Do property joint ventures need to be in writing?
Property developers don't beat around the bush. So when
John Cappello phoned John Scrivener to ask for his share of
the joint venture profits, Scrivener told him “You’ve got
nothing in writing … Good luck if you want to try and get
anything in court”.
The property development was the amalgamation of three 5
acre parcels of land at Rouse Hills, Sydney, for a medium
density subdivision (see image). Put & Call Options were
obtained, a Development Consent was granted, and the site
was sold at a large profit.
But while the property development was a great success,
the relationship between the partners was not. This was
because after securing the site, and contributing to an
option fee, John Cappello had taken a backseat role as a
silent partner, allowing John Scrivener to pursue the
development project in his name. This led to John Scrivener
thinking it was all his project.
The property joint venture made a $9 million profit. So
it was well worth John Cappello taking his claim to the NSW
Supreme Court, in a trial which lasted 7 days and cost
hundreds a thousands of dollars in legal fees.
John Cappello's weakness was that there was no joint
venture agreement in writing. There was no Joint Venture
Agreement, no Joint Venture Company, not even a Heads of
Agreement to document the joint venture.
The evidence was an unsatisfactory mixture of emails and
recollections of conversations at meetings, in phone calls,
at a cafe and over lunch, many years before.
The good news for John Cappello is that the NSW Supreme
Court awarded him a one half share of the joint venture
profit treating his relationship with John Scrivener as a
For my case note click
Do joint venture partners need to put their property venture
into writing? (a case study)
Parents and Children at war over who can stay in the family
This is the story of how a daughter, with the best of
intentions, saved the family home from being sold from under
her parents feet by the ANZ Bank, only to find it all fall
This is what happened:
- The father was a builder. He built a house at
Pennant Hills in 1985, and he and his wife raised their
family in it.
- The father was forced to retire in 2012 due to a
heart condition. His financial affairs were in a mess.
He owed the ANZ Bank $740,000 and had other creditors
and was being threatened with legal proceedings.
- He had a plan. He converted the house into two
units, an upstairs unit and a ground floor unit with
separate entrances. He invited his daughter, her husband
and two sons to move into the upstairs unit provided
they paid off the Bank debts.
- The daughter raised $840,000 which was enough to pay
out the ANZ Bank and the other creditors. The title to
the property was transferred into her name as security
for her loan.
- Four years later, they were at war because the new
co-habitation arrangement did not work out - the father
kept tinkering with building materials he stored in the
drained pool area; he was rude to the daughter's husband
and children. The police were called more than once.
- In the court proceedings that followed, all the
parents wanted was to stay in the house for life. But
the daughter and her family could take it no more and
wanted them to leave. The Court agreed with the daughter
and issued an eviction order.
We have not heard the end of this story because the
parents have appealed and the eviction order has been put on
hold. But there will be no winners. The appeal judges will
most likely order the house to be sold and the proceeds
divided up between the parents and the daughter.
All this because they did not tie up loose ends when they
went into the transaction. Specifically, the living
arrangements and the payment arrangements were left up in
To read my case note click here -
Parents are evicted from their home
because they transferred title without safeguarding
continuing occupation rights
2 Schofield Parade, Pennant Hills
Stamp duty on property options
Property options are used to acquire properties for
purposes such as:
- Property Subdivisions of acreage
- Small scale townhouse developments
- High rise apartments or offices
- Flipping properties
The stamp duty regime is favourable provided you steer
clear of put and call options.
- On grant of call option or put and call option - no
duty is payable
- On exercise of option - duty is payable on the
Contract on the full price
- On nomination of someone else to exercise the option
- the nominee pays duty on the fee paid, and if a put
and call option, the nominator pays duty on the full
- On assignment of the option - the assignee pays duty
on the fee paid, and if a put and call option, the
assignor pays duty on the full price.
- On lapsing of the option (i.e. it is not exercised)
- no duty is payable
Note: this is the situation in NSW. Other states have
similar, although not always the same, regimes.
For more details click on my article
When is stamp duty payable on property
options in NSW?
