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Property Agents and Land Transactions Bill 2016

Dr Rosalie Woodruff MP

Dr Rosalie Woodruff MP  -  Thursday, 27 October 2016

Tags: First Home Buyers, Housing, Legislation

Ms WOODRUFF (Franklin) - Mr Deputy Speaker, our primary concern with this bill is that it fails to address the lack of consumer protections that face Tasmanians when they are purchasing a new home. The purchase of real estate is the most significant purchase that most people will make in their lifetime and the substantial amounts of money involved in the transactions give rise to some real and significant risks that can have lifelong consequences for people if they get things wrong. This is highlighted by the fact that most purchasers take on a large mortgage and usually end up paying this off for most of their life.

Unlike in America, Australians cannot simply walk away from a mortgage if something goes wrong with the property, or it is not worth what they initially imagined it was when they purchased it. Should the mortgagee default on their repayments, bankruptcy remains a real risk, with all the consequences that then flow on from that.

Many Tasmanians would be unaware of the risks associated with purchasing a property. Having taken possession, they may have quickly found out that they were unable to use the property for the purpose they intended when purchasing it. Thousands of Tasmanians would have found themselves in the position of having to find additional finances to fix problems that were only identified after they had purchased the property. These includes things like substantial costs resulting from illegal building works, or because there is the need for some costly remedial works or renovations.

Under the proposed amendments in this bill, the conveyancing process will continue to be based on the principle of caveat emptor - buyer beware. This means that the purchaser must decide what conditions to place on a contract and what searches or questions to ask before agreeing to a purchase. However, this approach is fraught. It relies on the purchaser having the right skills. As most Tasmanians will only purchase a property once in their lifetime, it is understandable that most people will not be an expert in the conveyancing process or in contract law. The risk of people not asking the right questions before signing a contract is very significant. There continues to be no cooling-off period and the purchaser finds themselves locked into an unconditional contract.

It is all well and good that a purchaser could seek the advice of a conveyancer, and that is certainly the case that anyone who has been down this track would advise a person to do, but it is also true that in the heat of the moment, and without any knowledge of the risks associated with a purchase, it is the case and it is foreseeable that many people do not do this. I am amazed that I still regularly meet people, especially when I was a councillor on the Huon Valley Council, who did not do this. It is particularly the case in the current heated Hobart market, where there would be five or six buyers ready and eager to make the purchase, and the short turnaround of property places very substantial pressures on would-be purchasers to put in an offer quickly, particularly an unconditional offer, if they are to have any chance of successfully purchasing the property.

I noted some terrible situations in the Huon Valley when I was there of young people coming in ignorant of property purchase and how some sellers are scoundrels essentially and are pleased not to point out very complex legal issues to do with ancient rights of way, for example. I know there was one property sold that had a right of way which went through a place that somebody else had sought and had approved from council the building of a house, records that were lost. One person thought they had a right of way, and that was the only way they could access their block. It was terrible and remains a highly contentious legal situation.

It is not that unusual in regional parts of Tasmania for these sorts of situations to occur. Of course conveyancing should be sought, but if it is not done or it is not done properly, then there are real risks. There is no guarantee that the advice provided by the conveyancer is sound, necessarily. There would be recourse where negligent advice is provided, but the pursuit of damages is very expensive and takes a large emotional toll. Once again, I personally have experienced people going down this path where they did not get the right advice. The parties subsequently divorced from the stress, and it caused neighbourhood angst which remains in that area today. It is a real and present threat for people purchasing properties.

The history of this Parliament trying to achieve appropriate vendor disclosure and cooling-off periods was set out in the minister's second reading speech. In his speech the minister rightly notes that Part 10 of the Property Agents and Land Transactions Act has never been proclaimed due to opposition from the industry. The industry's opposition to disclosure requirements and cooling-off periods similarly oversaw the failure of the 2009 attempt to address the concerns about holding back the implementation of Part 10. In 2012 the Greens Minister for Consumer Protection again attempted to implement vendor disclosure and cooling-off periods through the Residential Property Transactions Bill 2013, only to be thwarted by the Labor Party who, once again, caved into pressure from the real estate industry on that issue.

Unsurprisingly, this Government has turned its back on ordinary Tasmanians in favour of the requests of the real estate industry, as reflected in the second reading speech from the minister and his continued reference to an industry-led approach. The Liberals' approach to ensuring consumer protection is to remove all protections from the legislation and instead rely on their inclusion in a standard form contract which is developed by the Real Estate Institute of Tasmania. Our understanding is that these protections are not guaranteed. The contract does not have to be used by parties and, in any event, parties will retain the ability to negotiate contractual provisions. It is therefore entirely foreseeable that the purchaser will be faced with a contract that does not include any of the vendor disclosure requirements or a cooling-off period as envisaged in Part 10.

The hypocrisy of requiring consumer protections to only exist in contract is highlighted by the proposed amendment in the bill to provide statutory protection to real estate agents to ensure that sellers pay commission to the agent for a property that is sold within 90 days of the end of the contract the seller has with the agent, where that agent introduced the seller to the purchaser. Currently this requirement is provided in the contract between the agent and the seller, but apparently real estate agents need statutory protection to make sure they are not taken advantage of. According to this Government, while an expert who deals in real estate day in and day out needs statutory protection, the average Tasmanian purchasing a property for the first time and perhaps the only time in their life, does not.

It should also be placed on the record that we have yet to see the standard form contract for the sale of residential real estate that we are told guarantees these minimum protections. If it does as you say, minister, it is critical to this debate, but you have not provided it and in failing to do so you have not really allowed for any informed debate in this House on that matter.

