Thinking | 6 December 2019

New requirements for off the plan contracts for the sale of land

From 1 December 2019 new laws will apply in NSW to off the plan contracts for sale of land. These new laws are in the Conveyancing Legislation Amendment Act 2018 and Conveyancing (Sale of Land) Amendment Regulation 2019. This means for a vendor of residential property which is being sold off the plan under a contract for sale entered into on or after 1 December 2019, you will need to comply with these laws. A purchaser will have certain rights under these new laws. The new laws cannot be contracted out of by the parties to the contract.

What do these new laws mean for a vendor before the contract is made?

To comply with the new laws, a vendor will need to attach to the contract a disclosure statement – off the plan contracts in the approved form. A vendor should also ensure the contract special conditions are consistent with the new laws.

Disclosure Statement

The following documents must be included in the disclosure statement attached to the contract of sale:

  • a copy of the draft plan, prepared by a registered surveyor, that includes the following information:
            • the proposed lot number of the subject lot
            • sufficient information to identify the location of the subject lot
            • the area of the subject lot
            • if the contract relates to a lot in a proposed strata scheme – a draft floor plan and location plan
            • if the contract relates to land that comprises a lot in a proposed community, precinct or neighbourhood scheme – the draft location diagram, draft detail plan and draft community, precinct or neighbourhood property plan
            • the site of any proposed easement or profit à prendre affecting the lot
            • the site of any proposed restrictions on use of land or positive covenant affecting any part of the lot
  • any proposed schedule of finishes
  • any section 88B instrument proposed to be lodged with the draft plan
  • if the contract relates to a lot in a proposed strata scheme – the draft by-laws
  • if the contract relates to land that comprises a lot in a proposed community, precinct or neighbourhood scheme – the draft management statement and the draft of any proposed development contract
  • where relevant – the draft building management statement.

Purchaser’s right to rescind for vendor’s failure to disclose

If a vendor fails to attach a disclosure statement to the contract, the purchaser may rescind the contract by notice in writing to the vendor at any time within 14 days of the contract being made, unless the contract has been completed.

Vendor to serve to a disclosure statement of a material particular

The new laws require a vendor to notify a purchaser, at least 21 days before completion of the contract, of changes that make what was disclosed in the disclosure statement attached to the contract:

  • inaccurate in a material particular at the time the contract was signed; or
  • become inaccurate in a material particular after the contract was signed.

A material particular includes a change to any of the documents required to be attached to the disclosure statement (including:

  • the draft plan
  • the draft by-laws
  • an easement or covenant
  • the schedule of finishes
  • a provision of a management statement or development contract),

and that will, or is likely to, adversely affect the use or enjoyment of the subject lot.

The new laws do not prescribe what is covered by the term material particular.  Case law will be the guide.

The new laws say the following are not material particulars:

  • a change in the proposed lot number or proposed street name
  • a change to the costs of shared expenses under a building management statement or strata management statement
  • a change to, or the inclusion of, the specific location or area of the parking or storage area, but only if the change or inclusion is made in accordance with the contract.

Can a purchaser rescind or claim compensation for change to a material particular?

A purchaser can rescind the contract, or claim compensation (up to 2% of the purchase price), for a change to a material particular but only if they can show that they:

  • would not have entered into the contract had they been aware of the change; and
  • are materially prejudiced by the change.

An affected purchaser can only exercise their right to rescind or claim compensation, within 14 days of being notified of a change or after service of the registered plan, as the case may be. A claim for compensation must be made before completion.

Purchaser’s claim for compensation for change to a material particular

As mentioned above, as an alternative to rescission, a purchaser may choose to remain in the contract but claim compensation of up to 2% of the purchase price of the property for a change to a material particular.

If the parties cannot agree to resolve a compensation claim, the claim can be referred to arbitration. The arbitrator’s decision is final and the purchaser is no longer able to rescind the contract because of the change to a material particular.

Cooling off period extended to 10 days

 A 10 business day cooling off period will apply to off the plan contracts (extending it from 5 business days).

Service of documents

A vendor will be required to serve on a purchaser a copy of the final registered plan, and any associated documents (such as the section 88B instrument), at least 21 days before settlement. A purchaser cannot be compelled to settle within the 21 day period.

Stronger sunset clause protections

The new laws and regulations now extend the definition of a sunset clause to capture other events which trigger termination of the contract, such as the issue of an occupation certification.

The sunset clause provisions will apply to all off the plan contracts, irrespective of whether they were signed before or after 1 December 2019.

The Hall & Wilcox Property team can assist with your off the plan contracts to ensure they are compliant with the new laws. Please get in touch if you would like further information.

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