Oracle Litigations

There are a number of litigations against people who signed off the plan contracts to purchase apartments in The Oracle development at Broadbeach, and who failed to settle once the building was complete. The developer is now suing the purchasers for breach of contract. One of the trials is partially complete. Some examples:

• South Sky Investments v Prins
• South Sky Investments v Groves & Gough
• South Sky Investments v Ryan

Keeping a Dog is Not Unreasonable

"Two extreme examples can be given to show what clearly falls outside the purpose of the by-law making power:

• Firstly, it could not be intended that the body corporate be empowered to make a by-law saying that residents cannot play chess on their property. This is a completely private activity that could in no way affect other residents. A by-law prohibiting playing chess could not be described as being for the purpose of the control, management, administration, use or enjoyment of the lots and common property.
• Secondly, it could not be intended that the body corporate be empowered to make a by-law saying that residents cannot conduct private conversations on their property. In some cases private conversations could be conducted so loudly that other residents will be disturbed. A by-law requiring residents to shut all doors and windows when entertaining guests after 11pm might be justified as being for the management of noise. However, a blanket prohibition on conducting private conversations that will normally not adversely affect other people could not be for the purpose of the control, management, administration, use or enjoyment of the lots and common property.
  

The present situation in which a by-law prohibits the normal residential activity of keeping a cat or dog is not as extreme as either of the above examples. However, it is of concern that the body corporate has adopted a blanket prohibition on dogs and cats when the keeping of such pets is a normal residential activity in Queensland and these pets can commonly be kept without interfering with the enjoyment of neighbouring residences. Of course, some pets will interfere with the enjoyment of neighbouring residences. However, adopting a blanket prohibition against every single cat and dog is unreasonable, disproportionate to the potential problem, and outside the scope of a by-law for the purpose of the control, management, administration, use or enjoyment of the lots and common property."

See Villa Casablanca decision

Watch Out For Illegal Conduct of Developers!

A legal case from last year again shows that developers and real estate agents of off-the-plan projects lie to trick people into purchasing. One common trick is to misrepresent the number of apartments sold and the number remaining for sale. (See this prior post.) Another trick, as this case demonstrates, is to have contracts signed at a high price but have an under-the-table rebate -- so that subsequent purchasers don't know the true pricing. Another tactic is for the agent to say that the developer has "stuffed up the pricing" so get in quick today before the developer realises and increases the price.

The case is Stumer Investments Pty Ltd v. Azzura Holdings Pty Ltd [2010] QSC 352 (20 September 2010), involving the off-the-plan purchase of a Gold Coast apartment.

"... Ms Greenwood and Mr Gaffney contracted to purchase an apartment, lot 80, by a contract with the defendant dated 27 December 2006. Their contract specified a price of $508,400. However, on a separate page it contained a special condition, handwritten by Ms Greenwood, which was as follows:

"The settlement to be on forty-five (45) days, but if settlement occurs within thirty (30) days, there will be a rebate of one hundred thousand dollars ($100,000)."

Their evidence is that Mr Kemm asked them to contract in these terms, the mutual intention being that the price would be $408,400, because he thought it desirable that it be represented that this apartment had sold for $508,000, which Ms Greenwood said had become the list price by the time of their contract.

Whilst Mr Stumer knew that Ms Greenwood and Mr Gaffney were themselves buying an apartment, he was unaware of the price and of its significant discount upon the listed price. There is no specific complaint that the non-disclosure of her contract price was misleading and deceptive. However, that non-disclosure, in the circumstances of the long friendship between these individuals, does not enhance her credibility. More importantly, the fact that Ms Greenwood and Mr Gaffney were prepared to facilitate a misrepresentation of their contract price to other potential buyers is relevant to their credibility."

In this case, the real estate agent made misleading statements about the likely future value of the apartment. The contract was cancelled by the court.

Also, have a look at this prior post.

Dangers of buying off-the-plan

"When they returned to the Dolphin Bay Real Estate office, Mr Conolly told Mr and Mrs Brecht about the development which was to be Number One Park. He told them that it was a “crème de la crème real estate investment opportunity”. Number One Park consisted of apartments with four penthouses at the top, two of which had been sold, he said, to a company associated with the former celebrity tennis player, John Newcombe. Those were units 9 and 10. The third penthouse, unit 8, had been sold and the fourth penthouse, unit 7, was being held by the developer because he wished to keep it for himself. However Mr Conolly told them that perhaps the developer could be interested in selling the last penthouse at Number One Park.

Mr Conolly told Mr and Mrs Brecht that unit 7 would be suitable for them because it was going to have uninterrupted views that could never be built out and although there was a development to be built in front called “Splash”, the residents of the penthouses would be able to see over the roof of Splash because the balconies of the penthouses, in particular of unit 7, would be higher than the roof of Splash. Mr Conolly said there would be uninterrupted views from unit 7, Number One Park and those uninterrupted views would be views of the ocean. He said to them that if you were standing on the balcony “you may not see waves breaking onto the sand, but you will see waves breaking.” He said that those surf views were panoramic, which Mrs Brecht understood to mean 180 degree views. In common parlance, the word “surf” is synonymous with the words “breaking waves” or “white water”, so that a view of breaking waves has the same meaning as a view of surf or white water views.

The apartments in Number One Park were yet to be built so they were to be bought off the plan. It was not therefore possible for intending purchasers to stand on the balcony to see if the representation made as to the views was correct. In such circumstances the vendor, real estate agent and intending purchasers all realise that purchasers must rely in the usual course on representations made by the real estate agent retained by the vendor to market the property for sale. ...