We know what protections for Tasmanian purchasers of real estate should look like. They are contained in the Residential Property Transactions Bill 2013 that the Labor Party abandoned and the Liberals at the time attacked. That bill struck an appropriate balance between mandatory disclosure and giving a purchaser the opportunity to make further relevant inquiries. It required a seller to attach some basic information to a contract for sale, such as the relevant title documents and a section 337 council certificate. This would have flagged key problems and would help purchasers and their legal practitioner or conveyancer to determine what further inquiries they should make. Where a significant problem is identified as a result of their inquiries, it would have been possible to rescind the contract.

Legal practitioners and conveyancers play an important role in protecting, where possible, the interests of purchasers. However, options are limited once a contract is signed. Unfortunately, all too often a purchaser will only seek advice after they have provided the real estate agent with their offer, which itself represents the final contract if it is accepted and signed by the seller.

Mr McKim was a Greens minister at the time. His bill would have strengthened the role of legal practitioners and conveyancers who would have been able to work with the purchaser to make key decisions during the cooling-off period about what further inquiries to make about the property.

We understand that there are valid concerns with Part 10 of the Property Agents and Land Transactions Act 2005. I understand the scheme was based on the vendor giving to purchasers answers to a series of questions. Although there was extensive consultation in developing this proposal, problems were identified when implementing the scheme. It was found to be impossible to create questions that did not create legal risk for the vendor or ambiguity for the purchaser.

For those reasons the scheme proposed by Mr McKim took a different approach and relied entirely on providing third-party documents. Mr McKim's bill only applied to the sale of residential property or residential land; it did not apply to the sale of commercial properties. This was in recognition that purchasers of commercial properties do not need the same level of protection as ordinary Tasmanians do when purchasing properties, as I said, often for the first time.

The bill would therefore have required the seller of a residential property or residential land to give certain documents to the purchaser along with the contract for sale. Those documents would have included a copy of the relevant folio of the register, or in the case of general law system land, a copy of the last conveyance or mortgage; a copy of the title plan for the property; a local government 337 certificate; a copy of the last local government rates notice for the property; a copy of all easements and covenants; a copy of any agreement with a planning authority that would affect the future use of the property; and a copy of a section 56ZQ certificate for water supply and sewerage. If the property was part of a strata scheme, the seller would also have been required to provide a copy of any variation to the standard bylaws for strata schemes; details of any outstanding and ongoing liabilities of the lot owner to the body corporate; details of relevant insurance held by the body corporate; and details of the secretary or manager of the body corporate.

Mr McKim's bill also sought to address illegal building works and to assist purchasers in identifying issues with the structure and general state of the building. For this reason the bill adopted the existing common practice of obtaining a building inspection report before completion of a contract. Unfortunately, under the proposed scheme before the House today it seems that that report can still be obtained where both the seller and the purchaser agree. Mr McKim's bill would have made this decision a right of the purchaser, which can be exercised during the same period as the cooling-off period and, therefore, after the contract is signed.

Mr McKim's bill also provided that the following matters were to be applied as the term of any contract for the sale of a residential dwelling. Namely, unless otherwise disclosed in the contract, there are no restrictions on the use of the property that may hinder or prevent the use of the property as a residential dwelling. Secondly, a purchaser can, during the same period as the cooling-off period, exercise an option to arrange for a building inspection report from an appropriately qualified building inspector. A purchaser can, during the same period as the cooling-off period, exercise an option to apply for a building certificate from the relevant local council.

The bill clarified existing law around the sale of property. A contract can provide for rescission where a property is unable to be used for a residential purpose. However, as there was some doubt about the application of the relevant law, the bill removed that doubt and made the position clear. Under Mr McKim's bill, a purchaser could rescind a contract for sale if it is established that the property cannot be used for a residential purpose.

A purchaser could also rescind the contact if remediation works are identified that exceed 1 per cent of the purchase price, or if a council is unable to issue a building certificate. This would have arisen when, for example, there might have been unapproved building works.

Mr McKim's bill also provided for a cooling-off period of five business days from the signing of the contract. During the cooling off period the purchaser would have an option to arrange, at their own cost, a building inspection and/or a local government building certificate. Despite opposition from the Real Estate Institute at the time, Mr McKim stood up for ordinary Tasmanians in the strong belief they needed to maintain this five-day cooling-off period. The main reason is most of the important decisions made by a purchaser, their legal practitioner and conveyancer, will be made during those five days. We realise a shorter cooling-off period would not give enough time for a purchaser to make appropriate inquiries and to make the informed decisions they need to make. This is a heated decision for most normal people who are not in the commercial sector. A five-day cooling off period is one of the most important aspects of the bill Mr McKim put up. The Labor Party walked away from the inclusion of a statutory cooling-off period.

The Government is also proposing to walk away from their duty to protect ordinary Tasmanians are preferencing the interests of the real estate industry. We do not have any problem considering the interests of the real estate industry. They must be considered, too, as there are valid concerns. The problem is when the interests of ordinary people without expertise are not included in that equation.

The Greens do not walk away from this abiding concern to put those interests of ordinary Tasmanians who, at the point of purchase of a property, are usually in a very vulnerable situation. I foreshadow we will tabling an amendment to the bill that introduces protections for Tasmanian purchasers of real estate, as was envisaged previously by Mr McKim. We hope members of both parties will recognise it is in our collective interests to consider the needs of constituents in this situation for the long-term benefit of everyone in our community.