AUSTRALIAN INSTITUTE OF CONVEYANCERS (NSW DIVISION)
2017 EDUCATION PROGRAM
Vendor Disclosure & Warranty
PRESENTED BY:
TONY CAHILL
10 APRIL, 2017
CROWNE PLAZA NEWCASTLE CNR MEREWETHER STREET & WHARF ROAD, NEWCASTLE
AUSTRALIAN INSTITUTE OF CONVEYANCERS (NSW DIVISION)
Vendor disclosure and warranty Tony Cahill Legal Commentator and Author
TABLE OF CONTENTS
About the author ...... iii
Purpose of investigations 1
The general law duty of disclosure 2
Statutory intervention – the “anti-gazumping” legislation 6
The range of investigations 7
The timing of investigations by the purchaser 7
Some issues regarding section 149 certificates 8
Some issues regarding drainage diagrams 19
Building certificates 20
Swimming pools 23
Home Warranty Insurance and Vendor Disclosure 25
Changed disclosure obligations as from 15 January 2015 33
A summary of the home warranty provisions 37
Mine Subsidence Compensation Act – a “special” warranty 41
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ABOUT THE AUTHOR
Tony Cahill started practice in 1981. After 13 years with a medium-sized city law firm, Tony commenced practice on his own account at Chatswood until June 2002. Tony is currently undertaking a ’sabbatical’ from private practice to concentrate on projects in continuing professional education.
Tony is a member of the Law Society’s Property Law Environmental, Planning and Development Committees. He has been a member of the Re- Draft Committees for the 2000 and 2004 editions of the Contract for the Sale of Business, and the Contract for the Sale of Land since the 1992 edition.
Tony was a co-author with Russell Cocks and Paul Gibney of the first New South Wales edition of 1001 Conveyancing Answers, and is currently a co- author of the Conveyancing Service New South Wales, and Annotated Conveyancing and Real Property Legislation New South Wales, both published by LexisNexis. Tony is also the General Advisor on the recently released online product LexisNexis Practical Guidance – Property Law Module.
Tony has been a part-time lecturer at the University of Technology, Sydney, in subjects including Construction Law, Legal Studies, and Real Estate Law, and a part-time lecturer at the Sydney and Northern Sydney Institutes of TAFE in various law subjects. He lectures in the Applied Law Program at the College of Law, Sydney.
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Vendor disclosure and warranty Tony Cahill
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Purpose of investigations
When acting for a vendor, investigations can be undertaken for several purposes: ➢ to enable the vendor to comply with disclosure obligations imposed under the general law; ➢ to enable the vendor to comply with statutory disclosure obligations (principally under the Conveyancing (Sale of Land) Regulation 2010 Schedule 1, but also, for instance, under the Home Building Act 1989); ➢ to determine whether there are circumstances which may give rise to a breach of statutory warranty (Conveyancing (Sale of Land) Regulation 2010 Schedule 3); ➢ to preclude objection to a breach of an implied term (Conveyancing (Sale of Land) Regulation 2010 Schedule 2); ➢ to comply with non-statutory disclosure obligations imposed under the contract (for example, the provision of a section 109 certificate); ➢ to check whether it is necessary to preclude objection to a matter affecting the property via an express term of the contract (typically clause 10.1.9, but also note clause 17 dealing with disclosure of tenancies); and ➢ to facilitate the transaction – even where disclosure is not strictly necessary, it may be helpful in the marketing of the property or in encouraging a cautious purchaser to proceed to exchange.
From the purchaser’s perspective, investigations may be undertaken: ➢ to investigate the quality of the property being sold; ➢ to test the validity of statutory warranties; ➢ to verify information supplied by third parties (for instance, obtaining certificates of currency to verify information in a section 184 (formerly section 109) strata information certificate);
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➢ to quantify any adjustable rates, levies and charges affecting the property; and ➢ to determine whether any amount is owing to an authority which may give rise to a charge on the land.
The general law duty of disclosure
The general principles regarding the vendor’s duty of disclosure are as follows: 1. The vendor will generally have to disclose any latent defects in title. A latent defect is one which is generally not discoverable on an inspection of the property. Some examples include: drainage or sewerage easements not discoverable from a surface inspection (Micos v Diamond (1970) 72 SR (NSW) 392); restrictive covenants (Re Roe and Eddy’s Contract [1933] VLR 427); or an undisclosed public or private right of way (Ashburner v Sewell [1891] 3 Ch 405). 2. A purchaser’s remedies for failure to disclose a latent defect in title will depend on the gravity of the defect. If the defect is “serious” or “substantial”, the purchaser can terminate the contract, or seek specific performance with compensation. In any other case, the purchaser’s remedy will be the usual “error or misdescription” remedy of compensation. 3. Whether or not the vendor knew about the defect at the time of making the contract is irrelevant. The purchaser’s state of knowledge is relevant. If the defect in title was irremovable (that is, could not be rectified by a payment of money – for example, a mortgage would not be an irremovable defect, and so the fact that the purchaser knew of an existing mortgage would not of itself mean the purchaser was taking title subject to the mortgage) and known to the purchaser (which knowledge includes an awareness that it is intended that the purchaser take subject to the encumbrance), then the purchaser will have to “put up with” the defect, in the absence of an express contractual obligation to provide an unencumbered title. 4. A vendor does not have to disclose a patent defect in title – one which is visible to the eye, or which is discoverable by the exercise of reasonable care when inspecting the property. For such
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defects the principle of caveat emptor – let the buyer beware – applies. Courts have been reluctant to find that a defect in title is patent in any but the most clear-cut cases. For example, in Yandle & Sons v Sutton [1922] 2 Ch 199, a track was situated on the property. The track ran, irregularly, from one side of the property to the other, and showed signs of periodical use by a number of people. The Court held the matter was latent rather than patent on the basis that even though the track’s use was reasonably apparent to the naked eye, this did not necessarily indicate a legal right to use the track (it was, in fact, a public right of way). 5. If the defect is a defect in quality – whether latent or patent – the principle of caveat emptor again applies. Some common examples of defects in quality include:
➢ town planning restrictions (Pottinger v George (1967) 116 CLR 328; Lavery v Nelson (1984) NSW ConvR ¶55-169; Carpenter v McGrath (1996) 40 NSWLR 39);
➢ breach of development consent provisions (Sullivan v Dan (1997) NSW ConvR ¶55-805);
➢ structural danger of a building (Kadissi v Jankovic [1987] VR 225);
➢ termite infestation (Eighth SRJ Pty Ltd v Merity (1997) NSW ConvR ¶55-813);
➢ flood-prone land (Maybury v Constantinou (1984) NSW ConvR ¶55-171);
➢ a consolidated coal mining lease (Borda v Burgess [2003] NSWSC 1171: 11 December 2003, per Young CJ in Eq); and
➢ the lack of home warranty insurance (or its predecessor) under the Home Building Act 1989 (Festa Holdings Pty Ltd & anor v Adderton & ors [2004] NSWCA 228, 13/7/2004, discussed in more detail below).
The caveat emptor rule is subject to a number of important qualifications. 1. Where the vendor has fraudulently concealed a defect in the property (for example, a serious structural fault is concealed by the vendor), the vendor intending that the purchaser acts on the
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concealment and the purchaser does so. Some of the leading cases have involved papered-over settlement cracks (Anderson v Daniels (1983) NSW ConvR ¶55-144); subsidence (Gronau v Schlamp Investments (1975) 52 DLR (3d) 631); or, in one case, even a cockroach infestation (Rowley v Isley [1951] 3 DLR 766). 2. Where the vendor has made a representation about the property, and that representation is untrue, the fact that the matter is one of quality will not necessarily preclude action. 3. Where the contract involves a house under construction or to be constructed by the vendor, there is an implied term that the house will be constructed in a proper and competent manner, using proper materials, and the end result will be reasonably fit for human habitation (Barber v Keech (1987) 64 LGRA 116). If these matters are expressly dealt with in the contract there will, of course, be no room for the implied term to operate. 4. The failure by a vendor to disclose an important defect in quality may be relevant to the exercise of a court’s discretion regarding an action commenced by the vendor for specific performance of the contract or an action by the purchaser seeking a refund of deposit under section 55(2A) of the Conveyancing Act 1919. 5. The purchaser may in some situations have a remedy under the Competition and Consumer Act 2010 for misleading or deceptive conduct relating to an otherwise non-actionable defect.
For a useful discussion of the principles see Clancy v Prince [2001] NSWSC 85; [2001] ANZ ConvR 354; (2001) NSW ConvR ¶55-981; [2001] ACL Rep (Issue 5) 355 NSW 24.
A recent case of interest raising issues of misleading conduct by silence is Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257; affirmed on appeal – Hinton & Ors v Commissioner for Fair Trading, Office of Fair Trading (GD) [2007] NSWADTAP 17. The agent held the listing for a property which had been the scene of a notorious triple murder. The agent formed the view that this was not a positive marketing feature, and so, to put the matter neutrally, downplayed how the property had come to be for sale. An intending buyer with no knowledge of the property’s history exchanged contracts, but discovered prior to settlement the history of the property. The buyer sought rescission and this was ultimately agreed to. The Office of Fair Trading took disciplinary action
– 4 – Vendor disclosure and warranty Tony Cahill against the corporate licence holder, the licensee-in-charge and the salesperson. Fines of the order of $28,000 were imposed. An appeal to the ADT confirmed the OFT decision. The judgment contained an interesting discussion of the law relating to ’stigmatized’ properties, and the duty of an agent to disclose such a matter to prospective buyers. The law regarding properties where a son has murdered his parents and sister is now clear. Issues such as ‘how stigmatized’ the property has to be, whether there is a statute of stigma limitations, and whether the principles are different if the adjoining property to the one being sold was the scene of the crime await clarification. An important practical issue is how does the vendor (or, for that matter, the purchaser) investigate the possibility of “stigma”.
