Off-the-Plan Purchases
Thinking of buying off-the-plan? You’re now better protected.
Changes to residential off-the-plan contracts as of 1 December 2019 provided increased protections, remedies and access to information and changes for purchasers.
Introduced by the Conveyancing Legislation Amendment Act 2018 (NSW) and Conveyancing (Sale of Land) Amendment Regulation 2019 (NSW), the added protections apply only to purchasers of residential lots and require vendors to comply with additional provisions that cannot be contracted out of.
What is an “Off-the-Plan Contract”?
Section 66ZL of the Conveyancing Act 1919 (NSW) defines “off-the-plan-contract” as “a contract for the sale of a residential lot (the subject lot) that has not been created at the time the contract is entered into.”
Importantly, this definition does not extend to vacant land or unregistered subdivisions.
The Changes:
The changes introduced will apply only to purchasers of residential lots and these protections include:
Cooling off period:
A purchaser of an off-the-plan property will now have a 10-day cooling off period, (increased from five (5)). During the cooling-off period a purchaser can rescind the Contract but, will forfeit 0.25% of the purchase price. That sum will be deducted from the deposit. If the deposit is insufficient, the balance becomes a debt recoverable by the vendor.
Waiving or shortening the cooling-off period can occur by way of a provision of the contract or by a separate written or oral agreement of the parties (s66S(5)). Additionally, a certificate which complies with s66W must be provided by the purchaser’s lawyer or conveyancer.
Completion extension:
The changes ensure that purchasers are not required to complete the Contract earlier than 21 days from when they receive complete copies of the registered plan (and all other documents registered with the plan). Before the change, the time period for completion was at the discretion of the vendor.
Deposited money changes:
Any money paid by deposit or instalment by the purchaser under an off-the-plan contract must be held in trust by either a real estate agent or conveyancer or as either trust or controlled funds by a law practice during the contract period. This money is not released to the vendor until settlement.
This change provides additional protections to a purchaser - in the case of an insolvent developer.
Sunset clauses:
Sunset clauses are provisions in off-the-plan contracts that allow for the contracts to be rescinded by the developer if a ‘sunset’ event does not occur by the sunset date - for example, the registration of a strata plan. The vendor may rescind the contract using the sunset clause only if they have received written consent from all the purchasers, or the vendor has obtained an order of the Supreme Court permitting a rescission. Failure by the vendor to fulfill these requirements may result in damages payable in favour of the purchaser. This provision will apply to all off-the-plan contracts whether they were signed before or after 1 December 2019.
Disclosure statements:
To comply with the changes, developers must attach a disclosure statement to off-the-plan contracts. This statement must include a number of details regarding the development, along with a draft plan prepared by a registered surveyor identifying:
The proposed-number and area of the subject lot, and sufficient information to identify its location.
The site of any proposed-easement, restriction or affectation on 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.
Off-the-Plan Contract must also 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, Strata Development Contract, Strata Management Statement and Building Management Statement, if relevant.
For lots in a proposed community, precinct or neighbourhood scheme, the draft management statement and any draft proposed-development contract.
Failure to include documents:
A failure to attach a disclosure statement, or a document required to be attached to an off-the-plan contract will allow a purchaser to rescind the contract within 14 days after the date of the contract, by notice in writing to the vendor.
Notice of changes:
Any proposed changes to a development must be detailed in a notice of changes and served on a purchaser, at least 21 days before completion.
In some cases, purchasers will be able to rescind the contract or claim compensation (which can be up to 2% of the purchase price) because of a change to a ‘material particular’. This however, will only be available if the purchasers can evidence that they would not have entered the Contract if they were aware of the change and that they are materially prejudiced by the change (s66Z0).
A purchaser who is affected is only able to exercise their right to claim compensation or rescind the Contract, within a period of 14 days after being notified of the change or after service of the registered plan (s66ZQ).