New protections for purchasers of ‘off the plan’ property

December 8, 2015

New protections for purchasers of ‘off the plan’ property

The Conveyancing Amendment (Sunset Clauses) Act 2015 was passed by the NSW Government on 17 November 2015 to protect Purchasers who enter into a contract to purchase a proposed Strata lot ‘off the plan’.

An ‘off the plan’ contract is a contract for the sale of a proposed Strata lot in a building yet to be built and a Strata Plan yet to be registered. A ‘sunset clause’ is a clause which allows a party to rescind the contract if the lot is not built by a specified future date (the ‘sunset date’).

The recent Amendment has been designed to combat increasing concerns that some property developers are engaging in the practice of intentionally delaying projects so that they can activate the sunset clause in order to rescind the contract, perhaps to secure a higher purchase price on a resale.

Most sunset clauses provide that the purchaser receives their deposit back but they cannot recover their legal or conveyancing expenses.

The new Legislation prevents vendors from rescinding a contract under sunset clauses in off the plan contracts unless:

  1.  The vendor has given each purchaser at least 28 days’ notice of their intention to rescind the contract under the sunset clause with  their reasons for  the delay and the need to rescind; and
  2.  The purchasers give their written consent to the rescission; or
  3. The vendor applies to the Supreme Court for and obtains an order that permits the rescission; or
  4. The reason for the rescission falls within a group of exemption categories (which are yet to be prescribed).

The new off the plan contract laws apply to any proposed rescission from 2 November 2015.

 

Previous post:

Next post: