In an effort to reduce the amount of deaths from house fires, the NSW State Government has introduced the Environmental Planning and Assessment Amendment (Smoke Alarms) Regulation 2006 (EPA Regulation), which commenced on 1 May 2006.
From 1 November 2006 it will be an offence for owners of various properties not to have working smoke alarms installed in their property. The regulation applies to houses, apartments, relocatable homes, boarding houses, hostels, backpackers accommodation, bed and breakfast accommodation, hotels, motels, health care buildings, hospitals and nursing homes.
Fines of between $200 and $300 will apply, depending on the type of property.
all sale contracts affected
The Conveyancing (Sale of Land) Amendment (Smoke Alarms) Regulation 2006 (Conveyancing Regulation)will affect all contracts for sale of residential property and some contracts for sale of commercial property from 1 November 2006. The Conveyancing Regulation provides:
every contract must include a statement by the vendor that the building complies with Division 7A (Smoke Alarms) of Part 9 of the Environmental Planning and Assessment Regulation 2000, if that section applies to the property;
if this statement is not included in the contract, the purchaser may rescind the contract at any time within 14 days of the date of exchange of the contract; and
if the statement is incorrect, the vendor may be fined up to $550, but the purchaser is not entitled to rescind the contract because of an incorrect statement.
what should vendors do?
The practical effect of the new legislation for most vendors is that after 1 November 2006 they must either:
ensure that the house or unit has compliant smoke alarms installed at the time of making the contract; or
take the risk that the purchaser can rescind the contract for 14 days after exchange.
The Conveyancing Regulation provides that a vendor statement of compliance must be attached to contracts of sale. By implication, it is clear that a vendor is not permitted to include a statement that the vendor has not installed the required smoke alarms (and it is hence the purchaser’s responsibility after completion).
Nor does it expressly permit the inclusion of a statement warranting that the vendor will install the required smoke alarms by the completion date.
The reason for the Conveyancing Regulation placing vendors in this position is presumably to provide a practical method of enforcement of the EPA Regulation. Instead of the Government performing spot checks of people’s homes, the policy will be enforced through the conveyancing process.
issues for mortgagees exercising power of sale
When mortgagees exercise their power of sale, it is important they have a binding contract and that purchasers are not entitled to rescind the contract.
Even in mortgagee sales, a purchaser may be able to rescind a contract for sale unless it includes a statement to confirm that the building has a smoke alarm.
Practical steps for mortgagees exercising their power of sale would include:
assessing all properties to ensure they comply with the EPA Regulation. This could be done by requiring all valuations of properties to provide a detailed report on the smoke alarms in the property; and
if the property does not comply with the EPA Regulation, taking early action to bring the property into compliance. Typically, mortgagees assess what necessary repairs are required before selling a property. The installation, repair or compliance of smoke alarms could be treated as a repair item. Items must be installed before opening the property for inspection, so that the statement is correct when the sale contract is issued.
The new smoke alarm legislation compels mortgagees, as vendors of property, to obtain a compliance statement or run the risk of the sale contract being rescinded and paying a fine.
The additional costs of the installation are not significant. It is therefore prudent for all mortgagees to ensure smoke alarms are installed. By Campbell Hudson and Naomi Bangle
t (02) 9931 4957
t (02) 9931 4906
This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.
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