Say goodbye to paper titles – Embracing a digital land registry in NSW

Published: 30 September 2021

Written by: John Momitsas and Sara Ibrahim

The pursuit to move from traditional paper conveyancing processes, towards a completely digital e-conveyancing system, will be achieved shortly with a firm date for the abolishment of the traditional paper system now set.

By order under section 33AA of the Real Property Act 1900 (NSW), the Registrar General of NSW (RG) has declared that as of 11 October 2021, recognised as ‘Cessation Day’, all Certificate of Titles (CT’s) will be abolished and no longer have any legal effect. As a result, the requirement for the Control of the Right to Deal (CoRD) will also be abolished.

The RG has declared that this is the final reform that converts the NSW land titles system to be 100% electronic and will facilitate a superior conveyancing process, which is far more efficient and secure than the traditional paper system.

It is important to note, that in these changes, a transition to 100% electronic leasing will also occur. The registration of leases will now be made easier as electronic dealings will now be required to be lodged by a subscriber to an Electronic Lodgment Network Operator (ELNO). A list of the electronic dealings that will be accepted for lodgment are listed here.

How does this affect property owners and transactions?

Following the new amendments, the RG announced three main impacts electronic CT’s may have on landowners:

1. When a landowner pays off their mortgage after this date, they will not receive a CT where they traditionally would have;

2. A purchaser of property without the need for a mortgage will not receive a CT; and

3. When a plan of subdivision is registered, and new parcels of land created, CT’s (or CoRD) will no longer be issued for those parcels.

Current CT’s of landowners of unencumbered land (i.e. no mortgage)

If you currently possess a CT for your property, no action is required to be taken prior to or after October 11. Simply, the CT will no longer be a legal document or have any legal effect.

However, if your CT is currently in the hands of a solicitor, it is best advised to ascertain the document, where you may choose for it to be returned, stored or destroyed. The remedy which allows you to get back your CT from others, under the Real Property Act 1900 (NSW) will be discontinued, given it holds no legal effect.

Electronic Leasing

Electronic leasing will now only require the landlord’s legal representative in the ELNO workspace, however if the tenant’s legal representative is the lodging party, then a different procedure must be followed, which procedure is to be released in due course via the RG’s Lodgment Rules.

CoRD Consent

Alongside the cancellation of CT’s, the CoRD framework will also cease to have any legal effect. As a result, CoRD will no longer be issued, and all recordings relating to CoRD holders will be removed from the Torrens Title Register on October 11. However, it is advised for parties pursuant to s 53(4) of the Real Property Act, to seek mortgagee written consent to the lease prior to registering. In doing so, you are ensuring the mortgagee will be bound to the lease. The mortgagee’s written consent is to then be uploaded to the ELNO workspace and registered with the lease.

How should you prepare?

These new changes are set out on the website of the NSW Office of the Registrar General, which can provide you with a complete picture of what these changes may look like or alternatively contact our Real Estate team to discuss how this may affect you.

If you are currently undergoing lease preparations, it is encouraged that you start using the electronic lease now to avoid being caught out after October 11.

Update & Snapshot: Commercial Tenancy Relief Scheme Regulations 2021 (VIC)

Published: 27 August 2021

Written by: John Momitsas and Sarah Ibrahim

A very much anticipated wait (since our Article earlier this month) has finally come to an end following the announcement of the new regulations that are set in place under the Tenancy Relief Scheme Regulations 2021 (VIC) (the Regulations).

The new measures which were announced on August 24^th are closely mirrored to the regulations that were in effect until March 2021, under the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (VIC). However, the Regulations include important and additional updates which include eligibility tests and mandatory reassessment testing. The Regulations have a retrospective effect from 28 July 2021, will be in force until 15^th January 2022.

To find out if these apply to you, here is an overview of what you need to know.

Who is eligible?

Pursuant to the Regulations, an eligible lease is one which:

• Is in effect on 28th July 2021;
• the Tenant is an eligible Tenant; and
• if a new lease is entered into after the 28^th of July 2021, it is deemed to be a continuation of an eligible lease in effect as of 28^th July 2021.

What about Tenants? An eligible tenant is:

• an entity carrying out business in Australia, or a non-profit body which pursues its objectives principally in Australia;
• a SME business, or a non-for profit with annual turnover less than $50 million for the whole of the financial year ending 20 June 2021; and
• a tenant which has met the decline in turnover test (at least 30% decline, or 15% for non-profit).

Obligations for Landlords and Tenants

As a general principle of the Regulations, it is expected that all discussions and actions between a Landlord and Tenant associated with the Regulations are negotiated on a bona fide and reasonable basis.

