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Risks for lawyers in late FIRB applications25 January, 2019
Do you warn your foreign investor clients pre-contract of the need to obtain Foreign Investment Review Board (FIRB) approval before they sign a purchase contract? Two claims this week show the risks of not doing this.
The FIRB has issued infringement notices this week to foreign investor clients of two law firms who failed to apply for approval to purchase residential property before signing contracts of sale. Those clients have complained they obtained pre-contractual advice from their lawyers about the purchase and were not advised of the requirement.
While both clients eventually received approval for their purchases they also received infringement penalties for not seeking approval pre-contract. Other consequences may have been imposed in this situation including a criminal penalty to a maximum of $157,500 or an order to sell the property.
If you practice in conveyancing you need to do the following things:
• hold training for all staff handling conveyancing transactions about the FIRB approval requirements.
• add FIRB requirements to your pre-contract advice checklist
• review your precedent letters for giving pre-contractual advice to purchasers. The letters need to clearly state the risk of entering into the contract without FIRB approval if the client is a foreign resident. The precedent should refer clients to the FIRB website to read the requirements and make the relevant application.
Given the consequences of not applying for approval pre-contract you should not make assumptions about a client’s residency status and should seek express instructions from every purchaser client.