In brief - Developers need to be aware of changes to notification requirements for off-the-plan contracts
The Office of the Registrar-General has signalled new significant notification requirements for off-the-plan contracts, which will be introduced into the NSW Parliament later this year. The reforms will enable purchasers, in certain circumstances, to rescind contracts in off-the-plan sales.
In line with reform commenced in 2015 with the Conveyancing Amendment (Sunset Clauses) Act 2015 (NSW), the NSW Government has sought to provide greater purchaser protection in off-the-plan contracts. The market for off-the-plan residential properties currently represents around 11.5% of residential sales in NSW.
Prescribed disclosure statement for purchasers of off-the-plan contracts
The reforms, initially raised in the NSW Government's discussion paper for off-the-plan contracts for residential property, propose a prescribed disclosure statement, which is intended to be in addition to the vendor mandatory disclosure regime currently in place.
The disclosure statement is intended to provide purchasers with a simplified, easy to read document that summarises key aspects of the sale. The Registrar-General suggests that the statement could include:
- whether or not planning approval has been obtained
- who will be holding the deposit
- proposed completion date, and
- details of any sunset clause (with a reference to the relevant provision in the contract)
In addition to summarising the contract, the Registrar-General has identified that certain documents will be required to be attached to the disclosure statement, including:
- a copy of the proposed plan, including details of easements and covenants
- for strata and community properties, proposed by-laws, and
- a schedule of finishes where building work is required as part of the contract
Developers will need to meet notice requirements for material changes
Developers will also have to notify purchasers of any changes made in the prescribed disclosure statement.
The Registrar-General proposes that the requirement to notify purchasers should be linked to the settlement date. Purchasers will not be required to complete a contract where material changes have been made without notice. The reforms propose a notice period in the range of 14 or 21 days.
Actions that are likely to require notification include material changes to:
- the proposed plan
- the schedule of unit entitlements (for strata and community schemes), and
- the by-laws or management statement (for strata and community schemes)
Crucially, if a purchaser is materially impacted by the change, they will be able to rescind their contract. As an alternative to rescission, the purchaser will also have a limited right to claim compensation in these circumstances.
Sunset clause protections and cooling off period
The Registrar-General has also indicated that Parliament will look to broaden existing sunset clause protections. The details of these protections have not been explained.
Lastly, the cooling off period for off-the-plan contracts will be extended to 10 business days and deposits must be held in a controlled account.
Proposed Bill to be introduced into NSW Parliament later this year
The reforms illustrate the Government's stated attempt to balance purchasers' need for clarity about the sale of a property against developers' legitimate need for flexibility during construction. The wording of the reforms will not be known until the proposed Bill is introduced into Parliament later this year.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.