Rent relief:

A Tenant under an eligible lease is not in breach of a failure to make rent repayments within the protected period if:

• before a rent agreement is made, the Tenant has made a claim to the Landlord, while accordingly paying the calculated deducted rent payment under the eligible lease:

• the rent relief request must be in writing and accompanied with an eligible lease and evidence of satisfying the decline in turnover test. If this is not satisfied, the request will lapse.  A rent relief request made before September 30^th will commence on 28^th July. Any date after the September 30^th will commence on that day.

• the Tenant is ensuring they are paying the prescribed relied payments; and
• if after an agreement was made a Tenant’s financial position has materially changed, they are eligible to apply for subsequent rent relief.

Duty of a Landlord:

Upon receiving the rent relief request from the Tenant, a Landlord has 14 days to offer rent relief.  After this period the Landlord must, for example:

• provide rent relief which is at the minimum requirement under the decline in Tenant’s turnover;
• provide at least 50% rent relief by way of waiver.

After 15 days of the Tenant receiving an offer of rent relief by the Landlord, the request is regarded to be agreed and accepted if no information has been advised otherwise.

What are some other key changes?

Mandatory testing – If a rent relief agreement has already been made, the tenant’s rent relief request was on or before 30 September 2021, and the tenant began trading before April 2021, the Tenant is required to give the Landlord the following information:

• the Tenant’s turnover for the turnover test period;

• the Tenant’s comparison turnover (the tenant can choose between three months from April – September);
• the calculation of the Tenant’s change in turnover; and
• a statutory declaration that declares that the Tenant is an eligible tenant and the information provided by the Tenant is in fact true.

Trading hours- Similarly to the 2020 regulations, as Tenant will not be held to be in breach of its lease if the Tenant reduces its opening hours or ceases to operate within the protection period.

Deferred rent – upon agreement of rent deferral, under the lease the Landlord must offer to the Tenant an extension of the lease term, which is equal to the period for which rent is deferred.

Moving Forward

The Regulations are very much what we expected to see. As a Landlord or Tenant, it is important to familiarise yourself with the Regulations for possible eligibility, and to understand your rights and obligations you may have. If you require assistance, please contact our Real Estate team.

The Commercial + Retail Leasing National Code of Conduct: back to life in NSW

Date Published: 17 August 2021

Written by: Duane Keighran

The Retail and Other Commercial Leases (COVID-19) Regulation 2021, as previously reviewed by us here, was amended from 13 August 2021, and applies across New South Wales.  

The Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (the Regulation) has extended the prescribed period so that the originally enacted regulations apply until 13 January 2022.  The Regulation retains the restrictions on a landlord undertaking prescribed actions, and also re-introduces concepts the market first grappled within 2020.  

Principles from the National Code of Conduct re-introduced 

The Regulation allows the parties to a lease to renegotiate the rent and any other terms, by reference to the established principles of The National Cabinet Mandatory Code of Conduct introduced on 3 April 2020 (the Code).  As in 2020 and by way of reminder, one of the largest impacts is that the Code requires negotiation of rental waivers and deferrals on a percentage basis by reference to a tenant’s loss in revenue – with rental waivers constituting not less than 50% of the total rental reduction negotiated.  

Whilst the actual financial impact of the COVID-19 pandemic needs to be considered in any negotiations, parties to a lease are reminded that the established principles of the Code must also be adhered to.  The market will be generally familiar with the requirements of the Code, and therefore we do not propose to repeat its contents in detail.  

Strict requirements for application of the Regulation  

In addition to negotiating in good faith and in accordance with the established leasing principles of the Code, parties must commence negotiations within 14 days of receiving a request from the other party to do so (or another date agreed between the parties).  Tenants must also provide evidence to the landlord that it is in fact an impacted lessee. If a tenant does not comply with any one of these requirements, a landlord is taken to have complied with the strict requirement to renegotiate.  

Resolving disputes 

The direction to first attend mediation (which fails to resolve the dispute) prior to taking any prescribed action under an impacted lease remains, however as in 2020, the tribunal or a court are again directed to consider the leasing principles of the Code whenever making a decision that relates to recovery of possession, termination of a lease, or the exercise or enforcement of another right under an impacted lease. 

Are there any built-in Landlord reprieves? 

Commercial and retail landlords are directed to provide the above relief, however it is at least arguable that landlords have not received the same level of support from the Government that tenants have.  In addition to the land tax relief for landlords mentioned in our previous article, there has now been a new fund of $40 million announced to provide support for landlords.  Details of the fund are unclear at this stage, except to state that it will be for ‘small commercial and retail landlords who provide rental waivers.’