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04 May 2018

Unhappy new year!

Sale, Purchase, Mortgage, Lease
Victoria

Asked

Land tax liability – Change in vendor status after contract

Dear Mentor,

I understand that with respect to land tax, the vendor statement can show no land tax and a principal place of residence exemption when the contract is entered into. However, I am concerned with the situation where the vendor moves out between sale and settlement and settlement occurs in a new calendar year.

In these circumstances, do I understand correctly that the purchaser must simply contribute to the land tax, because the vendor's circumstances have changed? And as the vendor statement was correct at the time of signing, it is simply the purchaser’s bad luck that the vendor changed their principal place of residence?

The reason I ask this is because it exposes my clients to almost $4k in land tax on a single holding calculation. If they are required to pay this without contest, then isn't this always a risk to a purchaser and shouldn’t all purchasers be warned of this possibility, where settlement spans two calendar years?

Or, is it still open to the purchaser to seek damages post settlement as the land tax was not anticipated by the s 32 statement?

It seems unjust that the vendor can change their principal place of residence status and thereby make the purchaser liable for part of their land tax if they settle in a new calendar year. Are any remedies available to my client for non-disclosure of this change?

Answered

Thank you for the question.

You have correctly identified an anomaly.

The s 32 statement only needs to be correct at the time of exchange. Anticipated changes are not relevant. If the vendor’s principal place of residence then changes and the settlement is in the next calendar year, the plaintiff has no remedy.

The purchaser may apply to the SRO for a refund, but there is no guarantee.

If there was non-disclosure of land tax in the s 32 then it’s a different situation. The purchaser’s remedy for non-disclosure was previously limited to avoidance of the contract, but that would not often be justified by a small land tax liability. Section 48A of the Sale of Land Act 1962 now allows a purchaser to sue for damages, which would be the appropriate remedy if the s 32 statement was incorrect.

See the article ‘Vendor statements and the ACL’ in the By Lawyers Sale and Purchase matter plans.

Regards

Mentor