USB145 AT2 Property Transactions Assignment 2 PDF

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USB145 Property Transactions – C St d

Madelaine Zarb N10756701 Word Count: 2016

Executive Summary The case study will outline potential liabilities for marketing material and disclosure documents regarding ‘off the plan sales’. Strategic advice will be delivered to increase the property developer’s opportunity of completing the sale in an appropriate and ethical approach, seeking the best outcome possible. The developer has made false and misleading representations breaching the binding contract with the buyer, disclosure statement, Australian Consumer Law, Land Sale Act 1984, Body Corporate and Community Management Act 1997 and Building Units and Group Titles Act 1980. The seller and buyer will aim to negotiate a suitable outcome however, if this matter cannot be resolved the buyers is entitled to pursue court. Therefore, creating a likely outcome the buyer’s case will override the seller’s reasoning potentially superseding any future sales.

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Table of Contents Introduction …………………………………………………………………………… 3

Legal Analysis ………………………………………………………………………… 3

‘Off the plan sales’ ………………………………………………………………………… 3

Disclosure Statements ………………………………………………………………. 3 -

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Due diligence …………………………………………………………………………….. 4

Action of Misconduct ………………………………………………………………… 4 -

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Advantages and Disadvantages of Negotiation ………………… 5 - 6

Negotiation Strategies ………………………………………………………….. 6

Conclusion ……………………………………………………………………………. 7

References ……………………………………………………………………………. 7

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Introduction The purpose of this case study will identify the property developer’s right, obligations and any potential exposure to legal risks. Advice on negotiating a suitable resolution and alternate dispute actions will be presented as an appropriate measure of the developer’s responsibilities during the process of property development. The case study will also outline the potential liability for marketing material and disclosure documents for ‘off the plan sales’. Strategic advice will be delivered to increase the property developer’s opportunity of completing the sale in an appropriate and ethical approach.

Legal Analysis ‘Off the Plan Sales’ The ‘off-the-plan’ residential contract between Michael and Suzanne is legally binding. Both parties within the contract agreement must abide by specific terms and conditions of the sale stated in writing. Because Suzanne purchased the property prior to construction there is specific regulations and terms subject to sales like this which are classed as ‘off the plan sales’. These regulations are based upon Land Sale Act 1984, Body Corporate and Community Management Act 1997 and Building Units and Group Titles Act 1980, which specifically identifies the rights in which both Michael and Suzanne are entitled (Queensland Government, 2016). Disclosure Statements Rights and responsibilities of the property developer (Michael) is to provide evidence of worth to the buyer (Suzanne) as part of the decision to secure purchase as well as information within the knowledge of the seller (Suzanne). As for the seller (Michael) they are required to provide a disclosure statement, list of detailed inclusions and ‘off-the-plan’ information forming a contract. The seller statement should demonstrate accuracy at the time it is made obtainable to a buyer (Suzanne) (Queensland University of Technology Law, 2017).

A seller (Michael) should be required to disclose: a. a current title search and details of any unregistered or statutory encumbrances; b. a copy of the registered plan for the lot and exclusive use plan (if applicable); c. the current zoning for the land; d. whether the land is on the contaminated land register or environmental management register (s 408 Environmental Protection Act 1994); e. if a tree order or application exists for the land (s 83 Neighbourhood Disputes (Dividing Fences and Trees) Act 2011); f. a pool certificate or notice of no pool certificate under the Building Act 1975; g. if a Building Energy Efficiency Certificate is registered under the Building Energy Efficiency Disclosure Act 2010; h. notice of any building work by an unlicensed builder; i. a copy of the last rates notice and water notice; j. details of any notices, orders or transport infrastructure proposals for the land issued by the state or local government; and 3