One point of note for legal practitioners arising from the Hinton case is that the agent did seek legal advice in the circumstances set out at [8] of the decision at first instance: 8 In response to the questions as to whether he had received any legal advice as to how he should comply with his ethical and legal obligations in respect of the sale of the house, Mr Hinton said that he had spoken to the vendor’s solicitor who told him there was no obligation to disclose that the house was the scene of the Gonzales murders. He had not sought independent legal advice with respect to his own obligations as agent, rather than the vendor’s obligations. He thought marketing the property as a deceased estate was, “the way I saw best to market the property in the absence of any other indication.” He conceded that the nomination of the property as a deceased estate conveyed an explanation for the state the property was in.
It appears that whatever may be the position of a vendor regarding disclosure, the vendor’s agent may be subject to different principles, and have different interests.
Editions of the standard contract since its inception have contemplated the possibility of contractual disclosure. As long as vendor disclosure was based purely as a matter of contract, there was a risk that the contract would be amended to limit, or, in an extreme case, even remove, the rights of a purchaser as regards defects in the property. This could be achieved either by use of a blanket clause requiring the purchaser to put up with a number of generically described items, or by what was to be dealt with by an attachment to the contract instead being summarised or paraphrased on the face of the contract. Users of earlier editions of the standard contract have long been encouraged to attach a zoning certificate to the contract. Some chose to delete reference to an attached certificate, and instead to
– 5 – Vendor disclosure and warranty Tony Cahill state the import of such a certificate. The problems which can arise with this practice are evidenced by cases like Sargent v ASL Developments Ltd (1978) 48 ALJR 410 and Champtaloup v Thomas [1975] 2 NSWLR 38.
Statutory intervention – the “anti-gazumping” legislation For many years purchasers of real property, and those advising them, operated under certain disadvantages derived from contract law and conveyancing practice. With a buoyant and rising real property market, a practice known as ‘gazumping’ grew up. Vendors, who had agreed to sell the subject property, later executed contracts with a different purchaser whilst the first purchaser was still securing the certificates of relevant information concerning the property, necessary for completion of the purchase. Different views may be held about this practice. For some, it was simply the market forces at work. For others, it indicated a decline in honourable standards and a retreat from agreements solemnly arrived at but not formalised. Between the two views was an opinion that an attempt should be made to reduce the burden on purchasers of the costs thrown away upon a conveyance which would not proceed and the frustration of dislocated plans, given the frequent interrelationship of one conveyancing transaction with others. It was to attain the objective of reducing the burden on purchasers, diminishing the risks of gazumping and shifting obligations to the vendor that the Conveyancing (Vendor Disclosure and Warranty) Regulation 1986 (the Regulation) was made, pursuant to section 52A(9) of the Conveyancing Act 1919.
The above (Copmar Holdings Pty Ltd v The Commonwealth (1989) NSW ConvR ¶55-451, per Kirby P), while part of a dissenting judgement, provides perhaps the most succinct summary of the policy issues behind the introduction of what is commonly (although, perhaps, slightly misleadingly) called the “anti-gazumping” legislation. After a false start with the infamous “preliminary agreement” era, the legislation has settled down and has produced comparatively little judicial commentary. In the rest of this session, the main features of the group of legislation dealing with formation of the contract and the purchaser’s remedies for non-disclosure, will be discussed.
The anti-gazumping provisions are contained in a number of different statutes, and have significantly different ‘triggering’ requirements and consequences which are occasionally confused by practitioners. Time will limit consideration to what might be described as “conveyancing statutes” (Conveyancing Act 1919, and Property Stock and Business Agents Act 2002) and one other statute (Home Building Act 1989). The important
– 6 – Vendor disclosure and warranty Tony Cahill subordinate legislation is now Conveyancing (Sale of Land) Regulation 2010 and Property Stock and Business Agents Regulation 2014. More general statutes, such as the Australian Consumer Law in the Competition and Consumer Act 2010 (particularly, for instance, sections 18, 29 and 30 of the ACL – the former sections 52, 53 and 53A of the 1974 Act), and non-statutory rights, such as contractual warranties, are important enough to merit a separate session.
The range of investigations
For a vendor, investigations prior to the formation of the contract should, at a minimum, include: ➢ those necessary to comply with statutory disclosure obligations; ➢ determining whether there has been any residential building work which could be the subject of disclosure under the Home Building Act 1989; ➢ ascertaining whether there has been any unauthorised building work; ➢ subject to instructions, those necessary to check whether there may be a breach of a statutory warranty – the remedy for breach can be precluded; and ➢ where documents are attached to a contract for other reasons, checking whether those documents are accurate (not misleading, deceptive or likely to mislead or deceive).
For a purchaser, and again subject to instructions, investigations should include at least: ➢ relevant quality reports; ➢ those investigations necessary to test relevant statutory warranties; ➢ for residential properties, whether there has been any work subject to the provisions of the Home Building Act 1989, and whether the vendor has complied with any obligations imposed under that Act (see sections 95, 96, 96A and 96B); and ➢ relevant rate and levy inquiries.
The timing of investigations by the purchaser
When should inquiries be undertaken on behalf of a purchaser?
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➢ Quality reports should be undertaken prior to exchange (or at least prior to the contract becoming unconditional). ➢ Matters relating to the Home Building Act 1989 should also be investigated prior to exchange, since lack of home warranty insurance will frequently be a matter going to quality rather than title – see the discussion below. ➢ Inquiries to test the statutory warranties should be made shortly after exchange of contracts (since the warranty obligations are assessed as at the date of the contract). ➢ Rating inquiries and land tax clearances should be obtained shortly prior to settlement (frequently these can be made at the same time as the testing of statutory warranties; where there will be a substantial delay between exchange and settlement, such as in an off-the-plan purchase, the rating inquiries should be postponed until the proposed plan is approaching registration). ➢ A search of the Torrens Register can usefully be made shortly after the contract becomes unconditional. Some practitioners would argue that in the age of vendor disclosure a purchaser need only make a final search. My difficulty with that approach is that the title disclosure documents attached to the contract may be out of date by the time of the exchange; and finding out there is a problem only at the time of getting a final search result may not allow sufficient time to address the problem.
Some issues regarding section 149 certificates
Should the vendor obtain a section 149(2) certificate, or the additional information under section 149(5)?
For the purposes of statutory vendor disclosure and warranty, a section 149(2) certificate suffices (see the definition of “section 149 certificate” in clause 3 of the Conveyancing (Sale of Land) Regulation 2010). Following the introduction of the more limited form of section 149(2) certificate in February 2009 (limited to dealing with complying development), the definition was amended to confirm that the limited section 149(2) certificate will not suffice for disclosure and warranty purposes.
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For the purposes of contractual disclosure, the additional information under section 149(5) may disclose information which can be precluded from objection.
For the purpose of facilitating the transaction, the full s 149 certificate will be welcomed by the purchaser.
It should be said that the practices of councils relating to s 149(5) vary widely. Some councils include most useful information (such as whether there are outstanding notices affecting the property). On the other hand, I have seen a certificate where the information provided under s 149(5) was to the effect that “Council has resolved not to provide any information under section 149(5)”.
When does a section 149 certificate “go stale”?
For the purposes of statutory disclosure, a section 149 certificate has no expiry date.
For the purposes of vendor warranty, a section 149 certificate may become problematic the day after its issue, since a change in council policy may mean the certificate no longer shows the “true status” of the property regarding the matters which must be contained in a section 149(2) certificate.
For the purposes of satisfying the requirements of an incoming mortgagee, the policy of the individual mortgagee will be relevant.
Local councils frequently take decisions which are of a type which will be recorded on the planning certificate. The Regulation does not prescribe a lifespan for a planning certificate, but some judicial guidance is now available from the Supreme Court decision of Mandalidis v Artline (1999) 47 NSWLR 568; [1999] NSWSC 909; (1999) 9 BPR 16,845 (9 September 1999, Austin J).
By contract dated 14 November 1996, the plaintiffs, as vendors, entered into a contract (substantially in the form of the standard 1992 edition of the joint copyright form) with the first defendant, as purchaser, relating to a warehouse and office near Kingsford Smith Airport. The section 149 certificate attached to the contract was dated 18 June 1996, and stated that the land was not affected by any council policy to restrict development by reason of land slip, bushfire, tidal inundation, subsidence, or any other risk. (The certificate also included separately a circular letter, suggesting that if
– 9 – Vendor disclosure and warranty Tony Cahill information about aircraft noise was required, a written inquiry could be made of the Federal Airports Corporation.) After exchange, the purchaser obtained a section 149 certificate, dated 19 December 1996, which stated that the property was affected by a council policy to restrict development by reason of land slip, bushfire, tidal inundation, subsidence, or any other risk. The policy was adopted on 4 June 1996 and amended on 18 June 1996. Details of that affectation were contained in an attachment to the certificate. Stripped of technical detail, the attachment effectively provided that, given the variation from time to time of flight paths, council would assume a “worst case scenario” in determining whether a property was affected by aircraft noise. If the property was affected, any development consent would be a “Deferred Commencement” consent to ensure that the development had been certified by the FAC and/or Air Services Australia to a specific Australian Standard. By letter dated 13 January 1997, the solicitors for the purchaser sent a copy of the second certificate to the solicitors for the vendor, and by letter dated 21 January 1997 purported to rescind. The purported rescission was resisted by the vendor, who treated the purported rescission as a repudiation and purported to terminate the contract. The vendor sought declarations as to the validity of the purported termination and the purchaser cross-claimed seeking a declaration of the validity of the rescission, or alternatively an order for recovery of the deposit under section 55 of the Conveyancing Act 1919.