Is your rental property fit to live
Some landlords refuse to spend any money to keep their
rental properties in good shape - to make them fit to live
in / fit for habitation. The kitchen cupboards are from the
1960s, the carpet is worn out and the flyscreens are torn.
These are cosmetic defects and mean that the property is
rented at a low rent.
But there may be more serious defects, often structural
defects, which are a threat to health and safety. It is
these defects which can make a rental property not fit to
The NSW Government has introduced minimum standards for
rental properties, to start on 23 March 2020, which will
make it compulsory for landlords to offer properties for
rent which are fit for habitation. Landlords will
need to answer Yes to these questions:
- Are the premises structurally sound?
- Does the premises have adequate natural or
artificial lighting in each room; ventilation?
- Are the premises supplied with electricity and gas,
and have adequate electricity or gas outlet sockets?
- Are the premises connected to a water supply
service; are there bathroom facilities; is there
adequate plumbing and drainage?
- Are there signs of mould or dampness; pests and
vermin; has any rubbish been left on the premises; and
are the premises listed on the Loose-Fill Asbestos
- Have the smoke alarms been installed and checked and
found to be in order; have the batteries been replaced
within the last 12 months?
- Are there safety issues, visible hazards relating to
electricity or gas?
- Is a telephone / internet line connected?
Are water efficiency compliance measures in place?
If the answers are No, the tenants can break the lease
without a break fee, and be compensated by a refund of part
or all of the rent.
For more click on my article
Is your rental property fit for
a seller responsible to fix a water leak after settlement of
the sale of a house?
Properties are 'sold as is', as the legal maxim, caveat
emptor (let the buyer beware) warns.
Caveat emptor means that if a real estate buyer wants a
price reduction because of a building defect they must point
it out to the seller before the Contract for Sale becomes
unconditional. Otherwise, the buyer cannot complain about
the condition of the house.
For this reason, buyers commonly obtain Building and Pest
Inspection Reports before the Contract becomes
unconditional. The real value of these reports is to find
defects which are not obvious to the untrained eye such as
dampness in walls or ceilings caused by water entry or below
the shower caused by a waterproofing failure. As you will
find out, these Reports can protect the seller as well as
Imagine the shock that Ms Ashton received when after
settlement of the sale of her renovated terrace house in
Darlinghurst, in inner city Sydney, she received a demand
from her purchaser to compensate him for a long list of
What made Ms Ashton different from other sellers was the
fact that two years previously, she had extensively
renovated the terrace house, with Council Consent. She had
an owner-builders licence and managed professional
tradespersons to carry out the building work.
This was residential building work which meant that the
defects warranties in the Home Building Act applied. These
warranties are that the work is to be carried out with due
care and skill and in accordance with building standards.
The Consumer Tribunal ruled that she was liable to pay
the purchaser a total of $42,317.77 in compensation for
defective waterproofing of the first floor balcony and
improperly installed cladding to the exterior of the attic
and bedroom. She was also ordered to pay the purchaser's
legal costs. The amount could have been much higher, but the
Tribunal rejected many of the purchaser's claims.
The lesson here is that if a seller sells a property in
which extensive building work has been carried out within
the previous 6 years, then they may be liable for defects
after settlement, despite caveat emptor. The exception is
that if the purchaser has purchased with "full knowledge"
either by obtaining Building and Pest Inspection Reports or
if the vendor has pointed out the defect.
For more information, click
Can a home buyer claim compensation
for a water leak after settlement?
Paint bubbling from a water leak
Is this the most
expensive letterbox in Sydney?
It probably is. It cost $400,000.
This is letterbox #9 in the Watermark Apartments,
Victoria Street, Manly.
In the image, the letterbox is locked. This was not
always the case.
When Trish moved into apartment 9 in July 2016, she
decided to keep the letterbox unlocked to allow the postman
to place small packages into the box which would not fit
through the slot.
This drove the strata committee to distraction. One month
after she moved in, Trish received this email from Gary, the
chair of the owners corporation - “I notice your mailbox has
been left unlocked for quite a while?”
