Capital Development Guidelines

Property Deed

The Property Deed of Charge is the means by which Human Services identifies and exercises its claim of financial interest in a property and under which organisations are required to comply with government and Human Services guidelines and procedures relating to property purchase and construction/renovation projects (refer copy Appendix A).

The agreement is between the Secretary to the Department of Human Services and the funded organisation. However, the document is only signed by representatives of the organisation.

Use of Property Deed of Charge

To protect its financial interest in property, Human Services needs to prevent any sale without its prior approval. An effective way for this to occur is to lodge a caveat on the Certificate of Title of the property. When a caveat is registered, a search of the Certificate of Title will show the Secretary to the Department of Human Services, as caveator. This alerts any purchaser or lender of the Human Services interest in the property.

If an organisation attempts to sell or mortgage the property without the prior approval of Human Services then, upon lodgement of the transfer or mortgage document, the Registrar of Titles will give notice of the dealing to Human Services. Human Services may either consent to the caveat being removed to allow registration of the dealing, or take legal action to protect its interest in the property. If Human Services takes no action, the caveat will lapse in thirty days and the dealing will be registered.

In order to lodge a caveat on the Title, Human Services must be able to demonstrate a caveatable interest in the property and the Property Deed of Charge is intended to satisfy this purpose. The Human Services Legislation & Legal Services Branch arranges lodgement of the caveat following receipt of a signed property deed document.

Features of the Property Deed of Charge

The Property Deed of Charge has the following features:

• Identifies the subject property by Title description and address
• Defines the Human Services financial interest in the property as a percentage of the property value (“relevant interest”)
• Identifies the events which may lead to Human Services requiring payment of its financial interest
• Requires the organisation to insure the property and maintain the property
• Requires the organisation to obtain the approval of Human Services before granting a mortgage on the property
• Provides for the organisation to deposit the Certificate of Title to the property with Human Services, if requested
• Provides for the organisation to grant a mortgage over the property, if requested
• Requires the organisation to obtain the approval of Human Services before undertaking building works other than routine maintenance
• Provides for adjustment of proportional interest to reflect future works funded by Human Services and/or the organisation.

Calculation of Human Services "relevant Interest"

The Human Services "relevant interest" in the property is calculated by applying the "Department’s percentage" to the value of property.

The "Department’s percentage" is the proportion that the funds provided bears to the total property value.

The total property value for typical projects is calculated as follows:

• Land & Building Purchase
  • Sum of purchase cost, valuation, architectural and legal fees
• Land Purchase & Construction
  • Land & Building Purchase & Construction
  • Sum of purchase cost, construction cost, valuation, architectural and legal fees
• Construction
  • Sum of current property value and construction cost, valuation, architectural and legal fees.

Operation of the Property Deed of Charge

If certain events listed in the Deed occur, Human Services may require the organisation to either:

• Pay to Human Services the "relevant interest" based on a sworn valuation of the property; or
• Sell the property at a price based on a sworn valuation and pay to Human Services the "relevant interest".

In the unlikely event that the organisation refuses to do either of the above, Human Services may take a mortgage over the property and enforce its security by selling the property.

Supplemental Property Deed

The Supplemental Property Deed is used in conjunction with the Property Deed of Charge to identify additional funding provided by Human Services which modifies the proportional interest in the property claimed by Human Services (refer copy Appendix B).

The agreement is between the Secretary to the Department of Human Services and the funded organisation but the document is only signed by representatives of the organisation.

Priority Deed

The Priority Deed is used in conjunction with the Property Deed to determine the priority of any financial claim on the property made by a financier under a mortgage and by Human Services under the Property Deed of Charge/Supplemental Property Deed. It determines the amount and the order in which each claimant will recover funds if the property is sold (refer to supplementary property deed).

The agreement is between the Secretary to the Department of Human Services and the financier and is executed by both parties.

The Priority Deed is used in cases where:

• The organisation has already granted a mortgage on the property as security to a financier; or
• The organisation intends to grant a mortgage as security to financier for funds made available towards the project to which Human Services is also contributing funds.

The analysis of mortgage documents and negotiations with a Financier can be complex and requires specialist skills. The Human Services Legislation & Legal Services Unit is responsible for arranging execution of Priority Deed documents.