The Court found for the purchaser, holding that the purchaser was entitled to a refund of deposit for breach of the statutory warranty. The Court also held that, even if the purchaser had not been entitled to rescind for breach of statutory warranty, the purchaser would have been entitled to relief under section 55(2A) of the Conveyancing Act 1919 for a refund of the deposit, because the contract was misleading because of the failure of the certificate to refer to the policy on aircraft noise.
It is tempting to suggest that aircraft noise should not be considered as a risk at all, or at least not as a risk of the same type as “land slip, bushfire, tidal inundation, and subsidence”, and so the council should not have mentioned this particular policy under the heading specified in the certificate. This argument was rejected by His Honour (at paragraphs [53] to [58]; 9 BPR at 16,858 to 16,860).
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The right to rescind for breach of a statutory warranty is not unfettered. Clauses 16(3) and 16(4) of the 2010 Regulation (clauses 19(3) and 19(4) in the predecessor Regulations) must be considered.
The purchaser was aware that the property may have been affected by aircraft noise – either from extrinsic evidence (properties in Mascot would, by definition, be affected by aircraft noise), or from the reference in the earlier certificate. The matter affecting the land was not the aircraft noise itself (a matter which has long been regarded as a matter of quality rather than going to title), but the policy restricting development because of the noise issue.
The defendant also argued that the failure of the purchaser to make the further inquiry suggested in the earlier planning certificate should count against the purchaser. This submission was also rejected by His Honour (at paragraph [63], 9 BPR at 16,861): The fact that prior to the contract, the first defendant made no evaluation of the policies of the Council in regard to development applications and the likely impact of any such policies on the value of the property is not to the point. In light of s52A and the legislative policy underlying it, a purchaser of the Property was entitled to assume, in the absence of anything unusual in the s149 certificate or other parts of the contract, that any necessary development application would not encounter any unusual difficulties, provided that it fitted the requirements of the appropriate zoning category.
His Honour also held that, in order to give best effect to the remedial nature of the legislation, the test in what was then clause 19(3)(c) should be construed subjectively (that is, would this purchaser have entered into the contract) rather than objectively (would a reasonable person in the purchaser’s shoes have entered into the contract (at paragraph [66], 9 BPR at 16,861-16,862)?
Mandalidis v Artline gives guidance to practitioners about the practice of updating section 149 certificates. It is probably impossible to treat planning certificates on the same basis as foodstuffs, with a legislative, regulatory, or judicial ‘use by date’ on the certificate. Practitioners will need to consider issues such as the land use, the relative “activism” of the council, the pace of development and redevelopment in the area, and so forth. What is clear is that, whether because of the statutory warranty or the operation of section 55 of the Conveyancing Act 1919, a certificate of the order of six months old imposes significant risks on the vendor.
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One final point – the first planning certificate postdated by two weeks the adoption of the council policy on aircraft noise. By coincidence, the date of amendment of the policy was the very day the first certificate issued. To that extent, the certificate did not disclose council’s policy as at the date of issue.
Will a section 149 certificate need updating when the prescribed content of the certificate changes?
The above discussion needs to be read in the light of the changes to the content of section 149 certificates which have taken effect progressively since 27 February 2009.
From time to time there have been changes to the prescribed content to be set out in a section 149(2) certificate. The key provision listing that content is Schedule 4 of the Environmental Planning and Assessment Regulation 2000.
What should practitioners acting for vendors do in the light of the content in the Schedule changing from time to time?
1. Applicants for a section 149 certificate should ensure that the application form specifies that the applicant requires the “full” rather than the “limited” certificate. The Department of Planning (in Planning Circular PS-005 issued on 20 February 2009) has recommended that Councils modify their application forms to mention the possibility of obtaining a limited certificate, and has advised that by default all other section 149 certificates should set out all of the matters mentioned in Schedule 4. Presumably all Councils have now done this.
2. Recipients of a section 149 certificate should verify that the Council has supplied a full certificate setting out all the matters mentioned in Sch 4 of the EP&A Reg.
3. Where a contract (or option) has not been entered into, practitioners should seek instructions from, and the informed consent of, the vendor as to whether exchange should be delayed until a fresh section 149 certificate is obtained; if not, whether the vendor can make a contractual disclosure by other means. For risk management purposes those instructions should be in writing. Any additional provision in the contract should be so drafted that it
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would not be construed as breaching section 52A (4) Conveyancing Act: (4) Except in so far as the regulations may otherwise provide, a provision, whether in a contract for the sale of land or any other agreement: (a) which purports to exclude, modify or restrict any provision of this section or a regulation made for the purposes of this section, or (b) which would, but for this subsection, have the effect of excluding, modifying or restricting any such provision, is void.
4. Where a proposed contract has been issued to an agent or auctioneer and the instructions are to update the certificate, the holder of that contract should be informed of the vendor’s instructions, and warned about the dangers of a premature exchange of contracts.
5. Where a fresh section 149 certificate is obtained after a draft contract has been issued to a prospective purchaser, it may be prudent, notwithstanding provision 20.1 of the standard contract, to seek specific confirmation that the later certificate was annexed to the contract prior to execution by the purchaser (see the discussion of formation of contract in Zhang v VP302 SPV Pty Ltd [2009] NSWSC 73; BC200900869).
6. Where the contract (or option) was entered into on or after a relevant “change date”, and the planning certificate does not disclose the true status of the land, instructions and informed consent should be obtained from the vendor as to whether to make a post-exchange disclosure of the status of the land. On the one hand, prompt disclosure may be relevant to any later argument about whether the purchaser has elected to affirm the contract (this aspect is discussed in more detail below). On the other hand, any disclosure may alert the purchaser to an opportunity which might otherwise have escaped the purchaser’s notice. It is strongly suggested that any disclosure be limited to answering the question raised by the relevant item in Schedule 4 (and if necessary specifying the reason why the Codes SEPP does not apply). Any mention of failure to comply with the Conv (SoL) Reg, or
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mentioning the remedies available for breach would be, it is suggested, unnecessary and unwise.
What are the implications for practitioners acting for purchasers?
1. Purchasers and prospective purchasers of properties which are prima facie within the operation of the Codes SEPP should be advised of the commencement (or extension) of the Codes SEPP.
2. Whether the practitioner is obliged to give more detailed advice about the effect of the Codes SEPP on the property will depend on the scope of the practitioner’s retainer (see the observations of Bryson AJ in Luxford v Sidhu (2008) NSW ConvR ¶56-203; [2007] NSWSC 1356 at [48] to [56]. That case is discussed below).
3. The importance of testing the vendor warranties by obtaining an up-to-date section 149 certificate on behalf of a purchaser (rather than relying on the certificate annexed to the contract) is highlighted by the successive changes to the Regulation.
4. The contents of a section 149 certificate attached to a contract exchanged on or after a relevant date should be considered to determine whether there is a breach of warranty. If so:
❖ The purchaser should be informed of the breach.
❖ Instructions should be taken to determine whether any of the restrictions mentioned in the Conv (SoL) Reg apply.
❖ If the purchaser is inclined to rescind, the purchaser should be warned that any entitlement to rescind may be challenged by the vendor (and that a challenge is even more likely when reliance is being placed on a ground which has only recently been introduced into the vendor disclosure and warranty provisions). It would also be appropriate to advise that a vendor will in general be more likely to resist rescission in a static or falling property market. If the purchaser were found to have wrongfully rescinded, the vendor could elect to treat the purported rescission as a repudiation, terminate the contract, keep or recover the deposit and sue the purchaser under provision 9 of the standard contract. The advice and subsequent informed consent should be readily provable.
❖ If the instructions of the purchaser are to rescind care should be taken that a right to rescind is not lost by waiver, election, affirmation
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or estoppel. In particular, the right to rescind should be exercised promptly, and in the manner prescribed by Conv (SoL) Reg clause 17.
What restrictions apply to a purchaser’s entitlement to rescind for breach of statutory warranty?
The right of a purchaser to rescind for breach of a prescribed warranty is limited both by the Conv (SoL) Reg itself, and, it seems, by principles of affirmation, election or waiver.
Clause 16 of that Regulation relevantly provides: 16 Circumstances under which purchaser may rescind contract or option (1) The purchaser under a contract for the sale of land may rescind the contract: ... (b) for breach of the warranty section 52A (2) (b) of the Act. (2) The purchaser under an option to purchase residential property to which a proposed contract for the sale of the land concerned is attached may rescind the option for breach of the warranty prescribed under section 66ZA (1) of the Act. (3) A purchaser may not rescind a contract or option under subclause (1) (b) or (2) unless: (a) the breach constitutes a failure to disclose to the purchaser the existence of a matter affecting the land, and (b) the purchaser was unaware of the existence of the matter when the contract or option was entered into, and (c) the matter is such that the purchaser would not have entered into the contract or option had he or she been aware of its existence.
A specific disclosure in the contract independent of the section 149 certificate (for example, by way of an additional provision in the contract) would preclude rescission by the purchaser because of the effect of clause 16(3)(a) and (b). Clause 19(3)(b) is more likely to be of relevance to an experienced or sophisticated purchaser, or one with a working knowledge of the planning reforms.