Trish continued to leave the letterbox unlocked. She
continued to receive emails from Gary asking her to lock the
box because thieves can use an open letterbox to identify
the lock barrel and make a skeleton key to access all
letterboxes to steal mail for identity theft. She ignored
On 24 May 2017, Gary sent her an email, which he
forwarded to all owners - he said that her leaving the
mailbox open “is the likely cause” of thieves obtaining a
skeleton key, that all boxes may have to be re-keyed, and
that compensation would be sought from the owner of Unit 9.
The next day, Trish replied by email which she copied in
to all owners. The email was sarcastic but not malicious -
Your assertion/s that a single unlocked letterbox has
allowed a criminal milieu to stalk the watermark building,
and spend the time necessary to copy barrels/locks in order
to then construct a master key is farfetched.
Your consistent attempt to shame me publicly is
cowardly. It is also offensive, harassing and menacing
through use of technology to threaten me. Please stop!
Gary brought a defamation suit based on that email. He
was awarded $120,000 at the trial in the District Court for
But on appeal, the NSW Court of Appeal decided to apply a
185 year old precedent case from England of Toogood v
Spyring (1834) to decide that although the comments in
the email were defamatory, they were protected by a common
As a result, the NSW Court of Appeal dismissed the
defamation suit and ordered Gary to pay Trish's legal fees
for both the trial and the appeal which I estimate are at
least $200,000. In addition, Gary has to pay his own legal
fees which could be at least $200,000.
The total Gary must pay $400,000 for taking the letterbox
dispute to court. And he remained humiliated.
For more information, see my case note
The unlocked letterbox -> the group email -> the defamation
suit -> the legal fees
What's new in conveyancing?
These are six trends to keep an eye on
Conveyancing, the legal side of a property sale, is
adapting to new trends.
Trends such as electronic conveyancing settlements,
auction contracts, personal guarantees for company
purchasers, subject to finance, tree problems and tax
This is a summary of these six trends:
- Electronic Conveyancing Settlements - settlements
are the business end of a property sale when the title
is transferred in exchange for payment of the price. E
conveyancing has replaced the paper based settlement
process of bank cheques, titles and transfers. It's all
now done on a computer screen.
- Auction Contracts - Purchasers often request, and
vendors often agree to two changes to the contract - (1)
a 5% deposit instead of 10% and (2) a longer settlement
period than 42 days, to give time to sell their current
- Personal Guarantees - the directors of a company are
now expected to provide their personal guarantee when
they buy in the name of their company.
- Subject to Finance - In Queensland and Victoria,
contracts often contain a subject to finance
clause. But not in NSW - unconditional contracts are the
- Tree Problems - Don't assume you can remove a tree
easily from a property you are buying.
- Tax Clearances - If a property is sold for $750,000
or more, the vendor must obtain an ATO Tax Clearance,
otherwise the purchaser must pay 10% of the price to the
For more details click on my article
Conveyancing trends in NSW
Screenshot from a PEXA workspace as a
property settlement is taking place
Do you have a right to peace and quiet (if your
neighbour is a hotel)?
If you buy an apartment or house next door to a
long-established hotel, do you have a right to complain
about the crowd noise from patrons or the loud music?
Complain is what Mr Ammon did after he bought a luxury
three bedroom apartment in the Raffles Hotel (Apartments)
which overlooked the beer garden and the Riverside function
room of the Raffles Hotel (see the low building in the
centre of the image).
He brought the little-known legal action for tort for
private nuisance. He claimed that the loud noise from
the hotel caused a 'substantial and unreasonable
interference' with his peaceful enjoyment, especially on
Wednesday, Thursday, Friday and Saturday evenings when the
music was played after 9:00 pm at night. He complained he
was unable to sleep, read his book, and watch the TV, even
with the balcony doors and windows closed.
The Court of Appeal of Western Australia were not
But it was not the 'hotel was there first and so don't
complain' argument that won out.
