QBM Lawyers, Author at QBM Lawyers

When Should I Retain My Lawyer If I Want To Buy Or Sell Property?

June 25, 2018
QBM Lawyers
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It is often the case that buyers and sellers in property transaction do not think to engage a lawyer until after they have secured a contract of sale. The obvious reason for this is an avoidance of legal costs. The other reason is that sellers are generally of the view that they know all about their own property. Sometimes this is not the case. If you are a seller, there can be a number of pitfalls in waiting until you have a contract to engage a lawyer. Residential property contract will almost always contain ‘warranties’ which the seller gives to the buyer. A warranty is a promise or assurance that something is or isn’t as it should be at either the date of contract or at settlement date. For example, under a standard form contract a seller gives a warranty that at the contract date the property is not affected by any proposal for transport infrastructure. Transport infrastructure can be works such as a road widening or a new road. If there is a proposal and it is not adequately disclosed in the contact the Buyer will be entitled to terminate the contract at any time prior to settlement. In Queensland a number of properties are affected by these transport infrastructure proposals and the property owner is completely unaware of the government’s plans for such works. Details of future transport infrastructure works can be discovered by a search. In some circumstances this can impact on the possible uses for the property in terms of future development and thereby possibly devaluing the property. Properties can also be affected by ‘statutory easements’ which are sometimes not discoverable by a standard search such as a title search, which is the usual search an agent would undertake. If these statutory are not disclosure in the contract the Buyer will have an automatic right of termination. In either circumstance, the issue may be dealt with by either: 1. Amending the warranty given in the contract; 2. Removing the warranty in its entirety from the contract; or 3. Making the necessary disclosure in the contract. If either a buyer or seller had have engaged a lawyer to undertake searches prior to entering into the contract, then this could have been revealed and dealt with in the contract. Ultimately, you cannot avoid the burden on the property but you can be aware of it and have your contract drafted to as to either make the prospective buyer aware or remove the right of termination. Conversely, if a buyer seeks our assistance prior to signing a contract we can undertake investigations in to the property so that they are informed when entering into the negotiation process and signing contracts. In some circumstances, this may be information which determines if the property is suitable for them prior to going into the negotiation process. These investigations are even more so important if the buyer is proposing bidding at an auction whereby your usual rights as a buyer may be diminished. At QBM Lawyers we always encourage our clients to speak with us when they are looking to list their property or looking at entering into a contract to purchase a property and at all time prior to signing the contract. We are always happy to undertake searches and prepare the contracts for the real estate agent or even assist the agent in preparing the contract.

New GST Remittance Rules Affecting Property Sales

June 6, 2018
QBM Lawyers
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On 29 March 2018, in a bid to strengthen compliance with GST Laws, the Government made changes to the GST remittance rules affecting property sales. Effective 1 July 2018, the new GST regime requires purchasers of newly constructed residential properties or potential residential land (i.e. new subdivisions) to withhold the GST amount and remit it directly to the Australian Taxation Office (“ATO”). Why the changes? The new GST regime has been introduced to shift the obligation to remit the GST to the ATO from developers onto purchasers. Largely, this shift is an administrative measure to prevent developers making taxable sales on residential property from failing to remit the GST collected from purchasers to the ATO while claiming input tax credits for development costs. What is the rate of withholding? The rate of withholding amount differs depending on the whether the margin scheme is applied to the transaction. If the margin scheme does not apply to the transaction, the rate of withholding is 1/11th of the GST inclusive purchase price set out in the contract. If the margin scheme does apply the rate of withholding is currently set at the default position of 7% of the GST inclusive purchase price, however the legislation reserves the right for the Minister to make a determination amending this amount to a rate not exceeding 9%. Withholding obligations for purchasers Generally, purchasers of new residential land and potential residential land (including subdivision of land and the sale of home and land packages) will have to pay the withholding amount directly to the ATO at settlement or by providing a cheque payable to the ATO to the developer at settlement. The amount required to be withheld is calculated irrespective of whether the amount reflects the actual GST Liability for the transaction or not. The purchaser is required to remit the withholding amount to the ATO on or before the date which monies (not including deposit) are first provided for the asset. For most property transactions this will likely be the date of settlement however, for contracts under which the price is payable in instalments, the withholding amount will be due on or before the date for payment of the first instalment of the balance purchase price. If there is a discrepancy between the amount withheld and the actual GST liability of the transaction, the developer is required to seek a refund for the difference from the ATO. Notification obligations for developers The new GST regime creates an obligation on the developer to provide written notice to the purchaser 14 days prior to settlement, advising that the property is or is not new residential property and providing the vendor’s ABN. If the purchaser receives a notice that the property is not new residential property and this turns out not to be the case, then the purchaser can rely on the developers notice to avoid an administrative penalty from the ATO for not withholding. A failure by a developer to provide notice of an amount to be withheld can expose the developer to a fine of 100 penalty units for individuals (currently $21,000) or 500 penalty points for companies (currently $105,000). When does the new regime take effect? The changes take effect on 1 July 2018 and exclude all contracts entered into prior to that date provided that the property transaction settles before 1 July 2020. If settlement occurs after 1 July 2020, the new GST regime will apply to pre-1 July 2018 contract date transaction. The effect on developers The new GST regime will have the potential to create cashflow issued for developers as they will no longer have the benefit of temporary access to the GST amount after settlement. Contact us If you like more information regarding the new GST regime and how it affects you, please contact our Property Lawyers on 07 5574 0623 or by email at property@qbmlaw.com.au. You can find more information about buying and selling residential property in Queensland on our website.