The predecessor to clause 16(3)(c) has been held to operate subjectively rather than objectively (Mandalidis v Artline, cited above, at [66]). Given the novelty of the expanded complying development regime, it is difficult to predict how a purchaser would subjectively view a parcel being (or not being) excluded from the operation of the Codes SEPP. Proponents of the
– 15 – Vendor disclosure and warranty Tony Cahill planning reforms may argue that if a purchaser acquired a site which was prima facie amenable to complying development (for example, a parcel on which construction of a single storey or two storey dwelling is not prohibited) and then discovered that the Codes SEPP did not apply the purchaser should have an entitlement to rescind. On the other hand, should a purchaser who buys a parcel which is clearly outside the Codes SEPP (for example, a site on which a multi-storey commercial tower is constructed) be entitled to rescind for a failure to disclose that the land is land on which complying development may not be carried out under the Codes SEPP? The attitude of a purchaser who discovers after exchange and prior to completion that the property is a parcel to which the Codes SEPP does apply may also be difficult to predict.
Can a purchaser lose the right to rescind for breach of vendor warranty by affirmation, waiver or election? “It is a well known principle of law that a man may by his conduct waive a provision of an Act of Parliament intended for his benefit.” (Sandringham C.C. v Rayment (1928) 40 CLR 510 at 527 per Isaacs J). This principle is subject to a number of limitations commonly summarised as “there can be no estoppel in the face of a statute”. Whether the limitations operate in any given case will depend in part on the wording and purpose of the statute (see for example the analysis in the Court of Appeal of the rights of rescission under Part 6 Division 2 of the Home Building Act 1989 in Tudor Developments Pty Ltd v Makeig [2008] NSWCA 243). There have been cases where a purchaser has been held to have affirmed the contract and elected against the purchaser’s right to rescind for breach of a warranty prescribed under section 52A: Zucker v Straightlace Pty Ltd (1987) 11 NSWLR 87; NSW ConvR ¶55-360; Molotu Pty Ltd v Solar Power Ltd (1989) 6 BPR 13,460; NSW ConvR ¶55-490. It should be noted that these two cases considered the operation of a differently worded warranty, and that the Regulation as it then stood did not contain a provision limiting the right of rescission as is found in clause 19 in the 2005 Regulation.
To what extent does the purchaser’s practitioner need to advise on matters mentioned in the s149 certificate which do not presently affect the property being purchased?
The standard of care expected of a purchaser’s solicitor in explaining to their client the effect of a section 149 certificate was considered in the case of Luxford v Sidhu [2007] NSWSC 1356. The purchasers sued their
– 16 – Vendor disclosure and warranty Tony Cahill solicitor alleging negligence in failing to explain the effect of the section 149(2) certificate annexed to the contract, in particular a notation of the existence of SEPP 53 and its (potential) effect on the property. The purchasers failed against their solicitor. This aspect of the case is considered at [48]–[56]: 48 The duties of a solicitor to his client are largely the product of the express and implied terms of his retainer: what the solicitor is asked to do and agrees to do. 49 When narrating what he told Mr McBride he wished Mr McBride to do Dr Sidhu used expressions to the effect that he wished to be told whether the contract was in order or whether everything was in order. That is to say, Mr McBride was not told anything specific which altered his ordinary responsibilities. 50 The form of contract proposed to be exchanged was given to Mr McBride in a context which shows that he was to advise on entering into the contract, but without any instructions that might define his responsibility or extend it beyond what a reasonable solicitor giving such advice with reasonable care would ordinarily do. Annexed to the contract was a Planning Certificate of Ku-Ring-gai Council under s 149(2) of the Local Government Act which stated (accurately) that the zoning of the property was Residential 2(C) under the provisions of the Ku-Ring-Gai Planning Scheme Ordinance. The Planning Certificate also contained much other information including para 7 the heading “What other planning instruments affect this property?” and a list of the names of 25 State Environmental Planning Policies all of which applied to Ku-Ring-Gai. 51 The respect in which SEPP 53 affects 10B Beechworth Avenue is (and is no more than) that the property is within Ku-ring-gai Local Government Area and it is within power, by some future amendment to Schd 4, to make Part 4 and the planning controls under it apply to the land, and supervene other planning controls including planning powers of Ku-Ring-gai Council, restrictive covenants and other prior instruments; but none of this has happened. 52 Mr McBride had no particular knowledge of how SEPP 53 operated or what it said about parcels of land in Ku-Ring-Gai. If he had investigated the matter further (and he was not given time to do so) the most that it can be supposed he would have told Dr Sidhu is to this effect – that under SEPP 53 land in Ku-Ring-Gai can be brought under special powers relating to medium density development, but this land has not been. If he had found that out and told Dr Sidhu, it would have had no relevant effect. 53 The primary responsibility of a solicitor to a client who is purchasing a property relates to the property itself; and at the centre of that responsibility is that it is the solicitor’s responsibility to see that the client gets title to the property which the client wishes to acquire. The solicitor’s responsibility extends
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beyond title to other matters which closely affect the land being acquired including its zoning under Town Planning law; the availability of the land under Town Planning law for use for the purpose for which the purchaser requires it. I do not accept that in reasonable practice of solicitors in New South Wales dealing with residential property, solicitors do or should investigate the impact of town planning on neighbouring or other nearby property. In doing this I accept and rely on the evidence of Mr Moses, a solicitor who gave expert evidence, and also on the evidence of Mr McBride, whose practice handles a very great number of property sales. I respectfully do not accept views expressed by Mr Bluth; notwithstanding Mr Bluth’s very wide experience, it seems to me that his views and evidence were affected by practice in dealing with commercial and development properties, which in turn should be taken to be affected by the purpose, known to the solicitor, for which purchasers wish to acquire property; attaining that purpose would often involve the client having some understanding of a wider town planning context than a person wishing to use the property as his residence would usually need. A solicitor’s practice when acting for persons purchasing commercial property and development property is probably also affected by communication by clients of additional requirements, widening the scope of the retainer beyond what should ordinarily be taken to be the terms of a retainer relating to residential property. If a solicitor acting for a purchaser investigated the town planning controls applicable to properties other than the property being purchased, his conduct should be attributed to an indication by the client that a wider investigation was required, or to some general knowledge of the client’s purposes and requirements which indicated that that was so. 54 Mr McBride’s usual practice, of which he gave evidence, is fairly highly defined in a routine which is followed in the large number of matters which he has handled and continues to handle. In his affidavit evidence about his practice he said that “I usually say to my clients words to the effect ‘We do not search with regards to surrounding properties but only the property you are buying. As to what goes on in the neighbourhood, you must make your own enquiries of Council.’” In two earlier transactions in which he had acted for Dr or Mrs Sidhu, he had given advice to this effect in writing; the probability that he observed his routine and gave advice to that effect while speaking to Dr Sidhu on 2 May 2005 is very high, in my view. In the two letters of advice about two purchases in December 2000 Mr McBride said: We advise that all of the searches and enquiries that we do relate to the property that you are proposing to purchase and none of them relate to adjoining properties or the surrounding area. If you should wish to obtain details as to what is proposed or possible under current Council Zonings, it will be necessary for you to consult the local Council. We will take the opportunity to discuss this aspect with you. 55 In his letter of advice about a purchase in October 2003 Mr McBride said the same things, word for word.
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56 It was Mrs Sidhu’s evidence that in the earlier transaction she did not see the letters in which Mr McBride gave this advice. Dr Sidhu said that he had not received one of them. I do not doubt that he received the other and saw what it said: and these letters are part of the proof of Mr McBride’s practice of advising in those terms. I do not accept Dr Sidhu’s evidence that he was not told to that effect by Mr McBride on 2 May 2005. Dr Sidhu denied that Mr McBride said to him to the effect that Dr Sidhu should make sure that finance was right, that the builder’s reports and pest reports were organised and that the Sidhus have done their enquiries with regard to the local area; he said “(t125/27) A. He said none of those three things”. I find it markedly improbable that Mr McBride said none of them. In my finding, Dr Sidhu and Mrs Sidhu were very committed to acquiring the property, and pursued their object of an immediate exchange that day, and Mr McBride’s advice had little effect on the course they took.
Some issues regarding drainage diagrams
Sewerage Service Diagram or Service Location Print (formerly sewer reference sheet)?
Two different diagrams are available from Sydney Water – one relating to the connections to the relevant property (and frequently including a sketch of improvements on the property), and another which gives a view of adjoining properties and connections.
For the purposes of vendor disclosure, it seems either diagram fits the requirement.
For the purposes of vendor warranty (and general law disclosure), neither diagram is guaranteed to disclose all sewers which might affect a property. Prudently, a vendor could obtain and attach both diagrams; a purchaser testing the warranty may also be well-advised to obtain both.
The availability of two diagrams appears to be an issue unique to Sydney Water; my understanding is that Hunter Water has a single diagram, as do most councils where the council has responsibility for sewerage and drainage matters.
What if a diagram is unavailable?
The vendor disclosure requirement is limited to where the diagram is “available from the authority in the ordinary course of administration”. To forestall inquiry from a purchaser about the lack of a certificate, it may be appropriate to include a special condition explaining the absence.
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For the purposes of statutory warranty and general law disclosure, alternative means of disclosure (attaching plans) or a special condition would be appropriate.
What if the diagram is known to be inaccurate?
For vendor disclosure compliance, the diagram should be attached.
The disclosure should be accompanied by a special condition explicitly identifying the inaccuracy, and, to the extent possible, disclosing the true position.
