On 1 December 2019 new laws will come into force effecting how “off the plan” properties are sold in New South Wales. These changes include introducing a new disclosure statement as well as additional rescission rights for buyers where the final property or lot is not as promised.
It also brings in other protections for buyers, including rules around the use of the deposit and the ability to claim compensation.
New Disclosure Statement
Developers now need to provide a disclosure document to purchasers prior to their signing contracts, which statement is to include:
- A copy of the proposed plan prepared by a registered surveyor
- 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.
A template of the disclosure statement can be found on the Office of Registrar General’s website.
New rescission rights
Previously, any rescission rights that a buyer had under an off the plan contract were essentially contractual. Under the new laws, buyers will now be able to rescind a contract:
- If there is a change to a “material particular” originally disclosed to the buyer which includes a change to the draft plan, draft by-laws, scheduled of finishes or easements and covenants, providing such change materially prejudices the buyer,
- In addition, if a disclosure document is not provided at exchange the buyer may rescind the contract within 14 days.
As an alternative to rescission, a buyer is able to claim up to 2% of the purchase price by way of compensation from the developer.
Other buyer protections
The laws also afford buyers the following additional protections:
- a mandatory 10 business day cool-off period (rather than the usual 5 day period);
- a requirement that the deposit be kept in a trust account at all times and not release to the developer prior to settlement; and
- a minimum period of 21 days in which the developer must serve a registration notice before completion may take place.
Amidst a lot of negative press around the ‘new build’ market this year, it might be seen as a positive for buyers looking to re-enter the market that there are new protections being provided (even if some provisions simply reflect what parties were already inserting in contracts as a matter of practice).
However, it may also drive up costs for developers in having to comply with a new disclosure regime and the new rescission rights might put pressure on presales (and bank funding?).
We note also that the legislation appears to make no distinction between ‘off the plan’ properties being sold by professional developers and, for example, ‘Mum and Dad’ vendors who are looking to subdivide and on sale their land.
If you have any questions about this article, please contact the office on 1800 870 407 and one of our solicitors/conveyancers will be able to assist.