Council’s attempt to ban Apartments in Brisbane’s Suburbs

As reported in the industry publication Urban Developer (see the link: TheUrbanDeveloper.com no-reply@theurbandeveloper.com ) Friday 22 November, BCC has decided to seek a Temporary Local Planning Instrument restricting town-house and multi unit developments in precincts that are predominantly Urban Residential ie detached residential. The TLPI has been anticipated for a while now and is in addition to other measures being taken by BCC to rein in town house/multi-unit development across the BCC area. The proposed amendments to City Plan 2014 are to:

  • remove provisions in zone codes, development codes and neighbourhood plans supporting Multiple dwellings (townhouses and apartments) in the Low Density Residential zone
  • amend other relevant provisions in City Plan to align with this change, including amendments to the Strategic Framework, and make necessary consequential amendments. 

The proposed TLPI has major problems for any developer contemplating a development application for such a project. Although only “temporary’, it acts as a definite planning instrument, but only once it has received approval from the State. That hasn’t occurred as yet. So, a small window of opportunity remains. And it may be that the State refuses to support the TLPI (but unlikely). A TLPI, once approved by the State, has a life of two years and then will lapse unless formally adopted in the Planning Scheme. Objections against the TLPI can be made to the State.

BCC has been trying to rein in higher density developments, apart from residential towers, for a while now. Other measures include proposals to revert to a policy of requiring strict compliance with car-parking requirements, a policy it all but abandoned about 5 years ago on the basis that there was decreased reliance on motor vehicles for inner city residents, and Council was promoting the notion of decreased reliance on motor vehicles.

Although the limitation of higher density development in urban residential areas probably has great merit, the proposed TLPI is a blatant political measure in the lead up to Council elections next March. The fact that the Council believes it is appropriate to contradict its own Planning Scheme in such ad hoc fashion is appalling town planning practice.  


Compensation on Resumption of Real Estate in Qld

South-east Queensland is again experiencing an infrastructure boom (believe it or not) with the State Government and most Councils playing catch-up from a lengthy period of under-investment in infrastructure. Major projects include the recent projects of Lytton Road widening (BCC) and current Centenary Bridge upgrade (State), Cross River Rail (State) and the Inner City South State Secondary College (State) projects.

 Whilst it is great to see such projects fulfilling the needs of a growing population, one inevitable consequence is that the relevant authority usually needs to acquire privately-owned “real estate” to facilitate the project.  Real estate in this sense includes land, improvements (eg house, commercial building), leasehold, Body-Corporate property, mortgagee and even easement rights). For ease of reference, “real estate” in this article is simply described as “land”.  Land-owners are at least fortunate in Queensland to have the protection of the Acquisition of Land Act 1967 (‘AoL Act’) which regulates both the powers of the relevant authority to take land, and the rights to fair compensation for dispossessed land-owners. Some projects such as the Cross River Rail have specific legislation regulating the acquisition and compensation process but it is essentially the same as the AoL Act.

Who can take your land and for what reason?

Essentially, any local authority (Council) or State Government Department (most often, for obvious reasons, the Dept of Transport and Main Roads) can compulsorily acquire privately owned land for any of the purposes set out in Schedule 1 of the AoL Act. The list of purposes is extraordinarily broad, and then further extended such that the purpose need only be ‘incidental to the purpose”. In short, it only needs to be a ‘proper purpose’.

Procedure.

Usually, the authority’s bureaucrats (used in the nicest possible sense!)  are very sensitive to the impact on the landowner and are keen to achieve a sensible result regarding compensation payable. Landowners usually receive early notice of the intended resumption and are invited to negotiate the compensation amount. But this is where most landowners let themselves down because it is fair to say that no authority is generous with the public purse and will not pay a cent more than is necessary just to achieve a quick result. Any affected landowner is well advised to immediately seek advices from relevant consultants such as a town planner, valuer and then lawyer to advise on the compensation claimable. And why wouldn’t you do so, because all reasonable cost incurred are claimable against the authority even if the resumption does not ultimately proceed.

Following informal notice of the intended acquisition, a formal Notice of Intention To Resume is delivered by the authority and that Notice advises the land owner of the purpose of the resumption and invites Objections (which are invariably a waste of time and effort – I have never seen any Objection receive a favourable response – perhaps the only likely Objection would be that the resumption was activated by wrongful purpose or is manifestly excessive to the required purpose) and then a claim for the compensation payable.  As I noted earlier, a claim can be made by any number of persons with an interest in the land eg owner, tenant, easement beneficiary etc) and the authority needs to ensure that all relevant parties are notified.

