Property Law

PROPERTY LAW ACT 2023 Queensland

The Property Law Act 2023 (“the Act”) passed the Queensland Parliament on 25 October 2023. The Act will replace the Property Law Act 1974 (Qld) and aims to simplify, streamline and modernise Queensland’s property laws, better facilitate e-conveyancing and electronic transactions, and remove outdated provisions.

The Act has not yet commenced but will take effect on a date to be fixed by proclamation, which may be several months into the future.

The Act will have implications for a range of property matters, including conveyancing and commercial leasing. It is expected that contracts used for the sale and purchase of land will also be updated as a result. The Real Estate Institute of Queensland has indicated it will be updating its contract pro formas before the Act commences and it will be important for all users of these contracts to ensure they are using the correct version once the Act commences.

Some key features of the Act include:

• A new seller disclosure regime;
• Updates to reflect the use of electronic conveyancing;
• New delay events provisions;
• Changes to the way easements bind successors in title; and
• New rights for buyers where there is destruction of or damage to a dwelling house.

We consider each of these aspects in more detail below.

Seller disclosure regime

A seller disclosure regime has been introduced for the sale of both residential and commercial property in Queensland. Before a buyer signs a contract of sale, the seller will be required to provide a disclosure statement, together with certain other documents (“prescribed certificates”) in relation to the property they are selling. There are certain exceptions, such as where the seller and buyer are related and the buyer gives a waiver notice. The buyer may be entitled to terminate at any time before settlement if the disclosure documents are not provided (or not provided correctly), or there is a mistake or omission that relates to a material matter, which the buyer was not aware of and had they been aware, they would not have entered into the contract.

Modern conveyancing processes

Provisions relating to the settlement of contracts have been updated to reflect modern conveyancing processes, including electronic conveyancing.

Delay events

Provisions dealing with a delay of settlement due to an adverse event (such as weather, public health emergency, act of terrorism, war or similar event) now apply. These provisions largely reflect the current ‘delay event’ provisions in the REIQ contracts. New provisions also relate to inoperative computer systems for electronic conveyances on the date of settlement.

Easements

A covenant in a registered easement will bind both the grantor and grantee of the easement, and each of their successors in title, unless the covenant is expressed to be personal to the grantor or grantee.

Destruction of or damage to dwelling house

Buyers will now have a right to rescind a contract by notice if, after entering that contract, the residential dwelling is damaged or destroyed and is unfit for occupation. This right can be exercised until the earlier of settlement, the buyer taking possession, or the seller restoring the dwelling.

OMB Solicitors has a team of experienced property lawyers Gold Coast that can assist you to navigate these legislative changes. If we can be of assistance, please give us a call on (07) 5555 0000 or email us at [email protected].

BREAKING NEWS: New Regulation Just Released

The Queensland Government has released the regulations to accompany the Legislation which was enacted on 23 April 2020 dealing with retail and other commercial leases and the Covid-19 pandemic.

Unfortunately, the entire process has taken some considerable time from when the Prime Minister and the National Cabinet initially announced the mandatory code. Then came the Covid-19 Emergency Response Act 2020 on 23 April 2020 and finally, The Retail Shop Leases and other Commercial Leases (Covid-19 Emergency Response) Regulation 2020 on 28 May 2020.

Finally, the regulation provides certainty and clarity as to many of the details surrounding the relationship between commercial Landlords and Tenants in what has turned out to be one of the most contentious areas for businesses and investors alike during the Covid-19 pandemic.

What are those details:

1. To be eligible you must either have a Retail Shop Lease or a Lease of a premises which is wholly or predominantly used for carrying on a business.

2. You must be a small to medium enterprise – generally a business with an annual turnover of less than $50,000,000.00.

3. The Lessee must be an entity that is responsible for employing staff and is eligible for the Job Keeper Scheme.

In those circumstances the regulations apply, and a Landlord is not entitled to take any of the prescribed actions. Those include, taking recovery of possession, terminating the lease, eviction the Lessee, exercising rights to re-enter the premises, seizure of property, forfeiture, damages, seeking payment of interest or a fee related to unpaid rent, claiming on a Bank Guarantee or security deposit, seeking performance under a Guarantee or exercising a right under the lease relating to the lease premises.  These actions are prohibited where a Tenant has failed to pay rent, outgoings or is not open for business during the “response period”.

The “response period” is defined as commencing on 29 March 2020 and ending 30 September 2020. There had previously been some discussion if the legislation would apply retrospectively or would only apply from 23 April 2020.

In circumstances where there is a genuine attempt by a Landlord to negotiate rent, but the Lessee substantially fails to comply with their obligations under the lease or the grounds under which the Landlord takes action are not related to the effects of Covid-19 the Landlord will not be prevented from taking these courses of action.

The parties are required to negotiate rent and other conditions in good faith. The lessee will usually request a reduction in writing from the Landlord to begin those negotiations. This should include true and accurate information to enable the parties to negotiate a fair settlement. This includes provision of accurate financial information or statements about the turnover of the Lessees business.

Within 30 days of receiving such a request the Lessor must offer a reduction in rental in accordance with the regulations, this will include at least 50% of the rental reduction to be in the form of a Rental Waiver.

The reduction in rental and conditions relating to any reduction can be given effect by way of either a Variation of Lease or another agreement between the parties. The regulations provide for a further rent negotiation provision where one party may ask the other to renegotiate if there is a material change of the grounds upon which the agreement between the parties was based.

In relation to any portion of the reduction given by way of deferred rental, that deferred rental will be repayable using a method agreed between the parties over a period of at least 2 years but no longer than 3 years. The Landlord can continue to hold any security deposit until that deferred rental has been repaid.