k. if the property is an existing lot in a community titles scheme under the Body Corporate and Community Management Act 1997 or an existing lot under the Building Units and Group Titles Act 1980, a body corporate certificate (Queensland University of Technology Law, 2017) A buyer (Suzanne) may be eligible to cease a contract if the disclosure statement is not signed by the seller (Michael), substantially incomplete or inaccurate. In this case the buyer (Suzanne) would be materially prejudiced if required to settle because of inaccuracy within the contract. The buyer (Suzanne) should seek legal guidance prior to entering or terminating a contract (Queensland Government, 2016). This avoids any material prejudice or misinterpretation that could occur during a property transaction. This goes hand in hand with the Australian Consumer Law ensuring consumer protection. There are two elements to consumer protection legislation, these being conduct during the consumer transaction as well as anti-competitive behaviour. According to the Australian Consumer Law sections 18 – 19 business conduct is prone to breach the law if it fails to disclose relevant information, promises, opinions and contingency. The business manner is breached when sellers engage in misleading or deceptive conduct by making false or ambiguous statements, advertisements, promotions, quotations and representations made of the price, value or quality of the consumer goods or services to the buyer (Australian Consumer Law, 2010). A factor that could significantly impact the sale is timing on value of information to the buyer (Suzanne). Under the Land and Sales Act 1984 and the Body Corporate and Community Management Act sellers (Michael) are obliged to disclose information prior to the buyer (Suzanne) entering into a contract subject to the sale. Therefore, any changes made subject to the property must be disclosed to a buyer (Suzanne) otherwise may result in termination of the buyer (Suzanne) and seller (Michael) contract. Due diligence In Suzanne’s case she should have engaged a solicitor to advise and to do the due diligence pre-contract. This proposed action would have confirmed the facts of the matter in contract with Michael. As per the Queensland Government (2016) it is recommended that a buyer seeks legal advice before entering or ceasing a contract, avoiding any communication or contract errors. A meeting should have been arranged with Suzanne as soon as Michael discovered the budget overrun, explaining any possible outcome that wasn’t subject to the overall aim disclosed in the marketing brochures and internet. This would have ensured Michael’s due diligence and consumer conduct was abided by to the full extent of the signed contract. Action of misconduct Subject to Michael and Suzanne’s legally binding contract acting in a fraudulent manner has breached the contract. This occurred by downgrading quality of the bespoke timber joinery for a cheaper version of wood grain laminate, all European appliances replaced with cheaper replicas, kitchens and bathrooms do not contain the high-end finishes to meet his 25% offthe-plan pre-sell budget (shortfall) and structural issues. Michael’s finance approval for the project was based on the proviso that he presells 25% of the apartments ‘off the plan’. Due to buyer misconduct and significant budget overruns, Michael could potentially lose all contracts and therefore not meet his 25% pre-sell criteria with the bank. By not including the correct finishes promised in the marketing and contract schemes, Suzanne has now paid 1.5 4

million dollars for an apartment that is no longer worth that price, therefore a breach in contract has occurred. Specifically, Michael also disclosed that his development was a transit orientated development. A TOD is a scheduling concept that endorses the creation of a network encompassing well-designed, human-sale, urban communities focussing around transit stations. The program objectives for developments are innovative design solutions, delivering efficient land use and transport integration whilst maximising the particular development prospective of a property (Queensland Transport: Department of Transport and Main Roads, 2017). A TOD is considered highly exposed to transit centres being within a 400-meter to 800-meter radius to a development. Michael’s marketing team have aggressively advertised the building as TOD; however, the development is respectively within a 500 meter to 2.5 kilometres to transit stations (The City of Winnipeg, 2011). Therefore, does not entirely fit the description of a transit orientated development, leaving false and misleading information to other potential buyers as well as demonstrating fraudulent behaviour. Michael has made false, misleading representations and promises in the marketing aspect of the property development and disclosure statement. According to the Australian Consumer Law (2010) states ‘a person is prohibited from engaging in conduct that is likely to mislead or deceive another person’. “Making false or misleading representation is an offence” (Australian Consumer Law, 2010, p.12). If Suzanne believes Michael has made false or misleading representations, he could occur a “minimum fine of $220,000 for an individual and $1.1million for a body corporate” (Australian Consumer Law, 2010, p.1). If the case proceeded to litigation Michael and his recruited marketing team could be sued due to false or misleading representations and civil wrong through contract law of the property development of a former significant heritage listed building in Fortitude Valley. It is Michael’s responsibility to negotiate with Suzanne until a suitable substitute plan is agreed upon. This will reduce Michael’s chances of further exposure to a harsher punishment communed by a judge. However, if this matter cannot be resolved there is certainty that Suzanne will pursue court, with a likely outcome her case will override Michael’s reasoning potentially jeopardising any future sales.

Advantages and Disadvantages of Negotiation The objective of a negotiation between Michael and Suzanne is to allow both parties to concur on an outcome which is mutually reasonable without inflicting the dispute to litigation. Provided by the actual terms of this agreement they can be as board or as specific as desired by both parties. The term of a negotiated settlement can be documented in the form of an arrangement and once signed by Michael and Suzanne it has a force of a contract concerning both parties. However, if the settlement is conveyed framing a litigious dispute Michael and Suzanne have the option of registering the settlement with court in conformity applicable to the rules of the practice.

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In procedural terms, negotiation is within reason the most flexible dispute resolution due to the fact it involves only those parties disputing. The parties have full control and flexibility of the agenda to align in accordance with their own needs depending on the willingness to participate in the negotiation. A neutral third party is sometimes incorporated to encourage the seller and buyer to remain equal without any authority imbalances. In some instances, negotiations allow a vaster possibility resulting in a successful outcome when the parties adopt an interest-based approach as opposed to a positional-based approach. For example, Michael and Suzanne pursue the interest-based approach centring their mutual needs as well as the incorporation of mechanisms such as objective standards. In turn increasing the chance of attaining a mutual agreement (Department of Justice, 2017). A successful settlement commands both parties to ensure a clear understanding of its negotiating mandate. Some issues or queries are not amendable and any party who chooses to cease settlements may do so at any time notwithstanding time, effort and money invested by any party. Overall, the negotiation phase cannot assure the good faith of any parties and can also be used as a stalling tactic preventing other parties from asserting its rights through the process of litigation (Department of Justice, 2017). An alternate settlement mechanism can be mediation whereby a third-party assists and directs both Michael and Suzanne to devise a suitable agreement.