It was the 'what do you expect when you buy close to two
highways where the traffic noise is higher than the crowd
noise and the music from the hotel most of time' that won
As the court said, you have no right to peace and quiet.
You must ask whether the noise is reasonable for the
locality. In this case, it was.
The lesson is that if the owner of the hotel applies to
extend the hours of operation, or applies for a permit for
renovations or extensions, the time to complain is when the
application is made.
It is a lot easier for a local authority to impose and
enforce a condition or regulation relating to noise levels
than it is for a neighbour to succeed in an action for
private nuisance for noise pollution.
For my case note click
Do you have a right to peace and quiet
(if you live next door to a hotel)?
Raffles Hotel Apartments – low building
Keeping the wolf from the
door - protecting the family home from the Trustee in
the best way to protect the family home from claims by
creditors and the Trustee in Bankruptcy?
Many professional people, company directors and business
owners put the title to the family home in their spouses'
name, to put it out of reach of creditor claims.
But does this provide effective protection against a
bankruptcy claim by the Trustee in Bankruptcy?
According to a Federal Court of Australia decision last
week, the family home may not be protected even if the title
is not in the name of the bankrupt.
Applying what is known as a common intention
constructive trust, the Federal Court said that the
Trustee in Bankruptcy can claim an interest in the family
- A common intention existed between spouses /
partners to buy the home as their matrimonial home /
place of residence; and
- The bankrupt made a contribution to the costs of
acquisition or improvements or maintenance.
The interest the Trustee can claim is proportionate to
Is it possible to defeat that claim? The answer is yes:
if the bankrupt has good legal advice, they may be able to
find a way around the common intention and contributions
traps when buying the family home, and protect it from the
Trustee in Bankruptcy.
For my case note on that decision, in which the home
owner was successful in protecting the family home from the
Trustee in Bankruptcy, click
Is it possible to save the family home
from the Trustee in Bankruptcy?
Whatever you do, don't
annoy the voters!
New laws for Airbnb rentals to start in
2019 in NSW
The Castle is a great movie because it captures the
emotional attachment Australians have to their home and to
living a friendly and peaceful neighbourhood.
Town planning laws support this by strictly separating
residential from business and commercial areas, with
exceptions for home offices and occupations.
However, Airbnb style short-term rentals have disturbed
the neighbours, especially in strata buildings, because the
guests come and go frequently, some are noisy, some hold
parties and some cause damage. They have disturbed the Local
Councils because Airbnb rentals introduce a commercial
activity into residential areas.
For the past three years, the NSW Government has been
searching for a compromise between encouraging tourism and
allowing people to make extra money on the one hand, and
complaints by voters of increased levels of noise and
disturbance in residential neighbourhoods on the other.
Now the NSW Government has introduced new laws to
regulate short-term rentals.
- Homestays are legal all year round if the
owner-occupier is renting a spare room, a flat or a
studio as a short-term rental in their home. No Council
approval is needed.
- Whole house or apartment short-term rentals are
legal up to 180 days per year, where the owner-investor
is not present. This limit applies to Greater Sydney.
Elsewhere in NSW, there is no upper limit on the number
of days. No Council approval is needed.
- If the apartment is in a strata building, the Owners
Corporation can totally ban owner/investors from using
their apartment for short-term rentals, but not
owner/occupiers from using the apartment for short-term
rentals when they are away, such as on holidays (for up
to 180 days per year). A special by-law is needed,
passed by a 75% majority, to ban short-term rentals
- All hosts will need to register their property.
Airbnb hosts, guests, holiday letting agents, etc will
need to comply with a code of conduct to keep the
neighbourhood peaceful, and observe rules for parking
and garbage disposal.
Of course, there are many fine details. To find out more
Be ready for the new Airbnb /
short-term letting laws which will start in 2019 in NSW
New NSW policy
welcomes short stay rentals (Airbnb style)
On 5 June 2018, the New South Wales Government announced
a new policy for hosts for short-term Airbnb style holiday
letting. The new policy will affect both owner-occupiers and
The key is a new cap of 180 days in any one year on
short-term lettings for an investment property, meaning a
property that is not owner-occupied. The cap does not apply
to owner-occupiers who rent a spare room or rooms.