Building certificates
Until about 1996, it was considered that, where a purchaser found after exchange of contracts that illegal building work had been undertaken on a property, the possibility that the council could order demolition of the offending work may constitute a defect in the vendor’s title, and the failure to disclose the illegal work in the contract grounded rights in the purchaser. (See Borthwick v Walsh (1980) 1 BPR 9259; Maxwell v Pinheiro (1979) 1 BPR 9225, and note the discussion in the first edition of Peter Butt’s The Standard Contract for Sale of Land in New South Wales at 564-572). On that basis, common practice was for a purchaser to investigate legality of building work after exchange. But that line of authority has been overruled by the Court of Appeal in Carpenter v McGrath (1996) 40 NSWLR 39. That case is authority for the proposition that the risk of the council ordering demolition of a structure passes on exchange – the normal equitable principles apply (as reflected in clause 11 of the standard contract). On similar reasoning, the failure of an owner to comply with certain council conditions of consent was held not to be a defect in the vendor’s title – Sullivan v Dan (1997) NSWConvR ¶55-805. The purchaser is protected where an actual order pre-dates the contract, but not against the potential for an order.
The Conveyancing (Sale of Land) Regulation 1995, and its predecessor the Conveyancing (Vendor Disclosure and Warranty) Regulation 1986, each gave some measure of protection to purchasers against illegal building work. If the council has issued an order to demolish, repair or make structural alterations to a building, and that order has not been fully complied with as at the date of the contract, that order will constitute an “adverse affectation” which will ground a breach of vendor warranty. The
– 20 – Vendor disclosure and warranty Tony Cahill purchaser will then have a statutory right to rescind (although that right has been restricted under the versions of the Regulation since 1995 – see clause 16 of the 2010 Regulation).
The more problematic area is whether a mere breach of council requirements, without the further step of the issue of an order, gives rights to the purchasers. This issue was addressed in both the 1986 and 1995 Regulations by the incorporation of an implied term in contracts for the sale of land. The implied term attempted to preclude a blanket removal of rights of purchasers by way of a general clause in a contract, requiring rather that any non-compliance be disclosed and clearly described in the contract. This approach has been used, and remains in use, in relation to encroachments. The problem with this approach is that the implied term effectively preserved the common law rights of a purchaser, and, since Carpenter v McGrath, those rights are, in a practical sense, non-existent.
The Conveyancing (Sale of Land Amendment (Vendor Warranty) Regulation was gazetted on 18 December 1998, and commenced on 1 January 1999. The key effect of the Regulation was to move non-compliance with the Local Government Act 1993 (and now, relevantly, the Environmental Planning and Assessment Act 1979) out of the realm of an implied term and into the realm of a vendor warranty.
The regulation expired as part of the subordinate legislation program with the commencement on 1 September 2000 of the Conveyancing (Sale of Land) Regulation 2000. The 2000, 2005 and 2010 Regulations continue the regime of the 1995 Regulation as amended.
What are the consequences of this move? ➢ The matter is not a vendor disclosure requirement. In other words, it is not compulsory for the vendor to obtain and attach a building certificate. ➢ Being a vendor warranty matter, the right to rescind for breach of warranty is not unfettered – in addition to the matters already dealt with in clause 16 of the Regulation (whether there was a failure to disclose the matter to the purchaser, the purchaser’s state of knowledge when the contract was entered into, whether the purchaser would have entered into the contract had the purchaser been aware of the existence of the matter), the issue of a building
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certificate relating to the property “cancels” the right of rescission under the Regulation.
Not every breach of the planning legislation falls within the warranty. The warranty only is relevant to “upgrading and demolition orders” as defined (Schedule 3, Part 1, item 2(d)). Only four of about 20 different types of possible orders are within the scope of an “upgrading or demolition order” – notably fire safety orders, and orders relating to cessation of use where the use has not been council approved, are not covered by the new warranty.
The new Regulation is designed to provide a greater level of protection to purchasers as regards illegal building work. Does this mean that the contract need say nothing about those matters? I suggest parties and their advisers still need to think carefully about these matters. 1. From the vendor’s perspective, the key question is whether there is any work which will (or may) be caught by the amended Regulation. If so, should the vendor/vendor’s practitioner:
➢ apply for a building certificate for the whole of the building on the property?
➢ apply for a building certificate for the relevant part of the building on the property?
➢ disclose the problem in the contract (and, in this case, how comprehensive and particular does the disclosure need to be)?
➢ fix the problem?
➢ remove the offending item or exclude it from the sale? 2. From the perspective of the purchaser or their practitioner:
➢ Is the Regulation sufficient protection? In particular, if a Building Certificate is required by the purchaser, or perhaps more importantly by its mortgagee, what if the certificate is refused for a reason not on the list? Furthermore, what if the vendor argues that one of the threshold requirements in clause 16 has not been met, and therefore there is no right to rescind.
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➢ Should the purchaser disclose the intended use of the property to the vendor or its representatives? If the purchaser is thinking about developing the site or demolishing the existing building, is there any potential prejudice in releasing this information?
If a problem arises, the purchaser should ensure that a right to rescind is not lost through waiver (Zucker v Straightlace Pty Ltd (1987) 11 NSWLR 87). Swimming pools
The most obvious change to conveyancing procedure following the commencement of the Conveyancing (Sale of Land) Regulation 2010 was the introduction of a prescribed notice about swimming pools. The new notice was included in Schedule 1 to the Regulation at the request of the Department of Local Government following Government concern about a spate of backyard drownings (compare the history of the smoke alarms warning as a prescribed document). As with the smoke alarms warning, the swimming pools warning must be in all contracts (even properties without a backyard pool, vacant land, multi-storey commercial etc). Since the new warning is a prescribed document, a copy of the warning must be in the hands of the agent (or vendor if the sale occurs without the intervention of an agent) prior to marketing the property. The warning states:
WARNING—SWIMMING POOLS
An owner of a property on which a swimming pool is situated must ensure that the pool complies with the requirements of the Swimming Pools Act 1992. Penalties apply. Before purchasing a property on which a swimming pool is situated, a purchaser is strongly advised to ensure that the swimming pool complies with the requirements of that Act. Since the Warning is generic, it is open to a vendor to sell a property with a non-complying swimming pool, possibly with the inclusion of an additional provision precluding objection to the non-compliance.
The disclosure requirements relating to sale of properties on which a swimming pool (within the meaning of the Act) is situated will change with effect from 29 April 2014, the date which is 18 months after the date of assent to the Swimming Pools Amendment Act 2012. The amending Act, which largely but not entirely commenced on 29
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October 2012, imposes new obligations on the owner of a swimming pool to which the Act applies. For conveyancing purposes the key features of the amendment Act are:
i. Extension of the operation of the Act to a wider class of premises. Prior to the amendments section 4 of the Act stated that the Act applied to swimming pools situated, or proposed to be constructed or installed, on premises on which a residential building, a moveable dwelling, a hotel or motel is located (with an exclusion for premises occupied by the Crown or a public authority). Section 4 (among other provisions) has been amended to replace the reference to “hotel or motel” with “tourist and visitor accommodation”, which is defined by reference to the Standard Instrument. The Dictionary to the Standard Instrument (Local Environmental Plans) Order 2006 defines “tourist and visitor accommodation” as follows: tourist and visitor accommodation means a building or place that provides temporary or short-term accommodation on a commercial basis, and includes any of the following: (a) backpackers’ accommodation, (b) bed and breakfast accommodation, (c) farm stay accommodation, (d) hotel or motel accommodation, (e) serviced apartments, but does not include: (f) camping grounds, or (g) caravan parks, or ….(h) eco-tourist facilities. ii. Limiting the scope of exemptions contained in sections 8, 9 and 10 of the Act (which relate to pools constructed prior to August 1990, existing pools on small properties or large or waterfront properties).Those amendments commenced on assent.
iii. A new Part 3A (sections 30A to 30E) requires registration of the pool with a central registry (registration to be effected either directly by the owner, or indirectly by the owner notifying the local authority (typically the Council) which in turn informs the registry). Part 3A commenced on 29 April 2013.
iv. A new Part 2 Division 5 of the Act inserts sections 22A to 22G which in summary: requires local councils to develop a mandatory pools inspection regime; allows
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an owner to apply to either the council or an accredited certifier for an inspection; sets out the contents of a “section 22D” certificate of compliance (to replace the existing section 24 certificate); imposes an obligation on an accredited certifier to issue a written notice to the owner if the pool does not comply (and send a copy to the council). Part 2 Division 5 also commenced on 29 April 2013, although a six-month moratorium on enforcement was put in place..
v. Amends the Conveyancing (Sale of Land) Regulation 2010 with effect from 29 April 2014 (since extended twice, most recently to 29 April 2016) to add a new prescribed document to Schedule 1 if the contract relates to land on which there is a swimming pool covered by the Act: either (a) a valid certificate of compliance; or (b) a relevant occupation certificate plus evidence that the swimming pool is registered.
vi. Requires a landlord on entering into a residential tenancy agreement to ensure that the swimming pool is registered and that the pool has either a valid certificate of compliance or a “relevant occupation certificate” (one less than three years old and that authorises the use of the pool) and that a copy of the document is provided to the tenant. This amendment is also to commence on 29 April 2016.
Note the modifications to the originally proposed scheme announced in March 2016 – the introduction of a ‘certificate of non-compliance’ disclosure path; the exclusion of properties in strata and community schemes comprising more than two lots from the sale disclosure obligations; and the exclusion of off the plan sale contracts.