In order for Barnscape to settle, the company borrowed $600,000 and used $600,000 of its own funds. Mrs Brecht said that if they had not used the $600,000 to purchase unit 7 at Number One Park, they would have otherwise invested the funds. They were unable to take up an opportunity to purchase a beach front block of land for $540,000 later in 2005 on Kangaroo Island (Lot 256 on De Coudie Drive) because the funds had been spent on Number One Park. The rest of their funds were invested elsewhere, and so were not available to purchase Lot 256. An RP Data Property Search showed that Lot 256 sold on 17 May 2005 for $540,000 and then on 27 March 2006 for $755,000.

If Barnscape had not purchased a unit in Number One Park, then there were properties which they could have bought on the Sunshine Coast between Coolum and Noosa with uninterrupted surf views. Of the alternative properties particularised, however, only unit 4, Splash appears to have become available during the relevant period and have the type of ocean view sought by the Brechts. Unit 4 Splash sold on 7 October 2003 for $1,950,000 and Unit 2 (rather than Unit 1), 16 Henderson Street sold on 18 October 2003 for $1,725,000. Those units were larger in size than either Unit 7 or Unit 8 Number One Park; Splash is closer to the ocean and has fewer units. Those factors made the units more expensive to purchase than unit 7 or unit 8, even if units 7 and 8 had shared the expansive views enjoyed by the units in Splash and 16 Henderson Street. Barnscape had access to an additional $1,000,000 at the time of settlement if more monies had been required to purchase a more expensive property. So those are opportunities that Barnscape missed as a result of the purchase of unit 7.

As the unit at Number One Park had been bought as an investment property, it was let as a holiday rental property. It was also used from time to time by Mr and Mrs Brecht personally. The rental was designed to provide some income while steps were put in place to work out what the cause of the problem with the view was and then to sell the property. The net rental received by Barnscape was as follows:

01/07/04 – 30/06/05	Dolphin Bay Real Estate	$17,361.99
	Laguna Noosa Holidays	$1,005.18
01/07/05 – 30/06/06	Dolphin Bay Real Estate	$20,112.58
	Zinc Realty	$4,267.73
01/07/06 – 30/06/07	Dolphin Bay Real Estate	$15,978.80
	Zinc Realty	$11,495.64

In addition, Barnscape had other expenses, including interest paid on the $600,000 loan. However, had they bought an alternative property at Sunshine Beach, they would have received rental income and most likely paid interest on borrowings. They would probably have received more income but paid more interest so it is very difficult to say they made a net loss on rental income and interest payments.

Unfortunately units 9 and 10 were for sale when the Barnscape contract settled and the Brechts took the view that the Barnscape unit would not attract a good price if it was put on the market at the same time as two other penthouse units. On 12 May 2006, Barnscape appointed Zinc Real Estate to sell unit 7 for $1,375,000. Once it was offered for sale it took 12 months to sell. Barnscape signed a contract to sell unit 7 on 29 May 2007 for $1,035,000.

See Avis v. Mark Bain Constructions and

Developer ordered to pay compensation after off-the-plan unit's views are blocked

Mirvac Sues Many

Mirvac Queensland has recently launched a number of lawsuits in the Supreme Court of Queensland. These lawsuits appear to seek performance of off-the-plan contracts for Tennyson Reach, where the buyer did not settle. Buyers that have been sued include McGann, MG Taylor Nominees, O'Hagan, De Pasquale, Holland, Crooks, Douyere, Thompson, Ibencastle Pty Ltd, Beioley, Campbell, Horne, and others. It would appear that Mirvac believes that the apartments that swiftly sold a few years ago off the plan are now worth less than the contract price? In the third stage of Tennyson Reach, about 70 apartments remain for sale in the Farringford Building. There are at least 12 apartments in stages one and two listed for resale. When I visited recently, the development seemed like a ghost town.

Lawsuit Against Council over Brisbane Apartment Rates

BRISBANE unit owners have launched a Supreme Court challenge against the validity of the Brisbane City Council's rating parity factor scheme.

The scheme was introduced by Lord Mayor Campbell Newman in the 2008-09 Brisbane City Council Budget and has been strongly opposed by unit owners, particularly in inner city areas.

Paul Cassels and Darryl Penfold, the president and vice-president of the Brisbane Association for Rates Equity (BARE), filed documents in the Supreme Court in which they seek a court order declaring the new rates scheme unlawful and invalid. The action has been brought by Mr Cassels and Mr Penfold on behalf of all BARE members, who are owners of lots in community titles schemes in Brisbane.

Outside court Mr Cassels said the Lord Mayor had tried to set the rest of Brisbane against unit owners by declaring they were millionaire "penthouse owners".

He said that wasn't true and the BARE was made up of average people who were opposed to rate hikes of up to 500 per cent. "The actions of the Lord Mayor have been disgusting," he said.

Mr Cassels said he hoped the Lord Mayor would reconsider his stand before the matter had to go to a court hearing. He predicted the issue would be a major factor in the next state elections.

Mr Cassels said the parity factor was a controversial rating mechanism that dramatically increased the general rates on thousands of units and townhouses throughout the city along with commercial and retail strata title property.

He said while the initial impact of the scheme would be felt most in inner city and near city areas, the exponential value formula on which the scheme was based meant that every year more and more units throughout Brisbane would be automatically "caught." BARE has already been instrumental in a substantial re-working of the scheme.

However, BARE has made it clear that it wants the scheme dropped and the rates cap on owner-occupied CTS property (also removed last year as part of the parity scheme) reinstated immediately.

Source: Courier Mail