In the last six months, two significant changes to the rules and regulations affecting property sales in NSW have come into effect. Elizabeth McDonald, Principal of our property team specialises in conveyancing and property law. In this article, Elizabeth examines the new vendor disclosure requirements that all sellers of land now need to consider. Elizabeth also reviews the changes to the foreign resident CGT withholding rules which impose obligations on both vendors and purchasers in conveyancing matters.
1. VENDOR DISCLOSURE REQUIREMENTS
It is widely known that anyone selling property in NSW must disclose certain matters and documentation about the property to the purchaser prior to exchange of contracts. These disclosures must be included in the contract for the sale of the property. If the relevant documentation is not attached to the contract or a required disclosure is not made, the purchaser may be able to rescind the contract without penalty under conveyancing laws.
The vendor disclosure requirements changed on 1 September 2017. Any contracts for the sale of land or options for the purchase of residential property that exchanged on or after this date must satisfy the new requirements.
While we discuss the disclosure requirements with our vendor clients on a case-by-case basis to ensure compliance, we note that some of the key new disclosure requirements include:
- Asbestos - a warning about the possible presence of loose fill asbestos in certain properties must be included in all contracts;
- Sewer lines - an additional sewer diagram showing the location of sewer lines in relation to the property must be attached to the contract (unless such a diagram is unavailable);
- Demolition, repair or other orders – the contract must disclose details of any order made by Council, the Minister or another authority under section 121B of the Environmental Planning and Assessment Act 1979, such as an order to demolish, repair or alter a building, cease to use a building, comply with a development consent or complete development that is subject to a development consent; and
- Strata properties - if the property is in a strata scheme, a copy of all strata-by-laws must be attached to the contract and the contract must disclose if the strata scheme has passed a motion that a Strata Renewal Proposal warrants further investigation or if a Strata Renewal Committee has been or is required to be established.
2. FOREIGN RESIDENT CGT WITHHOLDING PAYMENTS
On 9 May 2017, the Government announced changes to the foreign resident CGT withholding rules (FRCGW Rules). While the aim of the FRCGW Rules is to ensure payment of CGT by foreign residents, the rules affect many Australian residents who are selling interests in land.
As a result of the new rules, any vendor selling land or an interest in land for $750,000 or more where contracts exchanged after 1 July 2017 will need to obtain an foreign resident CGT withholding clearance or variation certificate from the ATO. If the certificate is not available or not provided to the purchaser, the purchaser must withhold 12.5% of the purchase price and remit this to the ATO. This is a significant expansion of the previous foreign resident CGT withholding regime which previously only applied where the contract price was $2 million or more (also, the withholding rate was previously 10%).
The foreign resident CGT withholding rules apply to the sale of taxable Australian real property, a lease of land, a mining, quarrying or prospecting right, an indirect interest in Australian real property or an option or right to acquire any of these types of properties or interests.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.