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Protections for Off the Plan Purchasers

1. Off the Plan Contracts

An Off the Plan contract is a contract where the Vendor is usually a property developer and sells to the Purchaser a property which has not yet been built. In some cases the property will not be completed for 2 or 3 years (or more) from the date that the contract was entered into. At the time of entering into the contract the purchaser pays a 10% deposit. Off the Plan contracts are usually for the sale of strata or community title apartments or townhouses.

One of the attractions of Off the Plan properties is that by the time that the property is completed the market value of the property has increased and the Purchaser now has a property worth sometimes significantly more that the price for which he contracted to buy the property.

2. Sunset clauses

All Off the Plan contracts will have a “Sunset Clause”. This enables the contract to be rescinded usually by either party if the contract is not completed by a certain time. If there have been delays in construction, having the strata plan registered or even finance difficulties on the part of the Vendor, this will enable the Purchaser to rescind the contract and have his deposit refunded to him. The Sunset Clause is also for the benefit of the Vendor, and although the Vendor usually has to use reasonable or best endeavours to have the Strata Plan registered by the Sunset Date, some Vendors have been able to legitimately delay completion past the Sunset Date so that they can rescind the contract.

The main reason for the Vendor wanting to rescind the contract  is that the property has increased in value, often significantly and the Vendor can then resell the property for a higher price.

3. Changes to the Conveyancing Act 1919

On 17th November 2015 a new part 4 Division 10 was added to the Conveyancing Act 1919, aimed at preventing developers from unreasonably rescinding Off the Plan contracts for the sale of residential property. This applies to any rescission made after 2 November 2015 regardless of when the contract was entered into.

(a) Residential property

• A parcel of land less than 2.5 ha in area on which no more than 2 dwellings exist or are in the process of construction;
• Vacant land on which construction of a single place off residence is not prohibited by law;
• A lot or lots under the strata schemes development legislation intended to be used as a single place of residence.

(b) Vendor’s right to rescind

• A Vendor must now give each purchaser notice in writing at least 28 days prior to rescission under a Sunset Clause.
• The notice must say why the Vendor proposes to rescind and give the reasons for the delay.
• The Vendor can only rescind if:

  • the Purchasers give written consent to the Vendor’s proposed rescission;
  • the Vendor obtains an order from the Supreme Court permitting the rescission; or
  • .the reason for the rescission comes within a category prescribed by the Regulations (No Regulations have yet been made)

(c) What the Supreme Court will take into effect

When deciding whether to approve the Vendor’s rescission  on the basis that it is just and equitable, the Supreme Court will take into account:

  • the terms of the off the plan contract,
  • whether the vendor has acted unreasonably or in bad faith
  • the reason for the delay in creating the subject lot,
  • the likely date on which the subject lot will be created,
  • whether the subject lot has increased in value,
  • the effect of the rescission on each purchaser
  • any other matter that the Court considers to be relevant, any other matter prescribed by the regulations

The Vendor is liable to pay the costs of a Purchaser in relation to the proceedings for an order under this section unless the vendor satisfies the Court that the purchaser unreasonably withheld consent to the rescission of the off the plan contract under the sunset clause.

The Purchaser may still rescind a contract pursuant to the terms of the Sunset Clause in a contract.

For further information regarding Off the Plan purchases please contact Jenny Graves This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. The publication reflects the law at the date the publication was written which may differ at the date the publication is being read. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.
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