Owner-occupiers - who rent 'rooms' in houses and home
units anywhere in NSW - There is no cap on the number of
days in a year that rooms can be let for short-term
lettings. This applies to owners who let part of the house
for short-term lettings, and live in another part. If
breakfast is served, a B & B Licence might be needed from
the Local Council.
Investors - who rent 'whole' houses and home units
outside of Sydney - There is no cap on the number of
days in a year that the whole house or home unit can be let
for short-term lettings.
Investors - who rent 'whole' houses and home units in
Greater Sydney - there is a cap of 180 days in any one
year for short-term lettings. The boundary line for the
Greater Sydney Region is yet to be drawn.
Investors - who rent home units in Sydney - If the
Owners Corporation passes a 75% majority resolution (a
special resolution) then it can ban short-term lettings by
investors of 'entire' home units in the building. This
cannot affect owner-occupiers who let rooms. It is not clear
whether existing bans will be allowed to continue, or
whether a new resolution will be needed.
For all short-term lettings, there will be a new
mandatory Code of Conduct that hosts and guest must follow,
accompanied by a two-strike policy, whereby hosts or guests
who commit two serious breaches of the code within two years
will be banned for five years and listed on an exclusion
For more details on the new rules, click
Is the new NSW
Government policy a win-win for short-term (Airbnb style)
An investment loan is not repayable without proof of the
When Michael Howard invested in the Great Southern 2006
Organic Olives Income Project he took up the loan offer from
the finance arm of Great Southern to fund the total cost of
$24,490. In turn, Great Southern Finance nominated ABL
Nominees, a company associated with the Bendigo and Adelaide
Bank to be the lender.
For three years Michael Howard paid interest on the loan
to Great Southern Finance. Not long afterwards the project
was wound up because it had run out of money to cultivate
the olive trees. He never received one dollar in return from
Seven years later, Michael Howard was served with a
Statement of Claim from the Bendigo Bank to recover the
loan, which by then had grown to $66,569.32 with interest.
He decided to fight the claim.
Last week, he succeeded in defeating the claim, not
because the project failed, but because the Bendigo Bank was
unable to prove that a loan advance had been made. It had a
paper trail - a loan deed and associated documents. But did
not have a money trail to show that the money had been
transferred to Great Southern to pay for the investment.
So in a roundabout way, justice was done. Michael Howard
was not forced to pay the investment loan for a failed
project. And the Bendigo Bank was ordered to pay his legal
This decision has significance far beyond Michael Howard.
He was one of 22,000 investors in Great Southern Projects
who used the finance arm to fund their investment, and one
of several thousand investors who dispute their loan.
Michael Howard's victory shines a light which may help
these investors. For my case note
click on No evidence of a loan advance
sinks the Bendigo Bank's loan recovery action against a
Great Southern investor.
Purplebricks real estate
promises greater fee transparency for sellers
Real estate agents charge sellers a commission, which in
Sydney is currently 1.65% of the price - $16,500 on a $1m
property; plus marketing expenses of about $5,000 which
cover a signboard, photography, listings on domain.com.au,
realestate.com.au and its own website, brochures and auction
Online marketers are disrupting this traditional business
model. They are doing away with shopfronts, and operate
virtual agency models. By doing so, they are able to lower
their cost base and charge less for selling a property.
The most prominent online marketer is Purplebricks real
estate, which charges a fixed fee, instead of a commission,
for selling a property. It advertises prominently a fixed
fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The
fixed fee includes the services of a 'Local Property
Expert', photography and write up for listings on the
domain.com.au, realestate.com.au and its own website, a
generic signboard, and inspections booked on the internet.
You might think that the fixed fee includes accompanied
viewings, marketing reviews, marketing upgrades, an auction
and so forth. But you would be wrong! In the fine print, you
will find that these are additional services for which
additional fees are payable.