Claim For Compensation

If the compensation can’t be successfully negotiated at this early stage, the authority will proceed to formalise the resumption by means of ‘Gazettal’ of the taking ie having the Governor in Council authorise the taking and publishing the resumption in the Government Gazette (which of course no one ever reads, but it is the official record of the authorisation) followed by registration of the transfer of land ownership in the Titles Office. The gazettal is notified to the land owner.   The date of gazettal is important for two reasons: first, it sets the date at which the value of the land is assessed (and for that reason it is important to be wary of concluding a negotiated result until close to gazettal because the actual taking may take a long time after the Notice Of Intention To Resume and the property value may have escalated, or plummeted by the time of the gazettal);  second, it sets in motion a time period of 3 years for a formal Claim For Compensation to be lodged by any affected party in the Land Court of Queensland. The Court is a specialised jurisdiction dealing mostly with compensation claims.  The 3 year time limit is not absolute but it is unwise to delay filing a Claim beyond that date.  In due course, the Land Court hears evidence from the appointed valuers, town planners and all manner of other relevant experts such as traffic engineers, hydraulic engineers and the like to determine the compensation and ‘Disturbance’ amount.

So, what is the Compensation based on?

Technically, Section 20 of the AoL Act sets out the basis of compensation assessment “assessed according to the value of the estate or interest of the claimant” but taking account of any enhancement of the value of any adjoining land owned by the claimant but also taking account of reduced value caused to any remaining land (eg where only part of the land is taken, as is often the case) and also taking into consideration any increase or reduction in value caused by the authority’s exercise of statutory powers eg where the land has been affected in value because the authority has over a long period announced its intention to resume.  A classic example of this is where the State or local authority has publicly announced its intentions for a road widening but then taken several years to actually issue the Notice or then take the land – the property price will have no doubt reduced in the interim because a buyer will be alert to the proposed taking. This has occurred eg with the State’s announcements for the Centenary Bridge and Pacific Highway, Springwood and BCC’s Canning Bridge projects.

In industry parlance, compensation is to be assessed “on fair and reasonable value as at the date of the taking, based on the highest and best use of the land”. Thus, and this is where it becomes essential for professional advice to be obtained, the value of the taken land is not based on the value of the current use but the land’s potential use.   For example, the resumed land might be used for a single residence but its potential use under the local authority’s planning scheme is for a town-house complex, child care centre or some other commercial enterprise. Valuers and town planners have the difficult exercise of not only assessing the value of the land taken but also the impact on value of a partial taking, and also the value unaffected by prior announcements of the authority’s intentions regarding the land.

As I mentioned earlier, the claimant is entitled to also claim all reasonable costs “attributable to disturbance”. Those costs include all professional costs (usually lawyer, valuer, town planner), costs of re-purchasing elsewhere such as stamp duty, mortgagee fees, removalist and storage fees, business interruption and other “economic losses and costs reasonably incurred …that are a direct and natural consequence of the taking of the land”.

“Injurious Affection”

Whilst the AoL Act does make reference to “injurious affection” (succinctly, the impact on value of any residual land where eg there is only a partial taking), this is not to be confused with the concept of injurious affection caused where a government authority’s actions impact a land owner’s property rights eg by means of a down-zoning (taking away use or potential use rights) ie changing a commercial use zoning to rural.   Whilst injurious affection claims are still ostensibly available under Queensland’s Planning Act 2016 to entitle a compensation claim for loss of development rights, such rights are difficult, convoluted and expensive to pursue.

Land Court determination.

As noted above, the Land Court is the relevant jurisdiction if negotiation for compensation on resumption ultimately fails. It is fair to say that very few matters progress to the Land Court since most are resolved by sensible negotiation before that perilous step is necessitated. Even then, the Court process requires mediation(s) before any Court determination. The Court has discretion to award costs against the unsuccessful party and usually does exercise that discretion. The principle of costs in that jurisdiction is that the party “nearest the mark” (ie the compensation ultimately assessed by the Court) will be entitled to a favourable costs order against the other party.

Summary

The above is of course only an overview of the resumption-compensation process under the Acquisition of Land Act 1967.  There is a treasure-trove of Court cases not referenced here that assist in interpreting the legislation. And of course the article doesn’t delve into the ‘dark arts’ of valuation and the various methodologies used by valuers to determine compensation, depending on the circumstances of each case.  The author Ian Neil and his team can of course assist with all matters relating to the topics canvassed above, and more.

 Ian Neil  Director Litigation, McCarthy Durie Lawyers.


