The new year starts with three key reforms impacting real estate agents, off-the-plan sales and tenancy regulations.
All three have the potential to affect the property market both directly and indirectly as the will be applied to developers, buyers, investors and estate agents making the changes far reaching.
The first of the changes comes via the NSW Government’s announcement of the real estate and property industry reforms that will start on 23 March 2020.
The reforms will affect a number of core estate agent/agency functions including:
- The professional licensing and qualifications of agents working in the real estate and property industry
- The exact roles that can be undertaken according to each type of licence:
The current licensing system is being significantly restructured, with licences and certificates of registration in three categories:
- Real estate (with or without restrictions)
- Stock and station
- Strata management
And other changes coming into force will address.
- Continuing professional development (CPD) requirements.
- Appointing a single licensee in charge for the entire business
However, for anyone dealing with a real estate agent and transaction two areas will may well be of more direct interest.
- Disclosing specific prescribed material facts:
Currently it’s an offence for an agent to induce a person to enter into a contract by concealing a material fact. The new regulations go further to specify the exact kinds of facts that should reasonably be known to the agent and must disclose to a prospective purchaser, some examples include that the property:
- Has been flooded by a natural weather event or bush fire in the last 5 years
- Has significant health or safety risks
- Is listed on the loose-fill asbestos insulation register
- Has been the scene of a crime of murder or manslaughter in the last 5 years
- Has been used for the production or supply of a prohibited drug or plant in the last 2 years
- Is, or is a part of, a building that subject to some additional requirements, contains external combustible cladding.
These are all very major and topical points that buyers would naturally be concerned to know. Under the new rules, an agent will be liable for failing to disclose these facts, if they knew of the fact, or should have reasonably known about the fact.
- Extended rules of conduct:
These new regulations introduce rules of conduct which apply to both agents and assistant agents and again will be of concern to all clients and they include the following points.
- Payment of rental income monthly to landlord
- Maximum dollar value of gifts and benefits
- Separate trust accounts for rental and sales money
- The licensee in charge of the business will need to establish separate trust accounts for rental money and sales money, most already do so but it will now be mandated.
All agents working in the real estate and property industry will be working to understand how the changes will affect them ahead of the new laws and while this may not be a major challenge, the changes are seen as important to end clients and the public profile of the industry.
New off-the-plan Laws
A major change impacting the apartment market comes via new requirements for residential off-the-plan contracts have started on 1 December 2019, under changes to the Conveyancing Act 1919 and Conveyancing (Sale of Land) Regulation 2017.
The changes which were subject to extensive publicity last year will bring further transparency and certainty for off-the-plan buyers. The changes are seen as a positive when some markets in NSW were seeing a slowing of such sales.
Although already best practice among most leading and experienced developers the welcome changes include:
- Vendors must give buyers key information about the development, including copies of the proposed plan, proposed by-laws and a schedule of finishes before contracts are signed
- Vendors must notify buyers of material changes to what was disclosed
- Buyers are allowed to end the contract or claim compensation in some cases if they are materially impacted by changes made from what was disclosed
- Vendors must provide a copy of the final plan at least 21 days before the buyer can be compelled to settle
- Widening existing legislation to clarify that the NSW Supreme Court can award damages where the vendor terminates under a sunset clause, and
- Extending the cooling off period to 10 business days, with any deposit to be held in a trust or controlled account until settlement.
I think that the changes are both sensible and where endorsed by the industry ahead of their introduction. Many of the changes are a natural progression given the growing demand and maturity of our medium and high-density projects.
Changes to tenancy laws
There are also a series of new tenancy laws that will start on the 23 March 2020 which will be of particular interest to residential property investors and to tenants.
With more than 30% of the NSW population now renting and with that number possibly increasing with more build-to-rent projects anticipated, changes to NSW tenancy laws are welcome and important as demand for quality rental properties (as I recently highlighted) will continue to grow.
The changes will provide certainty for tenants, clarify the rights and obligations of both tenants and landlords and hopefully help to greatly reduce disputes over repairs and maintenance.
The key changes included in the new legislation include the following areas:
- That landlords must ensure that their rental property meets 7 minimum standards to be ‘fit for habitation’ these are important for all investors.
The minimum standards, although most established investors would already meet these standards, are designed to set clearer expectations for landlords and tenants and will apply to all rented properties. They become even more important of supply is limited.
- Properties are structurally sound
- Adequate natural or artificial lighting in each room, except storage rooms or garages
- Adequate ventilation
- Supplied with electricity or gas and has adequate electricity or gas outlets for lighting, heating and appliances
- Adequate plumbing and drainage
- Connected to a water supply service or infrastructure for the supply of hot and cold water for drinking, washing and cleaning
- Contains bathroom facilities, including toilet and washing facilities, which allow user privacy.
The new rules will then further go on and further address:
- New and improved disclosure obligations on landlords and agents as well as new remedies for tenants when these obligations aren’t met
- Landlords must ensure that smoke alarms are in working order
- Making it easier for tenants to install fixtures or make alterations, additions or renovations that are of a minor nature
- Mandatory set fees when a tenant breaks their lease will apply to all new fixed-term leases that are 3 years or less
- Limiting rent increases to once every 12 months for periodic (continuing) leases
- New powers for Fair Trading to resolve disputes between tenants and landlords. This includes powers to investigate and issue rectification orders to require landlords to carry out repairs and maintenance, or tenants to fix damage.
More detailed information on these important new laws is easily available by searching the relevant legislation on-line via Fair Trading NSW.