NSW Parliament has passed new laws designed to bring stronger protection for purchasers who buy property off-the-plan under the Conveyancing (Legislation) Amendment Act 2018.
Off-the-plan Contracts
New legislation gives off-the-plan purchasers greater certainty about what they are buying and builds on safe guards, in response to community concerns.
An off-the-plan contract is used to sell a parcel of land or strata unit that does not exist at the time the contracts are exchanged. These are a popular way for buyers to enter into the property market, as buyers can commit to purchasing a property that will not be settled for some time. A deposit (often 5%-10% of the price) is paid on exchange of contracts, with the construction and settlement period (often several years after) allowing buyers time to save additional funds required for settlement.
Off-the -plan buyers have been particularly vulnerable to the actions of developers, being generally unable to inspect the property before purchase. The new laws address this vulnerability, by creating a more transparent process, setting minimum standards of disclosure and providing statutory remedies where the final property differs from what was to be provided under the contract.
A new mandatory disclosure regime for off-the-plan contracts
Before a contract is signed, vendors will be required to disclose crucial information about the development (including sunset clauses), in a mandatory disclosure statement, attach key documents to be prescribed by regulations including:
- A copy of the proposed plan, as well as details of easements and covenants;
- For strata and community properties, proposed by-laws;
- A schedule of finishes, where building work is required as part of the contract.
Notification of changes
Developers will have to notify purchasers of changes to a ‘material particular’ during the development, that will adversely affect the use or enjoyment of the of the lot being sold. Examples may include changes to the size of the lot or the internal configuration of a strata unit.
Statutory remedies where purchasers are materially prejudiced by changes
If a purchaser is materially prejudiced by a change to a material particular and would not have entered the contract had they known about the change, they will be able to rescind the contract. The amending Act also permits regulations to prescribe a mechanism for materially prejudiced purchasers to claim compensation (but remain in the contract). Regulations are being developed in support of this provision and will be made available for public consultation in early 2019.
Registered documents to be given to purchasers before settlement
Developers will need to provide the purchaser with a copy of the final, registered plan at least 21 days before settlement.
Sunset clauses
Sunset clauses are contractual terms that allow either party to terminate an off-the-plan contract should a certain event, like the registration of the plan, not occur by a specified date. In 2015, the Government introduced laws preventing developers from using sunset clauses to end contracts without an order from the Supreme Court (unless the purchaser agrees). The amended legislation builds on this protection by extending its application to capture other events that trigger termination of the contract, like the issue of an occupation certificate. The legislation also confirms that the Court can award damages if rescission is permitted.
Cooling off period and deposits
The cooling off period for off-the-plan contracts is extended to 10 business days (from 5 business days for contracts relating to already constructed residential property). Deposits must be held in a controlled money or trust account.
You may wish to view our other articles in relation to buying off the plan:
https://rslaw.com.au/pros-and-cons-of-buying-off-the-plan/
https://rslaw.com.au/buying-off-the-plan-property/
If you are interested in further information or advice concerning buying off-the-plan property, please contact Rockliffs Lawyers on (02) 9299 4912.