Negotiation Strategies There are two opposite types of negotiation, including distributive and integrative. The distributive negotiation mechanism is defined as giving out or scattering of value. Meaning that by nature there is a limited quantity of what is being distributed. In this style of negotiation two parties enter with the objective to claim as much value as possible. As for integrative negotiation style this is relatively more cooperative and can be seen as joining forces to achieve a suitable outcome for both parties. Ideally, this mechanism means each party concluding with a successful outcome. Both of these negotiation mechanisms can be used in contrast, however in Michael’s case he needs to be certain of the approach he is intending to conduct (Negotiation Experts, 2020). In order for Michael to have success it is recommended to strategise and pursue the integrative negotiation mechanism to ensure the best outcome possible. Michael needs to make the first offer as this generally acts as the negotiation anchor, becoming the point at which, the rest of the settlement is likely to revolve and set off in Michael’s favour. However, it is imperative that Michael’s offer is fair and reasonable compensating Suzanne for the lack of communication and unjust seller ethics shown by Michael. There are many advantageous outlooks when both parties pursue a cooperative approach. Skilful mutual problem-solving generally involves some form of value-for-value concessions. In conjunction, understanding both situations imbedded with as much information as possible, helps each side attain the other’s interests and objectives working towards a win-win outcome for both parties (Negotiation Experts, 2020). It is essential for Michael to grasp Suzanne’s projected outcome in order to harmonise and reconcile any competing interests to formulate a suitable agreement. Focusing on interests instead of positions, means moving from theoretically a negative discussion of demands to a positive discussion of Michael and Suzanne’s common

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needs (Power, 2015). This should ensure Michael and Suzanne have a successful negotiation outcome where no party is better off than the other.

Conclusion Overall, Michael has made false and misleading representations on several occasions. Michael has been involved in fraudulent behaviour by aggressively advertising the Fortitude Valley development as TOD. By using this title of development, he has misled the current contract holders and future prospect buyers. Furthermore, he has also breached the binding contract with Suzanne, disclosure statement, Australian Consumer Law, Land Sale Act 1984, Body Corporate and Community Management Act 1997 and Building Units and Group Titles Act 1980. Michael is at serious risk of being sued by Suzanne and losing any potential sales and or the Fortitude Valley development if the process of negotiation with Suzanne fails. If this proceeds to litigation a likely outcome will be that Suzanne’s case will supersede Michael’s case potentially divesting the development.

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References Australian Consumer Law. (2016). Avoiding unfair business practices: a guide for business and legal practitioners. Retrieved 10th September, 2020 from https://consumerlaw.gov.au/sites/consumer/files/2016/05/0553FT_ACLguides_UnfairPractices_web.pdf City of Winnipeg. (2011). Winnipeg: Transit-Oriented Development Handbook. Retrieved 10th September, 2020 from https://winnipeg.ca/ppd/Documents/CityPlanning/PoliciesGuidelinesStudies/TransitOriented-Development-Handbook.pdf Department of Justice. (2017). Dispute resolution reference guide. Retrieved 10th September, 2020 from https://www.justice.gc.ca/eng/rp-pr/csj-sjc/dprs-sprd/res/drrg-mrrc/03.html Final Report: Seller Disclosure in Queensland. 2017. Retrieved 15th September, 2020 from https://www.justice.qld.gov.au/__data/assets/pdf_file/0006/536748/final-report-sellerdisclosure-in-queensland.pdf Negotiation Experts. (2020). Negotiation types. Retrieved 10th September, 2020 from https://www.negotiations.com/articles/negotiation-types/ Power, R. (2015). 13 Win Win Tactics in Negotiating Negotiating effectively is about making everyone feel like they got a win. Retrieved 10th September, 2020 from https://www.inc.com/rhett-power/13-win-win-tactics-in-negotiating.html Queensland Government. (2016). Buying off the plan. Retrieved 10th September, 2020 from https://www.qld.gov.au/law/housing-and-neighbours/buying-and-selling-aproperty/buying-a-home/ways-to-buy-your-home/buying-off-the-plan Queensland Transport: Department of Transport and Main Roads. (2017). About transit oriented developments (TOD). Retrieved 10th September, 2020 from Retrieved 10th September, 2020 from https://www.tmr.qld.gov.au/Community-and-environment/Planning-anddevelopment/Transit-oriented-developments/About-transit-oriented-developments...