NEW SUN SET CLAUSE LAWS INTRODUCED TO PROTECT PURCHASERS OF OFF THE PLAN PROPERTY
UPDATE
On 17 November 2015 the NSW Government passed the Conveyancing Amendment (Sunset Clauses) Act 2015 to provide further protections for purchasers in off the plan property contracts.
What are off the plan contracts?
An off the plan contract is a contract for the sale of a property that is yet to be built. Most often, this includes strata title properties but could also include large parcels of land that are to be subdivided. An off the plan property does not have a separate title at the time the contract is entered into.
For off the plan contracts, the purchaser pays a deposit and waits for the vendor to finish the building works and obtain registration of the strata or deposited plan. Once the building works are completed and the plan is registered, the contract is then completed.
Sunset clauses
Off the plan sales are conditional contracts. Completion of the contract is conditional upon the building works being completed and registration of the plan on or before a certain date, being the “sunset date” or the latest date by which the registration must occur.
A sunset clause is a provision in an off the plan contract that provides for a contract to be rescinded (ended as if the contract never existed) if the relevant plan has not been registered by the sunset date. Most sunset clauses allow either the vendor or the purchaser to rescind if the development is not completed within time.
Problems experienced by Purchasers of off the plan contracts
There has been an increase in reported incidences of vendors rescinding contracts where development of the property has run late and the sunset date has passed.
Evidence suggests that the increase in termination of contracts has been prompted by the rising housing market. In a rising market, a vendor might have an incentive to delay the property development past the sunset date, rescinding the contract and selling the property to a new purchaser at a much higher price.
New Protections for Purchasers
Under the new protections, a vendor must give each purchaser notice in writing at least 28 days prior to rescission under a sunset clause. The notice must state why the vendor is proposing to rescind and give reasons for the delay.
If the property has not been created before the sunset date, the vendor can only rescind under a sunset clause if:
- the purchasers give written consent to the vendor’s proposed rescission; or
- 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).
Commencement of the new provisions
The new laws apply to any purported rescission that takes place on or after 2 November 2015, the date that the Minister for Better Regulation and Innovation announced that the legislation would be brought to Parliament.
For further information visit www.jemfish.com.au.
To speak to a solicitor or arrange a meeting please contact our office on (02) 9267 6263.
Disclaimer: The information in this article is correct as at 18 November 2015. This information is not to be taken as legal advice and at all times we recommend you seek independent legal advice regarding your own individual circumstances from your legal representative.
For further information, please contact:
Catherine Vincent Senior Associate Phone: (02) 9267 6263 Email: Catherine@jemfish.com.au
Greg Jemmeson Partner Phone: (02) 9267 6263 Email: Greg@jemfish.com.au