Ian has over 30 years experience as a solicitor in the Queensland Planning & Environment and Land and Supreme Courts; He is a Life Member of the Redland City Chamber of Commerce, Vice Chair of The Redland Foundation and PP of Cleveland Rotary as well as being Hon. Solicitor to many local community groups;   McCarthy Durie Lawyers has offices in Brisbane CBD, Cleveland, Capalaba, Arana Hills, Qld and Sydney NSW.


Originally appeared on the Clegg Town Planning website


A practical guide to setting up a Project Bank Account

The 4 things to note as a head contractor

So, you’re a head contractor on a project that will need a Project Bank Account. How do you go about it?

To put it simply – Project Bank Accounts are trust accounts which are held by you as the head contractor, for the benefit of the subcontractors on a project.

Each subcontractor becomes a beneficiary to the trust account when they enter into a subcontract on the project. The subcontractors remain as beneficiaries until they are paid all amounts (including retention monies) they are entitled to be paid.

If you aren’t yet sure if you need a Project Bank Account, see our previous article here. If you do know you’ll need one, here are four steps to take into account.

1) Contact your bank to see if they can help

Project Bank Accounts are a first for Queensland, so it’s likely your local branch might not yet be up to speed on all of the requirements. Contact your bank to make sure they do have a suitable product available.

2) Note some specific PBA requirements

For all Project Bank Accounts, there are specific requirements you must adhere to:

  • Deposit and withdrawals can only be made using electronic transfers.
  • Withdrawals can only be made using a payment instruction given to your bank.
  • Transfers between accounts can only be made using a payment instruction given to your bank.
  • The account name must include the words ‘trust account’.

The Head Contractor must also allow the Principal on the project access to the Project Bank Accounts, so they can view:

  • Deposits and withdrawals to and from the trust accounts
  • Payment instructions given to the bank, and
  • Account payment reports.

3) You must set up three Project Bank Accounts

You must establish three accounts for each applicable project, namely:

  • General Trust Account – for amounts paid under the head contract
  • Retention Account – for amounts held as retention amounts
  • Disputed Funds Account – for amounts that are subject to a payment dispute

4) Written notice is required to the principal

The head contractor must provide written notice to the principal every time the head contractor:

  • Opens a Project Bank Account; or
  • Closes a Project Bank Account; or
  • Changes the name of a Project Bank Account

The written notice must be provided within 10 business days and must state:

  • The name of the Project Bank Account/ trust account
  • Details of the bank where the trust account is held, including the BSB, and
  • The trust account number.

The Project Bank Account can only be closed if:

  • There are no longer any subcontractors to be paid; or
  • The only remaining work to be carried out is maintenance work.

Note that penalties can apply

Penalties can be applied if you do not set up a Project Bank account correctly, including significant fines (currently up to $63,075) and prison sentences of up to two years.

Contact MDL for advice on setting up Project Bank Accounts

If you’re a head contractor and you’re unsure about how to set up a Project Bank Account, call MDL’s experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.


The nuts & bolts of operating a Project Bank Account

7 answers to your FAQs about PBAs

From 1 March 2018, the head contractor on a construction project has the responsibility of managing the funds held in a Project Bank Account.

That means the head contractor must comply with the strict requirements of the Building Industry Fairness (Security of Payment) Act 2017 (‘the Act’) when operating a PBA.

Project Bank Accounts are trust accounts which are held by you as the head contractor, for the benefit of the subcontractors on a project.

Each subcontractor becomes a beneficiary to the trust account when they enter into a subcontract on the project. The subcontractors remain as beneficiaries until they are paid all amounts (including retention monies) they are entitled to be paid.

If you’re not sure whether the project you are working on needs a Project Bank Account, see our previous article here.

1) What funds must a Project Bank Account hold?

The principal on a project must deposit all payments to the general trust account, including:

  • Payments paid to the head contractor under the building contract; and
  • Payments that otherwise reduce the unpaid amount of the contract price of the building contract.

Even if the principal incorrectly pays any funds directly to the head contractor (and not into the trust account), the head contractor must deposit those funds received from the principal to the general trust account as soon as is practical after receiving it.

2) What are the funds deposited in a PBA used for?

All funds held in a Project Bank Account must be for the following limited purposes:

  • Paying the head contractor an amount the head contractor is entitled to be paid; or
  • Paying a subcontractor an amount they are entitled to be paid; or
  • Paying an amount held as retention; or
  • Paying an amount which is the subject of a dispute.

All retention monies must be held in the retention trust account and must be clearly identified as being held in trust for a specific subcontractor.