It is not clear whether the existing Swimming Pools Warning will be considered otiose now that the more detailed documentation has to be attached. That issue will be addressed as part of the next review of the Conveyancing (Sale of Land) Regulation.
Home Warranty Insurance and Vendor Disclosure
Some, but not all, vendors have disclosure obligations under the Home Building Act 1989.
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The legislation identifies a number of classes of “players” in the industry, including: ➢ a holder of a licence; ➢ a holder of an owner-builder permit; ➢ a supplier of a kit home; ➢ a developer; ➢ a “person who does residential building work otherwise than under a contract”; and ➢ a holder of a building consultancy licence (this category has now been removed from the statutory scheme).
A “developer” is defined in section 3A as follows: 3A Application of provisions to developers (1) For the purposes of this Act, an individual, a partnership or a corporation on whose behalf residential building work is done in the circumstances set out in subsection (2) is a developer in relation to that residential building work. (1A) Residential building work done on land in the circumstances set out in subsection (2) is, for the purpose of determining who is a developer in relation to the work, deemed to have been done on behalf of the owner of the land (in addition to any person on whose behalf the work was actually done). Note. This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to the work. (2) The circumstances are: (a) the residential building work is done in connection with an existing or proposed dwelling in a building or residential development where 4 or more of the existing or proposed dwellings are or will be owned by the individual, partnership or corporation, or (b) the residential building work is done in connection with an existing or proposed retirement village or accommodation specially designed for the disabled where all of the residential units are or will be owned by the individual, partnership or corporation. (3) A company that owns a building under a company title scheme is not a developer for the purposes of this Act.
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The concept of a “person who does residential building work otherwise than under a contract” may seem a little strange, given the requirements for a written contract under, for example, section 7 of the Act. The provision is most likely to be relevant to ‘do-it-yourself’ builders, who will rarely, if ever, enter into a contract. The concept also deals with what, at first, appears to be a gap in the definition of “owner-builder”. The definition of an owner-builder set out above means that someone is not caught by the definition of owner-builder unless that person holds a permit.
Finally, the successors in title to the builder, developer, owner-builder, etc. have rights (and occasionally obligations) under the Act.
The disclosure obligations on sale as they stood prior to 15 January 2015 were set out in sections 95, 96, and 96A of the Act. Those sections are set out in full below: 95 Owner-builder insurance (1) An owner-builder must not enter into a contract for the sale of land on which owner-builder work is to be or has been done by or on behalf of the owner-builder unless a contract of insurance that complies with this Act is in force in relation to the work or proposed work. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (2) An owner-builder must not enter into a contract for the sale of land on which owner-builder work is to be or has been done by or on behalf of the owner-builder unless a certificate of insurance evidencing the contract of insurance, in a form prescribed by the regulations, is attached to the contract. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (2A) A person who is the owner of land, and to whom an owner-builder permit was issued under Division 3 of Part 3 after the commencement of this subsection and not more than 6 years previously must not enter into a contract for the sale of the land in relation to which the permit was issued unless the contract includes a conspicuous note: (a) that an owner-builder permit was issued under Division 3 of Part 3 to the person in relation to the land, and (b) that the work done under that permit was required to be insured under this Act.
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Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (3) This section does not apply: (a) to a sale of the land more than 6 years after the completion of the work, or (b) if the reasonable market cost of the labour and materials involved does not exceed the amount prescribed by the regulations for the purposes of this section, or (c) if the owner-builder work is of a class prescribed by the regulations. (4) Subject to subsection (4A), if an owner-builder contravenes subsection (1) or (2A) in respect of a contract, the contract is voidable at the option of the purchaser before the completion of the contract. (4A) A contract is not voidable as referred to in subsection (4) if: (a) the owner-builder obtained a certificate of insurance evidencing a contract of insurance that complies with this Act in relation to the work or proposed work before entering the contract concerned, and (b) before completion of the contract, the owner-builder served on the purchaser (or an Australian legal practitioner acting on the purchaser’s behalf) a certificate of insurance, in the form prescribed by the regulations, evidencing that contract of insurance. (5) (Repealed) 96 Insurance in relation to residential building work not carried out under contract (1) A person must not do residential building work otherwise than under a contract unless a contract of insurance that complies with this Act is in force in relation to that work. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (2) A person who does residential building work otherwise than under a contract must not enter into a contract for the sale of land on which the residential building work has been done, or is to be done, unless a certificate of insurance evidencing the contract of insurance required under this Part for that work, in a form prescribed by the regulations, is attached to the contract of sale. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case.
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(2A) (Repealed) (2B) A person who does residential building work otherwise than under a contract must, before entering into a contract for sale of land on which the residential building work has been done, or is to be done, give the other party to the contract a brochure, in a form approved by the Director-General, containing information that explains the operation of the contract of insurance, and the procedure for the resolution of disputes under the contract. Maximum penalty: 40 penalty units in the case of a corporation and 20 penalty units in any other case. (3) This section does not apply: (a) to an owner-builder, or (b) to a person who does owner-builder work within the meaning of Division 3 of Part 3 that does not involve: (i) the construction of a dwelling, or (ii) the alteration of, or additions to, a dwelling, or (iii) the construction of an inground swimming pool, or (c) to an individual who is exempted by the regulations from the requirements of section 12, or (d) to a sale of the land more than 6 years after the completion of the work, or (e) the reasonable market cost of the labour and materials involved does not exceed the amount prescribed by the regulations for the purposes of this section. (f) (Repealed) (3A) Subject to subsection (3B), if a person contravenes subsection (2) in respect of a contract for the sale of land, the contract is voidable at the option of the purchaser before the completion of the contract. (3B) A contract is not voidable as referred to in subsection (3A) if: (a) the person obtained a certificate of insurance evidencing a contract of insurance that complies with this Act in relation to the residential building work before entering the contract concerned, and (b) before completion of the contract, the person served on the purchaser (or an Australian legal practitioner acting on the purchaser’s behalf) a certificate of insurance, in the form prescribed by the regulations, evidencing that contract of insurance.
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(4) (Repealed) 96A Obligations of developers in relation to insurance (1) A developer must not enter into a contract for the sale of land on which residential building work has been done, or is to be done, on the developer’s behalf unless a certificate of insurance evidencing the contract of insurance required under section 92 by the person who did or does the work for the developer, in a form prescribed by the regulations, is attached to the contract of sale. Maximum penalty: 1,000 penalty units in the case of a corporation and 200 penalty units in any other case. (1A) A developer must, before entering into a contract, give the other party to the contract a brochure, in a form approved by the Director-General, containing information that explains the operation of the contract of insurance, and the procedure for the resolution of disputes under the contract. Maximum penalty: 40 penalty units in the case of a corporation and 20 penalty units in any other case. (2) Despite anything to the contrary in section 3A, a reference in this Part to a person who does residential building work: (a) does not include a reference to a developer, and (b) includes a reference to a person who does the work on behalf of a developer. (3) Subject to subsection (3A), if a person contravenes subsection (1) in respect of a contract, the contract is voidable at the option of the purchaser before the completion of the contract. (3A) A contract is not voidable as referred to in subsection (3) if: (a) the person obtained a certificate of insurance evidencing a contract of insurance that complies with this Act in relation to the residential building work before entering the contract concerned, and (b) before completion of the contract, the person served on the purchaser (or an Australian legal practitioner acting on the purchaser’s behalf) a certificate of insurance, in the form prescribed by the regulations, evidencing that contract of insurance. (4) This section does not apply to a sale of the land more than 6 years after the completion of the work.
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Given the practical difficulties which occasionally arose in complying with the requirements set out above, section 97 is also significant: 97 Exemptions from insurance requirements (1) A person may apply to the Director-General to be exempted from the operation of a provision of section 95 or 96 in a particular case. (1A) A person may apply to the Director-General to be exempted from the operation of any other provision of this Part, but only if: (a) the person is, or is a member of a class of persons who are, prescribed as entitled to apply for the exemption, or (b) circumstances prescribed by the regulations as entitling the making of an application apply to the person. (2) The Director-General may, by notice in writing, grant an exemption under this section, either unconditionally or subject to conditions, if satisfied that: (a) there are exceptional circumstances, or (b) full compliance is impossible or would cause undue hardship. (3) An exemption under this section operates to exempt the person from the operation of the provision concerned, subject to compliance with any conditions of the exemption.
Finally, practitioners considering (or confronted with) “special conditions” in contracts for sale attempting to “deal with” a non-compliance with the above provisions should have regard to sections 103D and 134: 103D Part may not be excluded A provision of a contract or another agreement that purports to restrict or remove the rights of a person under this Part is void. 134 Aiding and abetting etc A person who: (a) aids, abets, counsels or procures a person to commit, or (b) induces or attempts to induce a person, whether by threats or promises or otherwise, to commit, or (c) is in any way, directly or indirectly, knowingly concerned in, or party to, the commission by a person of, or
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(d) conspires with another to commit, an offence against this Act or the regulations is guilty of the same offence and liable to be punished accordingly
One of the difficult issues with the exemptions set out in sections 95(3)(a), 96(3)(d) and 96A(4) is that, prior to 1 February 2012, the Act did not comprehensively define when work was taken to be complete for the purposes of the Act. Section 3B (and, since 15 January 2015, section 3C) attempt to deal with that lacuna:
3B Date of completion of residential building work
(1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.
(2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.
(3) It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work:
(a) the date on which the contractor handed over possession of the work to the owner,
(b) the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),
(c) the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work,
(d) (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work.
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(4) If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings).
(5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of home warranty insurance.
