BPU v NSW Trustee and Guardian

Proposal to sell the family home

1. CCL put to the Trustee the following reasons to sell the family home: 1. Based on a real estate report she received, the property cannot be rented in its current state and needs renovations at a cost of $70,000 to $80,000 before it can be rented. 2. Legal advice on the impact of the mortgage and amounts owed (to the applicant) is that the sale value will be high enough to be sufficient to cover the protected person's ongoing costs. 3. The protected person's Centrelink pension has stopped because it has been two years since the protected person moved into the nursing home. 4. Sale of property is urgent as expenses are depleting funds held in the protected person's bank accounts and the net sale proceeds are needed to ensure that the client's quality of life can be maintained or increased.

Internal Review affirms the decision to approve proposal to sell the family home

1. The Internal Reviewer's Assessment of Material Facts and Reasoning provided in his determination of 10 November, 2014 noted that the family home has been bequeathed to the applicant, and that the applicant having obtained a rental appraisal, believes that renting the property will cover the protected person's expenses.
2. The Internal Reviewer compared the options of selling the family home with undertaking the necessary repairs in order to bring it up to the required standard for renting. In having regard to the protected person's current financial circumstances, the Internal Reviewer determined that the preferable option is to sell the property.

The Will and Deed dated 20 May 1997

1. Evidence was provided of a deed made on 20 May 1997 between the protected person, the applicant and CCL. It stipulates that the applicant will give CCL $165,000. The family home will then be bequeathed to the applicant and CCL would thereafter have no claim on the protected person's estate.
2. There is evidence of a Will made by the protected person dated 20 May 1997, which gives the whole of his estate to the applicant.
3. There is evidence of a mortgage over the family home made in favour of the applicant. In his statement of 20 February 2015, the applicant states that whilst he understood the terms of this mortgage, at the time he and his father were of the opinion that he would live in the family home for the rest of his life and the property would be transferred to him through the Will. The applicant states that he has never sought payment for the loan secured by this mortgage even though it had a repayment date of 1 July, 2007.
4. The applicant states that he lived in the family home with the protected person until he moved into aged care. The applicant continued to live in the family home for a period of time but has since moved out. The applicant states that he understands that if the property is sold, a portion of the sale price would be paid to him but he says it would only be enough to move into a "small apartment in a lesser area". Further, the applicant states that the funds raised from the sale will "greatly diminish leaving a nominal estate when my father passes away. This was never my father's wishes".
5. The applicant also states that he filed a caveat in relation to the costs he has paid out "of my pocket to maintain the property and ongoing utilities whilst living in the Burwood property" with the protected person.
6. A statement from Dominic Myssy, a Certified Practicing Accountant, dated 18 February 2015 calculates that the payout figure owed to the applicant is $511,551. The applicant refers to other 'out of pocket expenses', however no written evidence was provided to the Tribunal by the applicant that quantifies or substantiates these expenses.

Sale proposal

1. CCL advised the Trustee that she obtained an opinion from Town and Country Real Estate Burwood that states that the property is not suitable in its current state for rental and in their opinion the cost of renovating is so high that they recommend sale.
2. CCL's statement tendered on the day of the hearing estimates the cost of repairs to be more than $80,000. It also estimates the rental income (if the property was brought up to the required standard) to be between $700 and $800 per week.
3. The hearing was adjourned in order for parties to obtain a building report to provide more detailed evidence of the repairs needed to bring the property up to a standard for rental and the cost of these repairs.
4. A building report from OLLES Pty Ltd (the building report) was received by the Tribunal on 15 May 2015. A Defective Condition Summary for "essential works to be undertaken prior to tenancy" is provided in that report from page 48 and concludes on page 72. The catalogue of repairs needed is clearly extensive and the cost is quoted to be $177,467.47.
5. This cost is more than what was anticipated by CCL in proposing to sell the family home. CCL argues in final written submissions received by the Tribunal on 21 May, 2015 that the building report lends further weight to the proposal to sell the family home given the extensive nature of the repairs needed and the potential cost of these building works.

Rental proposal

1. The applicant submits that the family home should not be sold but rather any expenses associated with renovating the property should be sourced by a reverse mortgage.
2. A statement provided from Ms George Massouridis, a certified mortgage broker, dated 21 April 2015, suggests that the "only" suitable product is an accommodation bond loan through Macquarie Bank. This product would allow a loan of up to 45% of the property (which is noted to be valued at approximately $1.9 million).
3. The applicant submits that if a loan of $117,467.47 was obtained to cover the cost of repairs, this would accrue interest at a rate of $7,870.32 per year.
4. Evidence in the proceedings was that the cost to accommodate the protected person is currently $26,691 per year. The protected person is 95 years old and the applicant submits that assuming a life expectancy of a further 5 years, the total cost of nursing home fees will be $133,455 based on the current rate.
5. The applicant argues that: 1. Total cost of renovations and care of the protected person is $250,922 but allowing for incidentals and inflation is prepared to accept it is around $300,000. 2. The interest that would accrue on the loan would be $9,658 in the first year. 3. The rental income of $41,600 per year is more than the interest that would accrue on the loan.
6. Further the applicant submits that the sale of the family home would diminish the protected person's estate even if available funds were to be re-invested, because the return would be less than the capital appreciation of the family home.
7. No evidence was provided to the Tribunal that quantifies the rate of capital appreciation that might apply to the family home over a given period.
8. The applicant also submits that the rental proposal is in line with the protected person's expressed wishes, as provided in his Will and Deed dated 20 May 1997.