Are you a Building Industry Fairness Act Claimant or Respondent?

3) When should a payment be made from a Project Bank Account?

All payments to subcontractors must be paid from the Project Bank Account, with no exceptions.

Even if a head contractor pays a subcontractor in full and on time, if the payment is not made from the project bank account, it will be a breach of the requirements under the Act and penalties can apply.

Additionally, the head contractor is unable to withdraw any funds from the trust account unless it is to:

  • Pay a subcontractor an amount to be paid under a subcontract;
  • Pay the head contractor an amount due under the head contract, which is over and above the amount due to the subcontractor for the same work;
  • Return an amount paid in error by the principal; or
  • Transfer money to another trust account as permitted under the Act.

4) What if there is a shortfall in a PBA?

If there are insufficient funds in a PBA trust account to pay a subcontractor, the head contractor must deposit funds to the trust account to ensure there are sufficient funds to make the required payment.

The top up of the trust account must be done as soon as the head contractor becomes aware of the shortfall.

In circumstances where there is a shortfall (and the trust account has not yet been topped up) and there are two or more subcontractors to be paid, the amount to be paid to the subcontractors is to be reduced in proportion to the amounts due to be paid.

5) When can the head contractor pay themselves?

The head contractor is only able to pay themselves from a trust account in circumstances where:

  • There will still be sufficient funds available after the withdrawal to pay all amounts due to the subcontractors; and
  • The withdrawal will not reduce a retention amount.

The funds held in the trust account cannot be used to pay the head contractor’s debts, and the head contractor is not entitled to be paid for administrative costs or bank fees associated with the running of the Project Bank Accounts.

6) What happens to interest earned on Project Bank Accounts?

The head contractor is entitled to retain any interest earned on funds held in Project Bank Accounts.

However, the head contractor is not entitled to invest these funds, with the only interest permitted being the interest paid by the bank at which the account is held.

7) What records do you need to keep for Project Bank Accounts?

Detailed written records must be kept of all transactions for a project bank account. These records must:

  • Explain the transactions in sufficient detail;
  • Provide a true position as to the outcome of the transactions;
  • Enable accurate accounts to be prepared;
  • Enable proper audit of transactions; and
  • Be in the English language.

Note also that the records must be retained for at least 7 years.

For advice on operating Project Bank Accounts, talk to MDL

If you’re not sure how to deal with a Project Bank Account, McCarthy Durie Lawyers can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.


How to deal with a dispute for funds in a Project Bank Account

From 1 March 2018, Project Bank Accounts have become part of the construction industry in Queensland. That means as a head contractor you’ll need to know how to deal with disputes when they occur.

Project Bank Accounts are trust accounts which are held by you as the head contractor, for the benefit of the subcontractors on a project.

Each subcontractor becomes a beneficiary to the trust account when they enter into a subcontract on the project. The subcontractors remain as beneficiaries until they are paid all amounts (including retention monies) they are entitled to be paid.

If you’re not sure whether a Project Bank account is required for your project, see our previous article here.

What is a payment dispute with PBAs?

The Building Industry Fairness Act (Security of Payment) 2017 (‘the BIF Act’) defines that a payment dispute occurs when:

  • A subcontractor gives a payment claim; and
  • The head contractor gives a payment schedule but pays an amount less than stated in the Payment Schedule

OR

  • A subcontractor gives a payment claim; and
  • The head contractor fails to give a payment schedule and therefore becomes liable for the amount claimed.

Dealing with a PBA dispute

Once there is a payment dispute, the head contractor must transfer the disputed funds to the Payment Disputes Trust Account.

These funds can then only be released:

  • To the subcontractor beneficiary; or
  • In accordance with the outcome of the dispute resolution process; or
  • Another person in circumstances prescribed by regulation.

The regulations restrict dispute resolution processes only to:

  • A proceeding in a court or tribunal;
  • An adjudication of a payment claim (which is now currently under the Building and Construction Industry Payment Act 2004); or
  • Arbitration conducted in accordance with a subcontract.

Therefore, once an amount has been transferred into the disputed claims trust account, these funds cannot be released without a final determination – one way or another.

Head contractors must therefore exercise caution to ensure the Payment Schedules issued are correct, or face lengthy delays until a final determination is made.

What penalties apply to PBA disputes?

Significant penalties can be applied to head contractors who do not adhere to the strict requirements of the BIF Act.

Get help with a dispute for funds in a PBA

If you’re not sure how to comply with Project Bank Accounts, MDL can help. Contact our experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.