Consumers complained to the Queensland Office of Fair
Trading that Purplebricks was being misleading in
advertising fixed fees, when additional fees were payable.
The OFT agreed, and as a result, Purplebricks has changed
its advertising to make the additional fees payable more
prominent, and has agreed to pay $10,000 to the OFT as a
When carrying out its investigation, the OFT found that
Purplebricks was in breach of many of the real estate
licensing requirements, and fined Purplebricks another
For more information on the action taken by the OFT,
click on my article Purplebricks
promises no misleading advertising of fixed fees and
additional services, and admits breaches of the real estate
selling your home or investment property? Is a flat fee
online agent better than a traditional estate agent? Is it
the difference in marketing?
Digital disruption has come to real estate agents in
Australian in the form of online agencies which are offering
marketing and sales services to assist sellers in selling
their property for a low fixed-fee. They are undercutting
full service real estate agents which charge a sales
Purplebricks is an online agency. For a look at the
Purplebricks Real Estate operating model, and how it is
attracting owners to list properties in the Australian Real
Don't sign a personal
guarantee to a lease unless you absolutely need to!
When a businessperson negotiates a lease of a shop, their
focus is on the rent, the rent free period, the term, the
options to renew, the security bond and the permitted use.
The personal guarantee for the rent is an afterthought,
unless giving one means a 1 month security bond is
negotiated instead of 3 months security bond without one.
The fact that giving a director's guarantee removes the
asset protection of leasing in a company name is rarely
Fast forward, and for whatever reason, the business is going
bad because it cannot make enough sales. The tenant falls
behind on their rent. The landlord terminates the lease.
What was once an afterthought becomes the major source of
financial stress as the landlord pursues the director's
personal guarantee: for rent up to the lease termination,
then for rent lost until the shop is re-rented, and finally
for make good expenses. Legally, there are few defences to
claims made by landlords under personal guarantees.
Two recent decisions by the NSW Court of Appeal demonstrate
how financially ruinous a personal guarantee can be:
- The directors of the ex-tenant - Panetta Fruits at
Westfield Miranda were ordered to pay $3,674,555.53
under their personal guarantees, which was equivalent to
over 3 years rent.
- The director of the ex-tenant - Circa Newsagency at
CircaRetail Bella Vista was ordered to pay $602,178.35
which was equivalent to several years rent.
What options does a tenant have when the landlord demands a
personal guarantee? The best option is to offer more
security bond - 3 months is common - instead of a personal
guarantee. The second best option is to limit the personal
guarantee to say 3 or 6 months. The third option is to walk
away from the lease.
For my detailed comments on the two Court of Appeal
click Two retail tenancy failures expose directors who gave
their personal guarantees to the landlord to ruinous losses
car parking spaces add value to a home?
Along with the number of bedrooms and bathrooms, the number
of car parking spaces is one of the three standard criteria
commonly used in marketing a home.
Click here to read more
about their value
Is it a good idea to switch from a
family trust to a company to save tax?
With family trusts under threat as a tax shelter, are
companies looking like an attractive tax effective
The tax effectiveness of a family trust is that profits
are distributed to members of the family, as you choose,
every year. This means diverting the profit distributions
away from high income earners to low income earners (such as
adult children) to take advantage of the tax free threshold
of $18,200, and the 19 per cent tax bracket up to $37,000,
so as to avoid distributions to high income earners who have
tax brackets of 37 per cent from $87,000 up to $180,000 and
45 per cent above.
The threat (currently the federal opposition policy) is
for family trust distributions to be taxed at a rate of 30
per cent. For example: if the low income earner is earning
wages (from casual or part-time work) of $15,000 pa, then
that is tax free because it is earned income. But on every
dollar of trust distribution which tops up income up to
$37,000, the tax rate is proposed to be 30 per cent. Trust
distributions which top up income above $37,000 will be
taxed according to the tax bracket, which is 32.5 per cent.
Company profits are kept by the company - they do not
need to be fully distributed each year - unlike profits from
a family trust which must be distributed. After paying
company tax, the profits do not need to be paid out as
dividends. Therefore, if the shareholders are high income
earners, they can avoid receiving income which is taxable in
a high tax bracket.
