As we come to the end of 2011, Hicksons Property and Private Client Services team would like to thank all our clients for their support during the year and we look forward to working with you again in 2012. We set out below some recent legislative changes and decisions relating to property matters for you to consider over the Christmas break! 

1. New Witness Requirements for Property Dealings 

Anyone witnessing a person’s signature on a dealing or application to be lodged at NSW Land and Property Information (LPI) must now:

(1) be at least 18 years old;
(2) not be a party to the transaction; and
(3) have known the person for at least 12 months or have taken reasonable steps to confirm the person's identity.

If a witness does not know the person or has known them for less than 12 months, the witness must see documents which confirm the person’s identity. If the person shows the witness a ‘Primary photographic document’ being a current drivers licence, passport, proof of age card or a national identity card, the witness will have satisfied their identity obligations. If the person does not have a ‘Primary photographic document’, the witness must sight an original or certified copy of both:

(a) a 'Primary non-photographic document' being a birth certificate, citizenship certificate or pension card; and
(b) a ‘Secondary identification document’ being an ATO, Centrelink or utility notice.

(b)
 A witness who does not comply with the above obligations is liable to a fine of up to $1,100. There is no obligation on a person to be a witness so, if you feel uncomfortable in witnessing another person’s signature, the message is clear – don’t do it!

2. New Mortgagee Identification Requirements

Mortgagees (being persons or companies who lend money) are now required to take reasonable steps to verify the identity of the mortgagor or guarantor. Incorporated bodies such as banks, building societies and credit unions who regularly lend money are already required to verify the identity of mortgagors under the Commonwealth Anti-Money Laundering/Counter-Terrorism Financing Act 2006 (“AML/CTF”). Such mortgagees will satisfy their new obligations if they continue to comply with their existing AML/CTF obligations. Private lenders and other mortgagees who are not subject to AML/CTF must take steps in accordance with clause 11B of the Real Property Regulation 2008. The obligations differ depending on whether: 

(1) the mortgagor is ‘natural person’ – the mortgagee must verify the full name, date of birth and residential address of the mortgagor by an original or certified ‘Primary photographic document’ being a current drivers licence, passport, proof of age card or a national identity card or, if the mortgagor does not have ‘Primary photographic document’, an original or certified copy of both:

(a) a ‘Primary non-photographic document’ being a birth certificate, citizenship certificate or pension card; and
(b) a ‘Secondary identification document’ being an ATO, Centrelink or utility notice.  

(2) the mortgagor is an incorporated body – the mortgagee must confirm the details of the mortgagor from a search issued by ASIC within last 30 days and that the mortgage was executed in an authorised manner.

(3) the mortgage is signed by a natural person under power of attorney – the mortgagee must confirm the name and address of the attorney and identify the person executing the mortgage by following the same procedure for a natural person set out in paragraph (1) above.

(4) the mortgage is signed by an incorporated body under power of attorney – the mortgagee must confirm the details of the attorney, identify the incorporated body from a search issued by ASIC within last 30 days and that the mortgage was executed in an authorised manner.

The mortgagee must be satisfied that any discrepancy in the mortgagor’s personal information and identification documents can be reasonably explained. All mortgagees must keep records for seven years of the steps they have taken to comply with their obligations and produce such records on request to the Registrar General.

LPI will not check that a mortgagee has carried out their obligations. However, if the registered mortgage is subsequently found to be fraudulent, and the mortgagee has not carried out their obligations, the mortgage may be removed from the register. This means the mortgagee will lose their indefeasible interest and will not be entitled to seek compensation from the Torrens Assurance Fund.

3. Office of State Revenue Client Identification Information

The Office of State Revenue (OSR) is now collecting Client Identification (CI) information from all parties liable to or exempt from transfer duty under Chapters 2,4,11 and 12 of the Duties Act. Documents that will require CI include: 

Where there are multiple liable parties (e.g. two purchasers) CI documents are required for each party.

An original or certified copy of the CI documents will be required for all conveyancing matters lodged for assessment (at the OSR or approved settlement rooms).

Acceptable CI documents are:

(1) Individuals – original or certified Australian birth certificate, Australian drivers licence, passport, firearms licence or proof of age card (any change of name must be appropriately evidenced); and

(2) Companies – evidence of ABN/ACN/ARBN. If this information is displayed on the relevant document no further evidence is required. Otherwise, the OSR will require a certificate of incorporation or ASIC extract.

CI documents can be certified by legal practitioners, conveyancers, justices of the peace, CPA’s, OSR officers, pharmacists, dentists, vets, magistrates, public notaries, Commissioners for Declarations, members of parliament, police officers, ministers of religion and doctors.

All conveyancing matters lodged with the OSR from 12 December 2011 for assessment must be lodged with the required original or certified CI documents which will be returned following assessment and payment. Failure to lodge this information will result in the matter being rejected for assessment and stamping.

4. Home Building Amendment Act 2011

The above Act has introduced the reforms outlined below which will apply to the following from 1 February 2012:

• new residential building work
• new home warranty insurance policies
• new residential building contracts.

Commencing 1 February 2012, all residential building work worth more than $20,000 must be covered by mandatory home warranty insurance. The current threshold is $12,000. The new threshold will also apply to the sale of a home by an owner-builder.

