees fail to consider the needs of the appointor as a beneficiary and prefer some over others in distributing income or capital from the trust. It is much better to have a clear controller or appointor in the trust, so the clear succession of that power is made if they die or become incapable of acting.

Can I have a company act as appointor of my trust?

The role of an appointor is a role created under the written signed terms of a trust deed. If the trust deed includes terms that allow a company to act as appointor, a company can act as appointor of a family trust. This can be very important if there are more family members than just one Principal interested or involved in the powers of appointing a trustee to the trust.

Should I have a company act as the appointor of my trust?

There are certain circumstances where using a company to act as trustee of the family trust is vitally important to the overall succession plan for the family group. Very often family trusts are used for a collective family business or group of property assets and everyone has a vested interest in the success. In that case the individual family members might want to be secure in knowing they have a share in a company that can exercise the powers of appointment of the trustee, so they are not excluded from decision making. They may want to reach formal agreement about how the company as appointor can make decisions regarding the trustee and the individuals that can control the trust. They may do this by excluding spouses of family members perhaps to protect the assets from claims under Family Law or other creditors.

An appointor company does not hold any assets, so there is no risk to the shares but there may be significant administrative benefits, by carefully managing control of the appointor role. Where a company is resolved to be acting as the appointor of the trust, then there is a cost for the company to be established, registered annually with ASIC and records maintained on an ongoing basis.

A corporate appointor will be very useful where there are complex family arrangements and loans or securities supporting the business or assets of the trust. It is very appropriate where there are ongoing control arrangements, where it is being transferred to multiple family members or different generations.

If you or one of your clients have questions regarding the ongoing control of a discretionary trusts, please feel free to call on 3317 4312 or email Tony.Crilly@perspectivelaw.com.