The icing on the cake is the recent company tax rate
cuts, which for a company with an annual income of less than
$25 million, means a tax rate of 27.5 per cent instead of 30
per cent. This means that small company can retain more of
But the 27.5 per cent tax rate is available only if 20
per cent or more of the company's income is from business
activities. That is, pure investment income does not
qualify, such as rent, interest, dividends, capital gains
and trust distributions
Conclusion: If a flat tax rate of 27.5 per cent is
attractive, then it's a good idea to switch to using a
company for a new active investment or business.
For more information,
click - Real estate investment companies must
pass the 80% passive income test to qualify for the company
tax rate cut
If you are moving out of a shop or
office, do you repaint or leave it as is?
If you own or rent a shop, office, warehouse or factory,
the ‘make good’ covenant in the lease usually requires the
tenant to repaint the inside. The question is, can the
landlord recover what the cost of repainting would be,
without actually doing the repainting?
click - If you are moving out of a shop or
office, do you repaint or leave it as is?
Does Airbnb give Boutique Hotels
and B&Bs a competitive edge?
Traditional hotel chains and large resorts have long
dominated the accommodation industry because of their strong
brand marketing and distribution channels.
But as with so many other industries, the internet is
disrupting the traveller accommodation industry. Through
internet booking platform operators such as Airbnb, Stayz,
eDreams and Bookings.com, the internet is providing small
accommodation providers with easy and cheap access to a
global market for travellers, whether it is for business or
There are four services which Airbnb provides, which give
Boutique Hotels and Bed & Breakfasts a competitive edge over
traditional hotels and resorts, and which allows them to
by-pass the traditional travel agents (brick & mortar or
online) in making bookings:
- Bookings Management
- Payments Platform
- Property Damage & Injuries cover
These services are increasing lodging occupancy and
pricing power for small accommodation providers.
For more information about how Airbnb is
empowering Boutique Hotels and B&Bs to build their business,
Click for more
The law is catching up with Airbnb
Until now, many Airbnb hosts have flown under the radar.
That all they are doing is making a little extra money by
renting out a spare room in their home.
But as it becomes more like a short-term holiday letting
business, as promoted by Airbnb, Stayx, eDreams and others,
it becomes more mainstream and widespread, and the
government has taken an interest in regulating it. The NSW
Parliamentary Inquiry has now issued its report, and the
Victorian Parliamentary Inquiry is currently considering
submissions on how to regulate it.
These trends are emerging as the law develops:
- Town Planning Law - If more than 2 or 3 rooms
are rented, and if breakfast or cooking facilities are
provided, it is a commercial use and a planning approval
or a licence as Bed and Breakfast Accommodation is
necessary. If a whole house or apartment is rented,
planning approval may be necessary either as a separate
dwelling on the ‘home block’ or as Serviced Apartment if
it is in a strata apartment block.
- Insurance - Renting a room in a home is the
same as having a home office for insurance purposes -
both are a business use which is not covered by a
standard Home Owner policy when it comes to coverage for
injuries. It is different for Landlords policies, where
coverage is provided for property investments.Malicious
property damage is not covered by any policy.
Airbnb fills these gaps by providing “Host Protection
Insurance” to cover injuries and a "Host Guarantee" to
cover property damage by guests.
- Taxation - For income tax purposes, all rents
are income and expenses are deductible. For capital
gains tax purposes, there may be a partial loss of the
main residence exemption because the property has a
For GST purposes, GST does not apply unless the use is a
- Strata Law - The Courts have ruled that any
strata by-law which restricts the use of apartments for
short-term holiday letting is invalid. Body Corporates
cannot bar Airbnb lettings, but can control noise and
damage to the common areas. The rest must be left to the
planning authority - the Local Council
For more information about the current status of
the law in these areas, click: What laws apply to an Airbnb
host in Australia?