Specific provision has been made for extending a lease and a Lessor must offer a Tenant an extension (on the same terms and conditions) for the period of the rental waiver or deferral. For example, if a rental waiver or deferral lasted for 6 months then the Landlord must offer to extend the Lease of the Tenant for a period of 6 months on the same terms and conditions, subject to the remaining clauses of the regulations.

This is only a brief outline of the regulations which are quite detailed, and we recommend you contact OMB’s Property Law Gold Coast team to assist with all leasing matters.

 

Landlord and Tenants on Commercial, Industrial and Retail Premises

As promised, here is the latest update on the evolving situation with Landlord and Tenants on Commercial, Industrial and Retail Premises. The Prime Minister has announced this afternoon that the National Cabinet has met and has made some decisions around this space, which we have all been waiting for.

Most importantly, it has been announced that the National Cabinet have introduced a Mandatory Code which will be legislated in each State. Landlords and Tenants are required to comply with the terms of this Mandatory Code.

The code will require Landlords and Tenants to negotiate in good faith. Landlords aren’t going to be able to terminate a Lease and Tenants are going to have to comply with the remaining terms of the lease.

The Code will apply where the business of either the Landlord or the Tenant has suffered as a result of the Covid-19 Pandemic, so that either business is an eligible business under the governments recently announced Commonwealth JobKeeper program and has a turnover of less than $50 Million.

The parties are then going to have to reach an agreement whereby the proportionate amount of reduction in a Lease rental will apply in cases where the Job Keeper Program already applies to that business. The reference to the Proportionate amount is the amount of reduced turnover of the Business suffered as a result of the  Covid-19 Pandemic.

In that circumstance and if those provisions apply, then the rental will be required to be reduced proportionate to the reduction in the business (for example if a business’s turnover has reduced by 50%, that business will see a 50% reduction in the rental for the period of the Pandemic). This rent reduction can be made up of “rental waiver” and “rent deferral”.

In respect of those proportions the  “rent free” proportion must make up at least 50% of the rental relief. The “rent deferral” component can be deferred and paid back over a period of not less than 12 months, but usually will be paid back over the remaining term of the lease (for example if the remaining term of the lease is longer than 12 months it would be paid back over the entire term, however if the lease term is shorter than 12 months that tenant will still have 12 months to repay those rent monies).

Rental increases under a lease will be frozen and penalties and interest charges will not be able to be charged, nor can guarantees or bonds be called upon.

These are important changes as the landscape is constantly changing and as things arise further, I will continue to keep you updated. Please remember though any agreements reached between Landlords and Tenants must be documented as the potential disputes in the future will be greater than the problem itself.

Please keep safe and if you have any queries whatsoever please do not hesitate to contact our Gold Coast lawyers.

We understand that being a Landlord at the moment is an extremely difficult time. We all await further clarification from the Federal Government as to what incentives, if any, will be offered to Commercial Landlords to assist with concessions that may need to be made with their Tenants. Some Australian Banks have announced they will defer loan repayments on loans up to $10 million dollars for Landlords that provide certain assistance to Tenants.

There are a number of incredibly important considerations for a Landlord during this time including maintaining a relationship with Tenants, ensuring that once we emerge from this crisis that your commercial premises have sustainable tenancies and businesses that can hopefully rebound and continue to operate and add value to your properties and the ongoing consideration of ensuring you have sufficient income to meet your financial needs.

With this in mind, a number of Landlords have been receiving approaches from Tenants regarding rental waivers or assistance packages. Given that we cannot be fully aware if any assistance is going to be provided to Commercial Landlords, we see the following as the 3 main options available to our Landlords at this time:

1. Provide a “Rental Waiver” – this is a fairly simple process of waiving rental for a specific period of the lease. We would need to be specific as to whether this includes or excludes outgoings;
2. Provide a “Rental Reduction” – this is a process where the rental may be reduced depending on the reduced capacity of the Tenant and again should be specific as to whether it includes or excludes outgoings;
3. Provide a “Provision of a Rent Moratorium” – this would relate to a specific period where rent is frozen. This means that the rent is not payable under the lease however it is not forgiven or waived by the Landlord. The Landlord could advise that after the Rent Moratorium period the Landlord will reassess the rental during the moratorium period which should allow a Landlord to either require repayment of that rental (say over the period of the remainder of the lease or some other period determined by the Landlord) or alternatively, the Landlord could agree to forgive or reduce that rental at that time;

This last alternative allows the Landlord to defer making a final decision in the reduction or waiver of rental until further information is to hand, including the length of this current crisis and the basis on which each individual is able to recover from the downturn.

We believe the most important element of any of these solutions is that the Landlord properly document any agreement which is reached. No agreement should be reached without proper review and documentation. The reason this remains so vital is that the greatest asset that the Landlord will have is the value of their premises and potentially the ongoing tenancies. If there is dispute at a later point regarding what agreement was reached or the specific terms of that agreement or the ability of the Landlord to later make a determination, each of these may result in substantial dispute and/or

litigation at a future point in time. This has the potential to cause more damage than the current situation if in the instance the Landlord is in a dispute with a large number of its Tenants.

We would recommend that each Tenant is dealt with on a case by case basis and bound to strict confidentiality failing which any agreement may be forfeited.

It may further be prudent that:

1. the Landlord negotiate the terms subject to final agreement and documentation to save incurring any unnecessary costs; and
2. the costs of documenting by the agreement are either born by the Tenant or potentially on a shared basis between the parties OMB Solicitors will assist with this documentation.

We believe this is an essential time for our Landlords and we look forward to providing you whatever assistance you need during this period.