John Mann providing Q & A on the 2GB Chris Smith Afternoon Show – discussing Property Law – 25 October 2016
Tuesday, 25 October 2016
CS – Chris Smith /JM – John Mann /C1,2,3, etc – Callers
CS 21 to 2 – 21 to 1 in Queensland. John Mann from Turner Freeman is in the studio. John. A very good afternoon to you.
JM G’day Chris.
CS Good to have you in here. If you’ve got a property law question, it may be something to do with buying and selling; it may be a dispute whatever you like to have answered, give John a call right now. 131 873. 131 873. I’ve got a $100 Westfield Voucher to give away as usual to one of our callers. Turner Freeman of course provide a range of specialised legal services – property law; compensation and negligence law; asbestos litigation; superannuation and disability claims; family and employment law; wills and estate law. They’ve got NSW offices in Sydney, Parramatta, Campbelltown, Penrith, Newcastle and the Gong (Wollongong). Their Queensland offices in Brisbane, Logan Central, Maroochydore, Ipswich and Southport and they’ve also got offices in South Australia and WA. 131 873. Okay. A lot of properties – there are a lot of apartments being built at the moment John and a lot being sold before a brick is seen on the side of the building. A lot off the plan and obviously you’ve got to be super careful when you’ve been given a contract by a real estate agent or a developer that says “This is your dream property” and you don’t have a dream property to inspect.
JM Yes that’s very true Chris. Described as you say as off the plan sales, developers are very keen to get buyers lined up for the units before they start building so that helps them finance – construction itself, but very often you are looking at all the glossy brochures or just lines on a bit of paper and the contract used to govern the rights whilst the building is being built, how it’s to be built, what it looks like and what it is supposed to when it’s finished. But of course once you enter that contract, you’re bound, but it may be some little time before your dream unit is complete.
CS Do you have any kind of additional cooling off period when you’re signing a contract or getting into a settlement on something that hasn’t been built, is it any different?
JM No the cooling off rights apply exactly the same way as existing properties.
JM But generally speaking a developer will insist on what’s called a 66W Certificate where the buyer waives their right to cool off.
CS Right. Okay so you’re trapped even more than what you would normally be trapped?
JM That’s right. Once you’re committed yes.
CS Yes. How is it mostly – how does it mostly go wrong in those circumstances?
JM Commonly, and this is something that recently the Government did their credit of remedy to some extent, these contracts also contain what’s called a sunset clause. Now, say somewhere in the fine print if this building is not complete and what’s called an Occupation Certificate exists for the unit you are buying by a certain date, either party may escape the contract, what’s called rescind or walk away from the contact. Now that’s all well and good for a buyer but if it’s a seller who hasn’t got the place complete, until the recent changes by the Government, they could say to the buyer – well look, it’s not ready – here’s the sunset date – sorry – we’ve got to call it all off – but if you would like to pay us an extra $50,000.00, well we’ll continue on with the contract……
CS Right, so they’ve got you well and truly over a barrel.
JM They do. Now the Government has now legislated so that where there is a sunset clause, the developer cannot automatically rescind a contract unless and until either all the buyers agree or he has to go to the Supreme Court and get an Order and satisfy the Court that what he’s done has been what he could possibly reasonably do in the circumstances and it’s just and reasonable for the Court to order that they can rescind the contract.
CS You’ve got to be extra careful. 131 873. We’ll get to your calls in just a second but we’ve got a serious traffic accident on the M5 in Sydney’s South West. Jenny, what’s happened?
JENNY There’s traffic banked way passed Fairford Road. I’ve just crossed the M5 but the ambulance and the fire brigade are going down the East bound lanes because they can’t get through on the west bound lanes on the traffic – to the traffic – yes. So it’s after Fairford Road westbound but tell them to avoid it because it’s gridlocked.
CS Gridlocked. Thank you Jenny. Appreciate the tip off.
JENNY Thanks Chris.
CS Alright. Thank you very much for the call. Steve. John is listening. Go right ahead.
Caller 1 – Steve
Steve Yes. Good afternoon John and Chris.
Steve My mother recently passed away and in 1988 she actually inherited a property off her mother. This property was my mum’s second property – not her main residence. She never actually rented this property out for any income purposes at all – I’ve been informed now that we are required to pay capital gains tax on that property from the period my mother inherited it back in 1988 to the current, this year. Is that correct and are there things we can do to sort of minimise that sort of capital gains tax?
JM Ah, no. Unfortunately it sounds very much like that it is caught. The magic date for capital gains tax is the 20th of September 1985. Assets required before that date are capital gains tax free – assets are quite after that date which are your principal place of residence are also given an exemption, but otherwise if a property is required post that date, the cost base becomes the date that you acquired it and the difference between the cost base and the selling price is how capital gains tax is calculated. At the moment the tax is only payable on one half of the actual total capital gain, but that is payable by whoever is entitled to it at personal income tax rates. There’s no such separate taxes of capital gains tax, it’s purely an extension of income tax.
CS But given the fact that this has sort of come at him at this stage, it might be something that he can run by an accountant to delay the payment of the capital gains tax?
JM Well capital gains tax is paid on disposal, so when the asset is sold, that’s when capital gains tax becomes an issue. If you inherit property, it’s not a disposal, it’s treated as an acquisition. So as long as you keep a property that was inherited by you, you don’t pay any capital gains tax when you receive it but when you dispose of it or you heirs dispose of it down the track 50 years, the same problem arises and the cost base all the way back to the date of acquisition in 1988…
CS There you go Steve. You just hang onto it and leave the headache with your kids/
Steve Yeah – It seems to be that way.