Click for more
Passionate about property - Property as a superannuation investment
Does property have a place in a super fund? As discussed
in chapter 6 of the book
'Super Rich: How to create a tax-free income for life'',
there are arguments for and against. The chapter looks at the advantages of property as a super
I’ll explain how property works as a tax shelter
outside and inside an SMSF, and how to ﬁnd and acquire
Click for more.
Without liability insurance, home
owners are exposed to million dollar law suits
Personal injury law suits represent the
single largest threat to a home owner's and landlord's
Compensation awards can exceed $1 million for head injuries
or spinal cord injuries caused by falling from a ladder,
slipping on stairs, and tripping over.
For this reason, it is essential for home owners and
landlords to have Liability insurance cover as part of their
Home Insurance / Landlord's Insurance policy.
The importance of having Liability insurance cover was
recently highlighted in a decision of the Supreme Court of
Tasmania. The court ordered the home owner (i.e. their
insurer) to pay their roofer over $1.1 million in
compensation for his severe head injuries because they owed
him a duty of care for his safety while working on the roof.
Without Liability insurance, such an award would have been
devastating for the home owner. They would have been forced
to sell their home to pay the award, and face bankruptcy for
For more information,
click - Roofer
falls off ladder set up by home owner; Court orders home
owner to pay $1.1m
How liable are you if a visitor slips
or trips when entering your property?
VERY LIABLE according a Victorian Supreme Court decision
of Scott v Wanklyn.
Of course, liability is not automatic. The property
owner/tenant must be at fault (i.e. negligent) in some way.
There is little or no liability if the visitor is at
fault, for example, if they are not looking where they are
stepping because they are texting on their phone or are
wearing slippery footwear.
But if the owner has done something like digging a
shallow trench which is hidden by fallen leaves (as in the
Victorian decision) or has not repaired a wobbly step or
uneven paving, then they are liable.
Public liability insurance covers owners and occupiers
liability for injuries to visitors. It is often called the
forgotten insurance because it is packaged into the main
- For home owners and landlords, it is in their home
- For business owners, it is in their business
- For tenants / renters, it is in their contents
With court awards of hundreds of thousands or even
millions of dollars, if a visitor is seriously injured and
loses their income, it is public liability insurance that
could save your house and save you from bankruptcy.
To read my summary of the Victorian decision,
click - Occupier's liability - Aged visitors
and uneven access ways are a recipe for injury
SHOULD YOU SELL THE FAMILY HOME WHEN
YOUR PARENTS MOVE TO AN AGED CARE HOME?
A son, seeking to protect his inheritance, used his power
under his mother’s Enduring Power of Attorney to transfer
her home unit into his name. This left the mother without
assets or funds to pay for her aged care costs.
See Full Article
VENTURE AGREEMENTS WITH
MONEY PARTNERS (INVESTORS)
REAL ESTATE INVESTMENT
See Full Article
THE EFFECT OF THE GST UPON
What impact will the GST have on real estate? In this
article, we will examine the impact of the GST on
residential and commercial real estate, and end with some
views on its impact upon the real estate market.
See Full Article
HOW DOES PROPERTY
FIT INTO SUPERANNUATION?
Property investment strategies suitable for Super.
Creative ways to get existing property into Super.
See Full Article
VENDOR FINANCE FOR PROPERTIES
With the GFC heralding demise of the sub-prime lenders and
the Banks tightening up their lending criteria, between 10%
and 20% of potential homebuyers no longer have access to
traditional finance to buy their own home.
This gap in the
marketplace is gradually being filled by non-traditional
financiers, who offer what is known as vendor finance or
seller finance to help homebuyers to buy their own home.
Selling homes using vendor finance helps sellers as well
as buyers. Sellers can broaden their property’s appeal
because the buyers don’t have to find their own finance, and
can sell at the price the property is worth.
several different kinds of vendor finance, all of which use
traditional legal documents.
There is Rent to Buy, Rent to
Own, Instalment Contracts, Second Mortgage Carry Backs,
Deposit Finance, and Delayed Completion Finance.
See Full Article
information, visit our other website