Changed disclosure obligations as from 15 January 2015
In September 2013 the Government issued a Position Paper which canvassed significant amendments to the Home Building Act 1989. Many of the proposed amendments have been carried through resulting in a radical change to the obligations of an owner-builder when selling. Section 6.3 of the Position Paper stated:
6.3 Prohibit owner-builders from obtaining home warranty insurance
The 2012 Issues Paper discussed the current situation where builders who carry out work for owner-builders are required to provide the owner-builder with home warranty insurance if the value of that work exceeds $20,000. In addition, if an owner-builder wishes to sell the property within six years of the work’s completion (‘completion’ for an owner-builder is deemed to be 18 months after the owner- builder permit was issued), they need to obtain a further home warranty insurance certificate for all the works combined.
These requirements give rise to duplicated insurance coverage. In addition, requiring owner-builders to obtain home warranty insurance when selling their property blurs the distinction between properties where work has been performed by an owner-builder and properties where work has been performed by a licensed builder and could act as an inducement for owner-builders to be more commercially orientated.
Although the Act currently seeks to draw a distinction between licensed builders and owner-builders by requiring owner-builders who sell their property to disclose that owner-builder work has been
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undertaken, it does not also apply to the subsequent purchaser of the owner-builder property.
Policy position: Prohibit owner-builders from obtaining home warranty insurance. To ensure potential purchasers are aware that owner-builder work has been undertaken on a property, contracts for sale of owner-built properties will be required to contain a conspicuous note stating the date the owner-builder permit was issued and any other necessary information. This would draw a sharper distinction for prospective purchasers between work undertaken by an owner-builder and work undertaken by a licensed, qualified builder. To minimise compliance costs, the current register of owner-builder permits maintained by NSW Fair Trading would be made available for online inspection, free of charge.
Unhappily, the Position Paper also indicated that the current high-rise insurance exemption will be continued “at this stage”.
Upon commencement the 2014 amending Act made significant changes to the Act as it affects conveyancing practice (among many other topics):
Home warranty insurance is renamed as “insurance under the Home Building Compensation Fund”
A new definition of “completion date” applies to a new building in a strata scheme (new section 3C)
3C Date of completion of new buildings in strata schemes
(1) This section applies to residential building work comprising the construction of a new building in a strata scheme (within the meaning of the Strata Schemes Management Act 1996) where the issue of an occupation certificate is required to authorise commencement of the use or occupation of the building.
Note. Section 3B provides for the date of completion of other residential building work.
(2) The completion of residential building work to which this section applies occurs on:
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(a) the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building, unless paragraph (b) applies, or
(b) the occurrence of some other event that is prescribed by the regulations as constituting completion of the work.
(3) If a contract to do residential building work (the primary contract) comprises the construction of 2 or more separate buildings, the date of completion of that work is to be determined as if there were a separate contract for each separate building (with each contract on the same terms as the primary contract) so that the work for each building will have a separate completion date. For the purposes of this section, a building is separate if it is reasonably capable of being used and occupied separately from any other building.
Note. Separate buildings can still have the same completion date if they are completed at the same time.
(4) This section applies for the purpose of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under the Home Building Compensation Fund.
(5) In this section:
building means any structure that, as a new building, requires the issue of an occupation certificate to authorise its use and occupation.
occupation certificate means an occupation certificate under the Environmental Planning and Assessment Act 1979.
Note. A swimming pool, tennis court or detached garage can be a building for the purposes of this section if an occupation certificate is required to authorise its use and occupation. If a structure in a strata scheme does not require an occupation
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certificate, section 3B will apply to it instead of section 3C.
The distinction between structural and non-structural defects is replaced with concepts of “major defects” and “major elements of a building” (s 18E(3) and (4))
Most significantly for property practitioners, the new section 95:
➢ Abolishes statutory cover for owner-builder work (s 95(1))
➢ Requires disclosure by way of a conspicuous note of details of the owner-builder permit and the absence of owner-builder insurance (s 95(2))
➢ The new section does not apply where the sale occurs more than 7 years and 6 months after date of the permit (s 95(3))
➢ The consumer warning requirement applies not only to the owner- builder but to successors in title (s 95(4))
A new section 96B(1) provides: “A contract for the sale of land comprising a house or unit that is excluded from the definition of dwelling in this Act because it was designed, constructed or adapted for commercial use as tourist, holiday or overnight accommodation must contain the warning required by this section if work has been done on the land in the previous 6 years that would have been residential building work had the house or unit not been excluded from the definition of dwelling.”
The 96B warning is a “prominent statement” to the effect that the property does not have protection under the Act.
The section prohibits entering into the contract unless the statement is attached; the contract is voidable if no statement in contract.
Savings and transitional provisions affect ss 95, 96B. Schedule 4 clauses 131 and 132 of the Act provide. 131 Insurance obligations of owner-builders
Section 95 (and sections 97 and 101 in their operation in respect of that section) as in force before being amended by the amending Act continues to apply to and in respect of the following contracts: (a) a contract of insurance or a contract for the sale of land entered into before the commencement of the amendment of section 95,
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(b) a contract for the sale of land entered into after that commencement if a contract of insurance that complies with this Act is in force in relation to the work concerned when the contract is entered into. 132 Contracts for sale of exempt dwellings
Section 96B (Obligations of sellers of excluded dwellings (houses and units used for commercial purposes)) does not apply to a contract for the sale of land entered into before the commencement of that section. A summary of the home warranty provisions 1 This home warranty insurance scheme has changed frequently. A statement of basic principles in 2017 would not be identical to one in 2014, much less 2009. 2 There are several classes of persons who are affected by the Act, and the provisions relating to insurance and the provision of proof of insurance are inconsistent between these classes. 3 The major classes of persons affected by the Act are, as mentioned above:
➢ holders of a contractor licence (a person who does residential building work under a contract)
➢ suppliers of kit homes;
➢ developers (defined in s 3A of the Act);
➢ owner-builders (defined in Schedule 1);
➢ persons who do residential building work otherwise than under a contract (not defined in the Act, but presumably a ‘spec builder’ would fall within the scope of the term, as it seems would a person doing owner-builder work without an owner-builder permit);
➢ successors in title to any of the above;
➢ (For the sake of completeness, the Act for a time envisaged the licensing of building consultants who undertake domestic pre-purchase inspections, but they are a significantly different class of licence-holder and in any event have not been the subject of licensing or regulation since September 2009). 4 (a) A person who does residential building work under a contract is required to provide a certificate of insurance to the other party
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to the contract (not necessarily to attach it to the relevant contract, which typically will not be a contract for sale) – see s 92. (b) One area of uncertainty in the operation of section 92 is what are the obligations where the “other party to the contract” is an owner-builder. Section 95(6) as it stood prior to 15 January 2015 provided: To avoid doubt, this section extends to residential building work that is also owner-builder work. The subsection was amended (and clarified) with effect from 15 January 2015: To avoid doubt, this section extends to residential building work that is also owner-builder work (when the work is done under a contract between the person who contracts to do the work and the owner-builder). 5 Prior to September 2009, a supplier of a kit home had corresponding obligations (see the now repealed section 93). 6 The developer must attach a certificate of insurance to the contract for sale (section 96A), unless the developer complies with cl 61 of the Home Building Regulation 2014, or unless the construction work is the construction of a multi-storey building where work commenced on or after 31 December 2003 (see cl 56 of the Regulation). 7 An owner-builder is not required to effect home warranty insurance whenever he or she undertakes residential building work. Prior to 15 January 2015, the rationale was that what might be called the “attaching” obligations for an owner-builder were triggered not by the doing of the work but rather by the entering into a contract for sale. As from 15 January 2015, the product is simply not available to owner-builders (see s 95(1) as amended with effect from 15 January 2015). 8 The owner-builder who did obtain insurance prior to its abolition, and the person who does residential building work otherwise than under a contract, must attach a certificate of insurance where he or she enters into a contract for sale within six years after completion of the work (ss 95 as it stood prior to the January 2015 amendment and 96).
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9 The owner-builder must include a conspicuous note in the contract which complies with section 95 (the content of the note changed with effect from 15 January 2015). The developer and the person who does building work otherwise than under a contract has the obligation to provide a NSW Fair Trading brochure (ss 96A(1A) and 96(2B)). 10 (a) A successor in title to either a developer or a person who does residential building work otherwise than under a contract (or for that matter the client who contracts with a licensed builder) is not required to provide (whether by attaching to the contract or otherwise) any evidence of insurance. (b) A successor in title to an owner-builder was not required to provide evidence of insurance (or to make any disclosure in the contract) when selling prior to 15 January 2015. As from that date section 95(4) contemplates that a successor in title is caught by the disclosure obligations set out in the section (although that obligation may itself be removed by a savings and transitional provision). 11 As from 15 January 2015, section 96B creates a new class of vendors with disclosure obligations. 12 The disclosure requirements outlined above are subject to exemptions. Some of the more important exemptions include (and these do not necessarily apply to every category or at every point in the history of the HWI scheme): insurable value below $20,000; the “hardship” exemption which can be applied for from NSW Fair Trading; work done more than a specified number of years (usually six years but note the relevant period in the amended section 95 is seven years and six months) prior to the contract for sale (and note sections 3B and 3C of the Act which defines when work is taken to be complete). Also note that the right of rescission by a purchaser given by ss 95 (as it formerly stood), 96, or 96A is lost in some (but not all) circumstances if the vendor serves an insurance certificate on the purchaser even though the certificate was not attached to the contract. 12 Page 2 of the standard contract for sale of land lists a number of documents which are commonly attached to contracts, including evidence of insurance under the Home Building Act (and in the 2005 and 2014 editions, a brochure or note / warning). Wherever
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such documentation exists, it is helpful to the parties for the document to be attached; however there is no legal requirement to do so in every case.