CS Thank you mate, 131 873. Lucy. Go right ahead.
Caller 2 – Lucy
Lucy .Hi Steve – how are you?
CS .Ah, it’s John – John’s listening.
Lucy Oh John. Sorry.
CS It’s okay.
Lucy What I’m just calling about – just to get some general information – just recently we’ve had our neighbour that’s adjoining property come through saying that with redevelopment they’ve had their surveyors said that we are encroaching on their land by ½ a metre and I just wanted to get some general information on how to go about that and what to do – like we haven’t received anything from them – it was just a verbal notification and that they are wanting that land back.
JM When you say you’re encroaching – what encroaches the fence?
Lucy So our land – apparently the fence is 50 centimetres on their land so it’s – they are losing 50 centimetres of the land.
JM Well that’s an extremely common problem. I mean a survey boundary is just an imaginary line and it’s very very difficult to get a fence bang on it. Technically speaking and I’m assuming that your property is what we call Torrens Title.
JM Then yes – under the Dividing Fences Act they can ask for the fence to moved onto the correct boundary.
CS But have you done your own survey Lucy?
Lucy No we haven’t – so this actually happened yesterday.
CS I’d get your own survey just to check the fact as your neighbour says is fact. I’d be checking on that and getting your own survey done.
Lucy Or should we be asking to get a copy of their report or is that something……..
JM Well I don’t see anything unreasonable about it at all.
JM And yes – check and see if it’s the case and again – this happens everywhere in suburbia and you are talking about 500 ml. Unless it’s causing some desperate problem, these things exist from day to day and nobody really worries much about them but technically the boundary is the boundary.
CS Good on you Lucy.
Lucy No worries. Thank you.
CS Thank you very much for the call. 12 minutes away from news time. Well the Daily Telegraph is joining the dots on this drive-by shooting at Georges Hall this morning as well and it’s consistent with what my theory is. We now have a name for the victim here from today’s drive-by – Hamad Assad – 29 – gunned down in the driveway in his home just before 9:30 this morning – he was a suspect in the murder of Walid Wally Ahmed – who was gunned down in the car park at Bankstown Central in April – this is what police sources have told the Daily Telegraph. Police believe Ahmed’s killing may have been retribution for the murder of Safwan Chabaji earlier in April outside Ahmed’s smash repair shop in Condell Park. Apparently that was all over a debt. So already we’ve got three people dead as a result of a disagreement over a debt. 131 873. Tom go ahead. John is listening.
Caller 3 – Tom
Tom Oh yes – I’ve bought a house in partnership with one of my sons – my son – number 1 – and now he wants to sell out to son number 2 who is living in the property – now, do we have to – how do we go about that? do we have like have to pay stamp duty all over again and how do we go about it?
JM The stamp duty would apply to whatever interest is changing hands so if your number 1 son is transferring to number 2 – the value of the interest that he’s transferring will be liable for stamp duty. Your share will remain untouched – so it’s only the value of the interest changing that would liable for duty.
CS Which will be 50%?
Tom Right oh. So what about if he sells it to me – like if I buy him out and then like leave it to the other son later on in my Will or something like that?
JM Well the same principals apply – you would have to pay stamp duty on your son’s share and whatever you do and whether you leave it in your Will, that’s whatever will happen with that, but it will be your property – you would dispose of as you saw fit.
CS Alright. Joseph’s got a question. Joseph’s in New Farm in Brisbane. Go ahead Joe.
Caller 4 – Joseph
Joseph Mate. Similar to the capital gains you were discussing earlier, I had a property that was left to me by my grandmother in lieu for my mother who had always inhabited to property. She inhabited the property 40 years prior and hasn’t inhabited until October last year where we had a shopping centre moving in so we sold that and bought another property for her and have now found out that we’ve got capital gains. Someone said to me that we might be able to get rollover relief or to put some documents together that show that the family all new that the property was held in lieu because I had to sign a document – the lawyers put something together when the Will was done but it wasn’t actually put in the Will, it was only put as a separate document saying the property was held in trust for her and I’m just trying to work out which way to go.
JM That’s something you’ll need to take your accountant’s advice on but whatever it is whether an interest as changing as a trust or personally owned asset if a capital gain is incurred, then capital gains tax may still apply. There are exemptions that exist as I say the principal place of residence is concerned – rollover relief is my understanding is usually only available in terms of business assets and farming assets – those sorts of things – but which way you approach that I suggest you talk to your accountant first because it will simply be an extension of somebody’s income tax whether it’s taxed to the trust or the individuals.
CS Hey Joe, I’ve got a $100 Westfield Voucher for you.
Joseph Thank you so much.
CS How good’s that? $100 coming your way. Stay right on the line there Joe and we’ll get the Westfield voucher for you. I’ve run out of time would you believe. Once again we do this segment each and every Tuesday on various aspects of the law courtesy of Turner Freeman – today it was property law – we’ll return to property law in November because there are some major changes to various laws relating to property acquirement on the 20th of November – so around about the 20th of November – I think it would be worth getting you back in John – if I could do that. Thank you. Much appreciated. John Mann from Turner Freeman Lawyers. Thank you for all those who rang in and had their questions answered. Sorry I couldn’t get to everyone this afternoon – busy busy day with lots happening – not just in our segments but also in news of course. That comes up in 4 minutes time.