In brief - The Property Law Act 2023 (The Act) passed Parliament on 25 October 2023 and received Royal Assent on 2 November 2023. The Act will commence on a date to be set by proclamation. Commencement of the Act is anticipated to be delayed to allow for consultation, preparation of the new regulations, education, and preparation work by affected legal, financial, property and community titles sector participants.
The Act will replace the Property Law Act 1974 (Qld) and its stated aims are to simplify, streamline and modernise Queensland’s property laws, to better facilitate e-conveyancing and electronic transactions, and to remove outdated provisions.
Some of the significant changes include:
1. Sale of Land Disclosure: implementing a mandatory seller disclosure scheme under section 99 for the sale of all registered freehold lots in Queensland, including private sales, sales by auction, sales by a mortgagee or receiver, and sales arising from the exercise of an option (subject to limited exceptions) which:
(a) requires the seller (or their authorised agent) to provide a signed disclosure statement in the approved form and each document prescribed by regulation to the buyer before the buyer signs the contract; and
(b) grants a right to the buyer to terminate the contract (see section 104) at any time prior to settlement:
(i) if the seller fails to give a disclosure statement for, or prescribed certificate applicable to, the lot before the buyer signed the contract; or
(ii) if the disclosure statement for, or prescribed certificate applicable to, the lot was given before the buyer signed the contract and:
(A) the statement or document was inaccurate or incomplete in relation to a material matter affecting the lot at the time it is given to the buyer; and
(B) at the time the contract is signed by the buyer the buyer is not aware of the correct state of affairs concerning the matter; and
(C) if the buyer had been made aware of the correct state of affairs concerning the matter, the buyer would not have signed the contract.
The right of termination will still apply where the seller was not aware of the inaccuracy (e.g. where a certificate prepared by a third party such as a body corporate is inaccurate) (see section 106).
If the buyer terminates the contract there is no statutory right to compensation, however the seller must refund any deposit and any interest on the deposit to the buyer (see section 105).
These disclosure obligations will not apply to the sale of proposed lots under the Land Sales Act 1984 (Qld) or the Body Corporate and Community Management Act 1997 (Qld), and the existing disclosure obligations under those acts will continue to apply (see definition of lot in section 95).
The form of the disclosure statement and the prescribed certificates are yet to be settled by regulation.
The disclosure statement may be electronically signed (section 99(7)) and the disclosure statement and prescribed certificates may be given electronically in the manner prescribed by section 102 or may be given in person or by leaving it at or posting it to the last known place of residence or business or a body corporate's registered office, principal office or principal place of business in the State (see sections 101 and 231).
For a lot sold by auction, the seller must have:
(a) for a buyer registered as a bidder before the start of the auction - given the disclosure documents to the buyer before the start of the auction; and
(b) for a buyer registered as a bidder after the start of the auction who was not given the disclosure documents before the start of the auction - complied with the requirements of section 103 (e.g. by displaying the disclosure documents at the auction).
The obligation to give the disclosure statement and prescribed certificates cannot be contracted out of (section 98), however there are limited exceptions to the obligation set out in section 100 including, for example:
(a) where the buyer and seller are related and the buyer gives a waiver notice before signing the contract;
(b) where the buyer is the State, the Commonwealth or another State, a local government, a constructing authority under the Acquisition of Land Act 1967 (Qld), a statutory body, a listed corporation or a subsidiary of a listed corporation;
(c) where the seller is a local government selling land to recover overdue rates and charges and the seller gives a notice to the buyer before the buyer signs the contract stating that the buyer is required to make its own enquiries and the seller is not required to comply with section 99;
(d) where the seller is the State and the buyer was the tenant of the lot for at least 3 years immediately before entering into the contract and the seller gives a notice to the buyer before the buyer signs the contract stating that the buyer is required to make its own enquiries and the seller is not required to comply with section 99;
(e) where the seller and the buyer are co-owners of the lot and the control provides for the acquisition by 1 or more co-owners of the whole or part of the interest of another co-owner;
(f) where the seller and the buyer are owners of adjoining land and the contract provides for the adjustment of a common boundary;
(g) where the contract gives effect to a court order, an enforcement warrant, or a financial agreement or a part VIIIAB financial agreement under the Family Law Act 1975 (Cth);
(h) where the contract gives effect to the transmission to the personal representative of a deceased estate or the transmission to the beneficiary of a deceased estate;
(i) where the contract is for the sale of a lot under section 41 of the Acquisition of Land Act 1967 (Qld) to the former owner;
(j) where the contract arises from the exercise of an option and the buyer under the contract is the same as the buyer under the option and the seller complied with the disclosure obligation in relation to the option for the sale of the lot;
Where a grantee of an option appoints a nominee buyer pursuant to an option deed, the seller will need to provide a further updated disclosure to the nominee buyer (which must be true as at the time the statement is given to the nominee buyer) before the nominee signs the contract. Grantors will need to ensure that their option deed includes a mechanism to give an updated disclosure statement to the nominee after nomination and ensure that there is sufficient time to obtain any updated searches which the seller is required to include with the disclosure.
The disclosure requirements will only apply in relation to a contract for the sale of a lot if the contract is entered into after the commencement and will only apply in relation to a contract arising from the exercise of an option if the option is granted after commencement (section 251).
(k) where the sale price is more than $10 million including GST (or such other amount prescribed by regulation) and the buyer gives notice waiving compliance with section 99 before the buyer signs the contract.
2. Leases - Effect of transfer of reversion of lease by lessor
The concepts of covenants which touch and concern the land will no longer be relevant to determining the enforceability of a covenant in a lease after a transfer of the reversion (e.g. on the sale of the land).
