In brief - Off-the-plan contracts, non-disclosure offences and terms contracts for residential land in Victoria to be affected
Prior to the election, the Victorian Parliament recently introduced the Sale of Land Amendment Bill 2018
in a bid to bring about further consumer protection under the Sale of Land Act 1962
. The Bill, if passed, will cause significant changes for vendors, developers and purchasers alike.
The key changes are detailed below.
Rescission of off-the-plan contracts and sunset clauses
Before being able to rescind a residential off-the-plan contract, due to failing to either register the plan of subdivision or issue the occupancy permit on or before a contract sunset date, a vendor will have to obtain the written consent of the purchaser. Under the Bill, when seeking consent, the vendor must:
- provide reasons as to why they wish to rescind the contract
- provide reasons as to why there has been a delay in issuing the occupancy permit or registering the plan of subdivision
- advise the purchaser that they do not have to consent to the vendor's rescission, and
- provide at least 28 days' notice
Once the Bill is passed, the new requirements will apply to all off-the-plan contracts currently in force regardless of when they were entered into and to any request for rescission after 23 August 2018.
The Bill also permits vendors to seek a Supreme Court order granting the rescission where it would be "just and equitable in all the circumstances" to do so. If the Court grants the order, the Court may order the vendor to pay reasonable compensation to the purchaser. Vendors will be obliged to pay the purchaser's court costs, unless they can demonstrate that the purchaser unreasonably withheld consent to the rescission request.
In determining whether to grant an order, the Court must weigh up several factors, including:
- the reasons for the delay
- whether the lot in question has increased in value
- whether the vendor has acted unreasonably or in bad faith, and
- the effect of the rescission on the purchaser
By 1 December 2019, residential off-the-plan contracts must all contain a specific statement regarding a vendor’s right to rescind under a sunset date.
As a result of the above changes, developers selling residential property under off-the-plan contracts will need to monitor the progress of this Bill and ensure that their contracts comply with its requirements, if and when it is passed.
Although the Bill was due to be debated in the Upper House prior to the election, as a result of the election the Bill will need to be reintroduced to Parliament once Parliament resumes. We will keep you updated on the Bill's progress.
Non-disclosure offences in relation to the sale of a property
Under the Bill, it will be an offence for vendors to knowingly conceal any material fact in relation to a property, during the conveyancing process. The Act currently provides that only concealing material facts fraudulently is an offence.
It is expected that the Director of Consumer Affairs will publish guidelines to demonstrate what constitutes a "material fact" once the provision comes into effect.
Terms contracts for sale of residential land
The Bill will prohibit vendors from entering into terms contracts for the sale of residential land for a price less than the amount prescribed in the regulations (which have not been released for review). It will be an offence to arrange, broker, induce or advertise a sale that is in breach of this requirement. Failure to comply with these new laws could result in severe penalties.
Purchasers will also have the ability to bring proceedings against a vendor for failing to comply with the above provisions. A court or VCAT may grant termination of the contract of sale and a full refund of deposit moneys to the purchaser as a remedy.
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.