New changes to residential off-the-plan contracts commenced on 1 December 2019, which increase disclosure obligations to provide transparency, create new remedies and stronger protections for buyers of NSW off-the-plan properties.
What is an off-the-plan contract?
An off-the-plan contract means a contract for the sale of a residential lot that has not yet been created at the time the contract is entered into.
In these circumstances, purchasers are relying on the contract and relevant documents such as the draft strata plan and schedule of finishes when purchasing the off-the-plan property.
New Disclosure Requirements for off-the-plan Contracts
As a result of the new changes that were implemented last month, vendors will now have to attach a Disclosure Statement into the contract which includes important information, for example, the sunset date (and whether it can be extended) and whether a development application has been approved etc.
A copy of a blank Disclosure Statement can be found here, which sets out other questions that need to be answered and disclosed by vendors.
The Disclosure Statement must include a draft plan prepared by a registered surveyor and it needs to show:
- the proposed lot number and area of the subject lot, and sufficient information to identify its location. For proposed strata lots, it is not necessary to show the location or area of any parking or storage area
- the site of any proposed easement or profit à prendre affecting the subject lot, and the site of any proposed restriction on the use of land or positive covenant affecting only part of the subject lot
- for lots in proposed strata schemes – the draft floor plan and draft location plan
- for lots in proposed community, precinct or neighbourhood schemes – the draft location diagram, draft detail plan and draft community, precinct or neighbourhood property plan.
Further, the Disclosure Statement should include:
- any proposed schedule of finishes
- any s88B instrument proposed to be lodged with the plan
- for lots in a proposed strata scheme, the draft by-laws
- for lots in a proposed community, precinct or neighbourhood scheme, the draft management statement and the draft of any proposed development contract
- for land that comprises or includes a lot in a proposed development scheme, the draft strata development contract
- for lots in a proposed strata scheme that relates to a part strata parcel, a draft strata management statement required under section 99 of the Strata Schemes Development Act 2015 for the registration of the strata plan,
- for land that will be subject to a building management statement under Division 3B of Part 23 of the Conveyancing Act 1919, the draft building management statement.
However, if the documents are included in the Contract, then they don’t need to be added again to the Disclosure Statement.
What happens if the above documents are not provided to purchasers of off-the-plan contracts?
If the Disclosure Statement, draft plan or other prescribed documents are not attached to the off-the-plan contract before being signed, it will enable the purchaser to rescind the contract within 14 days of exchange.
Notification of material changes by a vendor
When purchasing off-the-plan, the final product often differs from what the initial off-the-plan contract included or disclosed. This is often due to a number of reasons, including conditions imposed by the Council or relevant authorities, or due to a preference of the developer.
These new laws now require vendors to notify purchasers of changes that make what was disclosed inaccurate as to a ‘material particular’.
These include changes that will adversely affect the use or enjoyment of the lot being sold and can include changes to the draft plan, by-laws, schedule of finishes, easements or covenants, etc.
However, notification is not required for matters including the change to a lot number or street name etc.
To notify a purchaser of the changes, vendors must use an approved form.
Other Changes to off-the-plan Contracts
Other changes include:
- the right for purchasers to rescind or claim compensation for some changes to material particulars;
- 10 business day cooling-off period for off-the-plan contracts;
- a requirement for vendors to provide a copy of the registered plan and other associated documents at least 21 days before settlement;
- the deposit will be required to be held in a trust account or controlled monies account and cannot be released to the vendor before settlement;
- stronger sunset clause protections.
For more information on the reforms and how they affect you, please contact us to get in touch with one of our specialist property lawyers.