It is now clear that, at general law (that is, unless there was a statutory right provided by the Home Building Act 1989), a failure to comply with the insurance provisions of the Act goes to quality rather than to title. In Adderton v Festa Holdings Pty Ltd & Ors [2003] NSWSC 1065, Gzell J held there was no obligation on an on-seller to arrange insurance cover where the predecessor in title had not done so. His Honour then continued (at [21] to [25]): 21 It was argued on behalf of the plaintiff that even if there was an obligation upon him to obtain alternative insurance, that was not a proper subject of a requisition on title strictly so called that could prevent him from requiring the first defendant to complete until a reasonable time after he had complied with the requisition (Adolfson v Jengedor Pty Ltd (1995) 6 BPR 14,147). 22 The contract for sale of the dwelling extended the definition of the term “requisition”. It did not, however, extend to a claim. In my view, the first defendant was entitled to resist completion of the contract for sale of the dwelling only if the absence of insurance of the residential building work was a defect in title to the property. 23 I doubt that the absence of such insurance goes to the title to the property. The first defendant contracted to acquire clear title to land and dwelling. There was no impediment to it acquiring that title. 24 In Sullivan v Dan (1996) 7 BPR 14,974, Bryson J held that the lack of compliance with the conditions of a development consent by a local council was not a defect in title. I regard a lack of insurance, if required, in like vein. 25 However, this is an issue that it is unnecessary for me to decide in view of my finding that the plaintiff was not obliged to remedy a lack of insurance by WDD Constructions Pty Ltd. It is an important question that ought not to be the subject of mere obiter dicta.
The decision of Gzell J was confirmed on appeal (Festa Holdings Pty Ltd & anor v Adderton & ors [2004] NSWCA 228, 13 July 2004). Indeed, the Court of Appeal expressly addressed the issue about whether a lack of home warranty insurance constituted a defect in title in the following terms (per Mason P at [54]–[55], [58]–[60]): 54 The subject matter of the Contract was land described as a freehold estate under Torrens title. Legal and practical enjoyment of that land was in no way undermined by the non-existence of a
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contract of insurance underpinning whatever rights the Purchaser might wish to assert against the original builder under the statutory warranties. Nothing in the evidence suggests that there was any basis for a claim against the builder at the time when the Contract was entered into (cf Carpenter v McGrath (1996) 40 NSWLR 39). 55 Not even the quality of the subject property is affected by the absence of insurance. All that has happened is that the Vendor (not having the benefit of insurance) did not promise to include that benefit as part of the Contract subject-matter. For all that one knows, the value of the absent insurance was taken into account in the negotiated contract price. … 58 Nothing in the Contract addressed the question of insurance under the Act. The Vendor had not bargained for nor obtained any such insurance from his vendor, Windy Dropdown. He had not been obliged to do so before he completed the purchase of the land from Windy Dropdown. Nor was he obliged by statute, contract or fiduciary obligation to procure such insurance for the benefit of his purchaser, a procurement that the appellant conceded was virtually impossible. 59 Gzell J held that s94 prescribed the effect of the original builder’s failure to insure. Nothing required the Vendor to obtain alternative insurance cover for his purchaser. Indeed, s94(1C)(a) was a counter-indicator. In the absence of a contractual requirement obliging the Vendor to obtain alternative insurance cover, his answers to requisitions 18B and 29 were appropriate. The absence of insurance imposed no impediment to the Purchaser obtaining clear title to the land and dwelling that were the subject of the Contract. His Honour refrained from deciding that there was a defect in title, although he favoured the view that there was not a defect. 60 It will be seen that I agree substantially with the reasoning of the learned primary judge. Unlike him, I think it necessary to grasp the defect of title issue. I have concluded that there was no such defect when the Act and the Contract are analysed. The second appellant’s argument is essentially circular and flawed in its statutory analysis. Insurance cover would have been an advantage to the Purchaser to the extent that any of the statutory warranties were breached within the seven year timeframe, but this was insufficient to give it a right to insist that the Vendor obtain such cover. Mine Subsidence Compensation Act – a “special” warranty Section 15(5) of the Mine Subsidence Compensation Act 1961 provides:
(5) Where any improvement has been erected or altered or subdivision has been made in contravention of this section (a contravening improvement or contravening subdivision):
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(a) such contravention shall not invalidate any instrument intended to affect or evidence the title to any land, but a purchaser may cancel any contract for sale and recover any deposit or instalment of purchase money paid together with reasonable costs and expenses where such contravention relates to the land purchased, (b) no claim under section 12 or 12A or application under section 13A is to be dealt with or any payment made under this Act in respect of the following: (i) any contravening improvement, any household or other effects fixed or attached to a contravening improvement or any household or other effects damaged as a consequence of damage to a contravening improvement, Note. For example, no claim may be made in respect of items placed in or around an unapproved house that are damaged by the collapse of that house. (ii) any improvement on land within a contravening subdivision that was erected or altered after the land was subdivided, (iii) any household or other effects on land within a contravening subdivision for the purpose of erecting or altering an improvement. Note. The Board may issue a certificate of compliance under section 15B (3A) in respect of an improvement or a subdivision of land that was erected or made without the approval of the Board. The certificate of compliance is for all purposes deemed to be conclusive evidence that the requirements of this Act relating to the improvement or the subdivision had been complied with up to the date of the certificate. The right to “cancel” a contract for sale has been in existence, and substantially unaltered, since the commencement of the Mine Subsidence Act 1928.
The remedy would operate similarly to a breach of statutory warranty under the Conveyancing (Sale of Land) Regulation 2010 but with some significant differences:
• The Regulation allows the operation of a Schedule 3 warranty to be excluded by a disclosure in the contract – there is no such exclusion under the 1961 Act;
• The restrictions on the purchaser’s right of rescission found in clause 16(3) of the Regulation are not replicated in the Act.
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• In general, where a contract is rescinded under the Regulation, neither party can recover damages, costs and expenses from the other (clause 18(3), subject to the limited exceptions in clause 18(4)). A purchaser can recover “reasonable costs and expenses” arising from a section 15(5) cancellation.
Whether a property is in a Mine Subsidence District is a prescribed matter to be included in a section 149(2) certificate.
Typically, a purchaser buying a property in a mine subsidence district will apply for a certificate under section 15B of the Act. That section provides:
15B Certificates of compliance (1) Any person may apply to the Board for a certificate under this section with respect to any improvement erected within a mine subsidence district or land within a subdivision within such a district. (2) An application for a certificate under this section shall be made in writing, be accompanied by the prescribed fee and state the name and address of the applicant, and the particulars of the improvement or land in respect of which the certificate is required. (3) Where the Board is satisfied that an improvement referred to in an application under this section was erected in accordance with the Board’s approval and that any alterations to any such improvement were so made, or that any subdivision containing any land referred to in such an application was made in accordance with the Board’s approval, or that any departure from any such approval is such that it need not be rectified, the Board shall, if the application was made in accordance with subsection (2), issue to the applicant a certificate under this section in respect of such improvement or land. (3A) The Board may also issue a certificate under this section in respect of an improvement that was altered or erected, or a subdivision of land that was made, without the approval of the Board if the Board is satisfied that it is appropriate to do so having regard to the circumstances of the case. (3B) The Board must not issue a certificate under subsection (3A) in relation to the following: (a) an improvement that is a residential building that was altered or erected more than 15 years before the
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application for the certificate was made, unless the Board is of the opinion that: (i) the failure to obtain the approval was not the fault of the applicant, or (ii) exceptional circumstances exist, (b) an improvement that is not a residential building, unless the Board is of the opinion that exceptional circumstances exist. (4) The production of the certificate shall for all purposes be deemed conclusive evidence in favour of a person having an estate or interest in the land that the requirements of this Act relating to the improvement or the subdivision had been complied with up to the date of the certificate. (5) If the Board refuses to issue a certificate under this section, it shall notify the applicant for the certificate of the refusal and the reasons therefor. Procedures for applying for section 15B certificates were changed with effect from 1 March 2017. The MSB (rebranded Subsidence Advisory NSW) website set out the change:
“1. Certificates will be issued electronically to reduce turnaround times.
2. An applicant requesting a 15B Certificate for residential improvements will be required to provide a statutory declaration from the existing landowner confirming the property has been built in accordance with the relevant mine subsidence building regulations. This statutory declaration will replace a physical inspection carried out by Subsidence Advisory NSW, resulting in faster and more efficient issuing of Certificates.
N.B. There will be no change to the current process for obtaining a 15B Certificate for commercial or infrastructure improvements. Subsidence Advisory NSW will continue to undertake an inspection for these requests.” (underlining added).
The practical difficulties for both vendors / landowners and purchasers will be obvious to practitioners.
Fortunately, the FAQs located deeper in the website provide some comfort:
If you are not the current landowner you must organise for the current landowner to complete a statutory declaration on your behalf OR where this is not available, schedule for SA NSW representative
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to undertake an inspection of the property in order to have a 15B issued.
So if no statutory declaration is available:
“SA NSW can provide in these instances, a scheduled inspection of the property by an accredited Project Manager.
Please note if you require an inspection it will delay the processing time of your application by 10 business days depending on availability of a Project Manager.”
It is understood that changes to the boundaries of mine subsidence districts, and substantial amendments to the Act, will be implemented during the course of 2017.
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