Sections 140(2), (3) and (4) provide that:
(a) each right conferred or obligation imposed on the lessor under the terms of the lease runs with the reversion of the lease and may be exercised by the transferee or enforced by the lessee against the transferee; and
(b) the transferee is bound by and entitled to the benefit of each term of the lease to the extent the lessor was before the transfer, whether or not the term touches and concerns the land or is express, implied or imposed by law.
Sections 140(2), (3) and (4) shall not apply in relation to a term of the lease to the extent that the lease provides that the term is personal or excludes the operation of the section in relation to the term, or the transferor and the transferee agree in writing that the benefit of the term remains with the lessor. Also, the lessor remains liable for a breach of a term of the lease committed by the lessor.
When purchasing a property, buyers will need to conduct a review of the terms of the lease to determine whether:
(a) the lease needs to be amended by the lessor and lessee (for example to clarify that the grant of a right of first refusal is personal to the transferor and does not bind the transferee); or
(b) the contract of sale will need to provide that the benefit of a term (e.g. the right to sue for arrears of rent) remains with the seller after transfer.
When purchasing a property a buyer will also need to ensure that notice of the purchase is given to the lessee as section 141 provides that where the lessee pays rent or another amount to the transferor without actual notice of the transfer the lessee is discharged from liability to pay the amount to the extent it has been paid to the transferor.
3. Leases - Lessor's consent to assignment or other actions
Section 142 provides that if a lessee is required to obtain the lessor’s consent to:
(a) assign, sublease or part with or share possession of the premises;
(b) change the use of the premises;
(c) create a mortgage over the lessee’s interest in the land;
(d) make an alteration or carry out works; or
(e) do any of the above in relation to a part of the leased premises or for a period of the term of the lease,
the lessee may request consent and the lessor must not unreasonably withhold its consent. The lessor must give its decision, within one month after receiving full particulars of the lessee's proposal (subject to a right of the parties to agree during this one month period to extend the period for giving a decision notice), setting out any conditions and the reasons for the conditions or refusal of consent.
The lessee can apply to the court to make a decision about the lessee's proposal if the lessee believes the lessor unreasonably withheld its consent or a condition is unreasonable, unnecessary or onerous or the lessor fails to give a decision notice on time, and the court may make orders it considers appropriate.
If the lessee makes an alteration or carries out work in relation to the leased premises without the consent of the lessor, the lessee must restore the premises to the condition the premises were in immediately before the alteration or the carrying out of the work.
Section 142 will apply from the commencement of the Act and can not be contracted out of.
A lessor might seek to avoid the application of the section by prohibiting the above actions in all cases (e.g. an absolute prohibition on assignment, subleasing, change in use or building works), however before entering into a lease which includes an absolute prohibition, lessors should also consider obtaining advice as to whether the lease may be subject to the unfair contract terms regime and whether an absolute prohibition would be contrary to the unfair contract terms provisions. You can read more about recent changes to the unfair contract terms regime which extended the operation of the regime in our update: Navigating the Unfair Contract Terms Regime. Is your business affected by the changes?
If a lease does allow the lessee to seek consent then the lessor should consider specifying in the lease:
(a) what information the lessee must provide in support of the request; and
(b) any particular conditions of consent that the parties agree to be reasonable.
4. Leases - Assignment of lease - enforceability of covenants
Section 143 provides that, subject to any agreement to the contrary, the assignee of a lease is bound by each term and entitled to the benefit of each term of the lease to the extent the lessee was immediately before the assignment whether or not the term touches and concerns the land or is express, implied or imposed by law, except to the extent that:
(a) the lease expressly provides that the term is personal or excludes the operation of this subsection; or
(b) where the lessee and the assignee agree in writing that the benefit of the term remains with the lessee and either:
(i) the benefit of the term accrued to the lessee before the assignment; or
(ii) the lessor consents to the benefit of the term remaining with the lessee.
This section will apply to all leases regardless of when they were entered into. Consideration of lease covenants is recommended to ascertain whether amendment is required to reflect that certain covenants are personal and/or will not pass on assignment of the lease.
5. Leases - Release of previous assignor on subsequent assignment
Section 144 provides that, despite any agreement to the contrary, if a lessee assigns the lease to another person (assignee) and after the assignment the assignee assigns the lease to another person (subsequent assignee) the lessee and any guarantor of the lessee is released from liability to the lessor for a breach of the lease by the subsequent assignee.
Section 144 will only apply to the assignment of a lease entered into after the commencement of the Act (section 255(2)).
The lessee would remain liable for breaches of the lease by the assignee but not for breaches of the lease by the subsequent assignee.
Lessor's may seek to mitigate their risk in respect of this release on assignment to a subsequent assignee by requiring new guarantors / security to be provided by an assignee as a condition of providing the lessor's consent to an assignment of lease.
6. Easements - Enforceability of covenants: Currently at common law, a positive covenant (e.g. an obligation to pay for construction of a road or keep a servient tenement free from weeds) is generally not enforceable against successors in title. Section 65 provides that in a registered easement over land (the burdened land) a positive or negative covenant in relation to the use, ownership or maintenance of the burdened land (e.g. covenants relating to maintenance or repair and payment of rates or taxes) will bind the grantor and the grantee of the easement and their successors in title unless the covenant is expressed to be personal to the grantor or the grantee.
This section will apply retrospectively whether the easement is created before or after commencement (section 247).
The Property Law Act 2023 will implement significant changes to property laws in Queensland. These changes will have implications on various aspects of property transactions, including the sale of land, leases, and easements. As we wait for the commencement of the act, it is important for all stakeholders to stay informed about the proposed changes to ensure they are prepared when the changes come into effect. Our property team will continue to provide updates on the reforms as they become available. If you have any questions in the meantime, please contact the team.