New statutory warranty periods will apply to builders, developers, owner-builders and tradespeople. Under the current law a homeowner, or subsequent purchaser, has the right to enforce these warranties for up to seven years after the work was completed. However, as from 1 February 2012, the warranty period will be reduced to:

(1) six years for structural defects after the work has been completed; and
(2) six years for structural defects after the work has been completed; and

These periods will be extended by six months if the homeowner or subsequent purchaser becomes aware of a defect in the last six months of these time periods. Given the nature of building works, not all defects can be neatly categorised as ‘structural’ and ‘non-structural’ and these definitions will no doubt provide much work for the CTTT and Courts to determine.

The term ‘completed’ has a very important role in the legislation because it marks the beginning of the time periods for statutory warranties and home warranty insurance.

There is now a new definition of what is meant by ‘completion’. Residential building work is ‘complete’ when it is completed in accordance with the requirements of the contract. If there is no contract, or the contract doesn’t specify ‘completion’, the work is regarded as ‘complete’ when it can be used for its intended purpose and is free of major defects. The earliest of the following events can be used to determine when this occurs:

• the date the builder ‘handed over’ the project to the owner;
• the date the contractor last carried out work (other than remedying minor defects);
• the date of the issue of an occupation certificate; or
• 18 months after the owner-builder permit was issued (in the case of an owner-builder).

5. Court Confirms Purchaser’s “Buyer Beware” Obligations!

In the recent case of Wood v Balfour [2011] NSWCA 382, the NSW Court of Appeal confirmed the difficulties faced by a Purchaser against a Vendor in relation to the condition of the property being purchased.

In 1984, the Vendor had identified and treated some termite damage. Between 1999 and 2000, the Vendors identified further termite activity and damage to timbers in their house. They arranged for a pest company to treat the property and took steps to repair and cover the damage. At the time, the Vendors were not intending to sell their property.

Four years later, in 2004, the Vendors put their property on the market for sale and it was subsequently purchased by the Purchasers. Soon after settlement, the Purchasers discovered the termite damage that had been covered and found that there was extensive further termite damage associated with that damage elsewhere in the property. The Purchasers commenced proceedings against the Vendors alleging that the work the Vendors did in concealing the termite damage, and the Vendors non-disclosure of that work to the Woods, amounted to a representation by the Vendors to the Purchasers that there was no serious damage to the property.

The Court upheld the principle that by making a property available for inspection, coupled with silence as to the existence of any latent defects, gives rise to a representation that the vendor has not knowingly concealed any defects in the property that would otherwise be patent or ‘visible to the eye’. Applying this principle to the present case, the Purchasers argued that the Vendors had made a false representation as they had knowingly concealed major termite damage which was not patent and which compromised the structural integrity of the property.

To succeed, the Purchasers needed to prove that the five required elements for the tort of deceit:

(1) that the Vendors had made a false representation;
(2) that the Vendors made the representation with the knowledge it was false or were reckless or careless as to whether the representation was false or not;
(3) that the Vendors made the representation with the intention it be relied on;
(4) that the Purchasers acted in reliance on the false representation; and
(5) that the Purchasers suffered damage by reliance on the false representation.

The Court found that essentially all the required elements were satisfied other than element (2). The Purchasers were unable to prove that, at the time of the sale in 2004, the Vendors knew of the extensive termite damage beyond what was visible and decided not to disclose it to deceive the Purchasers. Accordingly, the representation was not made by the Vendors with the knowledge that it was false.

The decision does also highlight the need for Purchasers to carefully read all the pre-purchase reports they obtain and follow up on any matters noted in the reports as requiring further investigation.

We will be keeping an eye on these issues and more as the New Year begins and will keep you updated with any significant developments.As we come to the end of 2011, Hicksons Property and Private Client Team would like to thank all our clients for their support during the year and we look forward to working with you again in 20We set out below some recent legislative changes and decisions relating to property matters for

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If you are interested in more information about the developments discussed in this e-bulletin, please contact:

Peter Gowers, Partner, Property and Private Client Services Group Phone +61 2 9293 5438 Fax +61 2 9293 5238 Mobile +61 (0)418 450 312 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Anne Sandeman, Partner Phone +61 2 9293 5418 Fax +61 2 9293 5218 Mobile +61 (0)421 051 259 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Alan Osburg, Consultant Phone +61 2 9293 5402 Fax +61 2 9293 5202 Mobile +61 (0)417 658 910 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Peter Bowen, Consultant Phone +61 2 9293 5440 Fax +61 2 9293 5240 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Mike Roberts, Consultant Phone +61 2 9293 5405 Fax +61 2 9293 5205 Mobile +61 (0)419 262 406 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Patrick Pilton, Associate Phone +61 2 9293 5492 Fax +61 2 9293 5292 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Morri Seifoor, Solicitor Phone +61 2 9293 5344 Fax +61 2 9293 5144 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it       Mark Blair, Paralegal Phone +61 2 9293 5342 Fax +61 2 9293 5142 Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it        This publication represents a brief summary of the law relating to the issues raised and should not be relied on as a substitute for professional advice. Specific legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred as a result of reliance on this document by those relying solely on this document.