An issue with underground power has re-affirmed the importance of asking good questions

Underground power levies and the importance of communicating material facts

A recent issue with an underground power levy has re-affirmed the importance of asking good questions when listing a property.

In this case, we acted for a seller who had recently had underground power installed in her street by the local council. Earlier in the year, the seller had received a letter from the council notifying her that an underground power levy would be payable in the future.

Because it was close to the end of financial year and the seller’s rates had not yet been updated by the council, we contacted the council to obtain last year’s rates, and an adjustment was made on a percentage increase as agreed by the relevant parties (a common practice at this time of year when the rates statements are unavailable).

Settlement took place successfully, but after settlement the council issued a new rates notice to the buyer, with a $4,500 underground power levy included.

Not having been informed by the selling agent or by their settlement agent, the buyer had no idea that a $4,500 levy would be payable after they purchased the property.

When the buyer contacted their settlement agent about the issue, the buyer’s settlement agent in turn contacted us to suggest that our client, the seller, should foot the bill. However, according to the Joint Form of General Conditions, this is not the case.

Section 11.5 of the Joint Form of General Conditions states that if underground power will be installed or has been installed before the contract date, then if “the Authority has not before the Contract Date prescribed: (1) an Underground Power Rate; and (2) the manner in which the Underground Power Rate must be paid,” then “the Buyer will be responsible for payment of the Underground Power Rate.”

Since the letter that the seller received from the council earlier in the year did not prescribe the rate or the manner in which the rate must be paid, the buyer is now faced with paying a $4,500 levy that they hadn’t expected. Had they known about the levy, it’s possible that they would have factored this into their offered price.

To avoid an issue such as this one, obtain any facts material to the transaction by asking good questions of the seller. For example, you may wish to ask specifically if there are any upcoming levies, particularly if you know that underground power has been installed or if you sell in an area where underground power is being rolled out.

Even if you find that responsibility for a levy will fall to the seller, the seller will appreciate the heads-up while deciding on an asking price.

Image by Gary Sauer-Thompson via Flickr.