Variation Claims and Adjudication

June 1, 2018
QBM Lawyers
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Variations will inevitably arise on a construction site. Subcontractors are often forced to pursue variation claims in an adjudication application to recover payment from a contractor. In our experience, contractors invariably dispute claims for variations on two grounds. Firstly, the subcontractor has failed to comply with the terms of the construction contract and obtain the written consent of the contractor prior to doing the variations. Secondly, the subcontractor has failed to provide the relevant information and supporting documents required by the terms of the construction contract to substantiate the variation claims. All standard construction contracts have clauses that provide for variations. The clause will set out what the subcontractor has to do to be entitled to a variation claim. This will include what notice has to be sent to the contractor requesting approval for a variation, when the notice must be sent and what information must be set out in the notice. Such a clause will also stipulate that a subcontractor is not entitled to a variation, unless the subcontractor has written approval from the contractor authorising the subcontractor to undertake the variation work, prior to the subcontractor undertaking the variation work. Subcontractors must ensure that they strictly comply with these contractual requirements when pursuing a variation. A failure to strictly comply with these requirements may disentitle a subcontractor to payment for variations. This may leave a subcontractor substantially out of pocket and the prospect of having to sue or make an adjudication application to recover payment for variations. If subcontractors comply with the contractual requirements for variations then disputes are less likely to arise in respect of variations. If you have not complied with the contractual requirements for variations then recovery of monies owing for variations in an adjudication application will be more difficult and complex. It is still possible to claim for variations in circumstances where you have not complied with the terms of the contract. You have to be able to demonstrate that you are still entitled to payment for variations because of the conduct of the contractor including, the contractor has waived the right to rely upon strict compliance with the terms of the contract, the contractor had knowledge of the variation work being done and has received the benefit of the variation work. Evidence of these matters has to be put before an Adjudicator in an adjudication application in the form of statements of evidence and written submissions. Chapter 3 of the Building Industry Fairness (Security of Payment) Act 2017 is set to commence 1 July 2018. Stay tuned for our bulletin that will provide an overview of the framework and processes for payment claims, payment schedules and adjudication applications. If you require further information or assistance in respect of a dispute concerning variations, please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au. If you would like to know what aspects of your business our Building and Construction Lawyers can assist you with, please visit our Website today.

Liquidated Damages in Adjudication Applications

May 1, 2018
QBM Lawyers
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In an Adjudication Application, a Head Contractor invariably seeks to rely upon liquidated damages when responding to a payment claim, by offsetting a liquidated damages claim against an amount claimed by a Subcontractor. Below are some ways that Subcontractors can limit the application of liquidated damages by a Contractor in an Adjudication Application. All standard Construction Contracts have clauses allowing for a Subcontractor to claim an Extension of Time (“EOT”) for delays caused by events beyond the control of a Subcontractor. The Construction Contract will provide for strict time limits for a notice of claim to be made for an EOT, together with the information to be provided in a claim for an EOT. Subcontractors should ensure that they strictly comply with the contractual requirements when seeking an EOT for delay. A failure to strictly comply with the requirements for seeking an EOT may disentitle a Subcontractor to an EOT and thereby exposing the Subcontractor to a claim for liquidated damages. What do you do if you are refused an EOT after making a claim for an EOT under a Construction Contract? A standard Construction Contract usually has provisions enabling a Subcontractor to refer a dispute about an EOT to an independent Mediator. Negotiations between the parties may result in a satisfactory resolution being reached in respect of an EOT claim and a Subcontractor thereby avoiding a liquidated damages claim for delay. It’s vitally important that Subcontractors ensure that communications in respect of claim for an EOT are in writing, so the written communications can be used to support the Subcontractors position in response to a claim for liquidated damages in an Adjudication Application. Even if a Contractor refuses to allow an EOT claim a Subcontractor can still argue in an Adjudication Application that it’s not liable for liquidated damages on the basis that the delay was caused by the conduct of the Contractor. Subcontractors should ensure that delays caused by acts and omissions of the Contractor are properly documented in writing by either emails and site notes so these can be produced and relied upon in an Adjudication Application. What happens if you have failed to comply with the Contract in making a claim for an EOT or have simply failed to claim an EOT and thereby exposing yourself to a liquidated damages claim in an Adjudication Application? Depending upon the terms of your Construction Contact a Subcontractor may still be able to defeat a claim for liquidated damages, in circumstances where, the Subcontractor is not entitled to an EOT or has not made a claim for an EOT. Firstly, the Construction Contract may provide the Contractor with a residual power to grant an EOT for any reason and at any time, notwithstanding that a Subcontractor has not claimed an EOT or is not entitled to one. A Subcontractor in such circumstances, can argue that the obligation of good faith requires the Contractor to exercise the residual power in its favour and grant an EOT, particularly if the Contractor has, by its own conduct, caused or contributed to the delay. Secondly, the amount claimed by a Contractor for liquidated damages may be a penalty and not enforceable at law against a Subcontractor in which case it cannot be offset against an amount claimed by a Subcontractor pursuant to a payment claim in an Adjudication Application. Thirdly, subject to the terms of the Construction Contract, the Contractor may not have a contractual right to set off a liquidated damages claim against a claim for payment for work done by the Subcontractor in a Payment Claim, in an Adjudication Application. Are you embroiled in a dispute regarding variation claims? It is a constant battle for Subcontractors to be paid for variations done. Stay tuned for our next bulletin that will discuss ways to assist Subcontractors with variation claims in an Adjudication Application. If you require further information please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.

Author: QBM Lawyers

When Should I Retain My Lawyer If I Want To Buy Or Sell Property?

New GST Remittance Rules Affecting Property Sales

Variation Claims and Adjudication

Liquidated Damages in Adjudication Applications

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