The correct and preferable decision

1. In determining whether the decision to sell the family home is the "correct and preferable decision", the Tribunal must have regard to the material before it, including any relevant factual material and applicable written or unwritten law (s 63 (1) of the Administrative Decisions Review Act 1997 (NSW)). When undertaking this task the Tribunal may exercise all of the functions that are vested in the Trustee (s 63(2) of the Administrative Decisions Review Act 1997 (NSW)). The Tribunal may affirm, or set aside the Trustee's decision. If the decision is set aside, the Tribunal may substitute its own decision for that of the Trustee, or remit the matter to the Trustee together with any directions or recommendations (s 63 (3) of the Administrative Decisions Review Act 1997 (NSW)).
2. Section 39 of the NSW Trustee and Guardian Act 2009 (NSW) instructs that it is the duty of everyone exercising functions under Chapter 4 of that Act (management functions relating to persons incapable of managing affairs their affairs) must observe the following principles: 1. The welfare and interests of such persons should be given paramount consideration 2. The freedom of decision and freedom of action of such persons should be restricted as little as possible 3. Such persons should be encouraged, as far as possible, to live a normal life in the community 4. The views of such persons in relation to the exercise of those functions should be taken into consideration 5. The importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised 6. Such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs 7. Such persons should be protected from neglect, abuse and exploitation
3. In affirming the original decision of the Trustee, the Internal Reviewer noted the following: 1. The sale proposal brings with it a degree of flexibility and certainty essential for prudent financial management and to secure the protected person's welfare and interest. 2. There is an inherent risk in relying on rental income to pay for essential needs which includes accommodation fees, care and living expenses. There is no assurance that income will be regular or that the property will have a 100% occupancy rate. Ownership of a property requires maintaining a certain liquidity to pay for planned and unplanned repairs and maintenance. There is also the risk that if the property is rented, it can be damaged or at least, not well cared for, particularly if the property us already in a state of needing substantial repairs. 3. Although the applicant has offered to undertake repairs and maintenance and contribute to any shortfall, a prudent financial manager must rely and make financial decisions based only on funds belonging to the protected person. 4. Given the protected person's need for a regular income, renting carries a level of risk which a financial manager should avoid. Landlord insurance that covers all risks is expensive and will adversely impact on cash flow on an on-going basis.
4. The parties accepted at the hearing that the protected person is no longer eligible for a government pension or benefit. The two options presented as a means of income are to either rent the family home or invest the proceeds of the sale.
5. CCL's final written submissions state that the protected person's savings has been diminished in the course of these proceedings and he now has $30,000 left in a savings account.
6. CCL submits that if $511,511 is paid to the applicant and the property is sold for $1.9 million, this would leave about $1.2 million to invest. On a fixed term deposit at 3% this amounts to $36,000 per year. Taking into account the cost to accommodate the protected person is currently $26,691 per year, this would leave $9,309 per year for other expenses.
7. I accept that the potential income from renting the property is impacted by: 1. Whether the property is rented 100% of the time; 2. Other expenses incurred by way of wear and tear, any damage cause by tenants or the aging of the property; 3. The interest rates applied to the reverse mortgage and the period of the loan; and 4. Other expenses incurred as a result of owning the property.
8. CCL notes in final written submissions that the product suggested by the applicant for a reverse mortgage (as the "only" product available) is for an accommodation bond for an aged care facility. CCL notes that the loan would not be required for this purpose and therefore might not be available in this case.
9. I accept that unless a suitable financial product is procured to fund the cost of repairs to the family home so that it can be rented, the protected person is left to rely on his savings, which are diminishing because he has no other source of income.
10. I also accept that the sale of the property provides a more certain income stream. It removes the uncertainty of potential expenses that the estate would have to meet if the family home was retained and rented, whilst maintaining a significant amount of capital that the estate could draw on if needed. It is clearly the option that provides more financial certainty and carries less risk.
11. In terms of the repairs that are needed in order to bring the property up to a standard so that it can be rented, the evidence is that they are clearly quite extensive. From the available material there is also the possibility that further defects might be uncovered in the course of undertaking these repairs, which would incur further costs.
12. Whilst the applicant clearly has an interest in this decision, and the testamentary intention of the protected person is also noted, in making the correct and preferable decision I must give the welfare and interest of the protected person paramount consideration. This requires weighing the respective merits and risks of both the option to sell the family home and the rental option.
13. The risk and uncertainties associated with the rental option means that it cannot offer the same financial certainty and security as the sale option.
14. Based on the evidence before the Tribunal and the overall circumstances of the protected person, having regard to the principles listed in s 39 of the NSW Trustee and Guardian Act 2009 (NSW) and any other relevant considerations, I have decided that the sale option is the more prudent approach, and the protected person's interests will be best served by the sale of the family home. For these reasons I have decided to affirm the decision under review I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 08 April 2016 - Amendment to Parties Details DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2016