New requirements for off-the-plan contracts as from 1 December 2019 the new laws impose an additional disclosure obligations on vendors in off-the-plan contracts in order that purchasers have greater transparency in entering into these contracts. Additionally, they give purchasers new remedies and more protection when buying property off-the-plan.
The changes are as follows:
1. Increased Evidence requirement:
1.1 Vendors will have to attach a disclosure document to the contract which provides details relating to completion, the existence of a sunset date, any requirement for the purchaser to pay more if they fail to complete on time, whether development approval has been obtained, confirmation that a principal certifying authority has been appointed and providing details and whether the vendor can cancel the contract if something occurs to prevent or enable the development to occur.
1.2 Additionally, the vendor will need to attach to the contract in respect of an off-the-plan strata unit purchase;
• A draft strata plan which shows the lot number and area of the lot being sold, the draft floor plan, the draft location plan and the site of any proposed easements.
• A s88 instrument if it is proposed that easements and covenants will be created when the draft strata plan is registered.
• A schedule of finishes which advises how the strata unit will be finished and with what materials, including specified inclusions such as stove and if applicable dishwasher and air- conditioning.
• A draft of the strata by-laws which will be registered when the strata plan is registered.
• And if applicable a draft strata development contract and draft strata management statement
2. Vendor’s obligation to advise of changes to “material particulars”.
If during a development changes occur so that the final strata unit will differ from what was envisaged in the off-the-plan contract, the vendor will need to notify the purchaser of these changes that make what was disclosed in the contract inaccurate in a material particular. These are changes that adversely affect the use or enjoyment of the property being sold and can include changes to any of the documents attached to the disclosure statement and referred to above.
Some changes are not material particulars and notification is not required, for example a change to the strata lot number or the street name of the property.
3. Purchasers right to withdrawal or claim compensation for changes to material particulars
3.1 Purchasers may be able to withdraw (rescind) from the contact and recover their deposit if there is a change to a material particular. However, this will only be available to purchasers who can establish that they would not have entered into the contract if they had known of the change to the material particular and that they have been materially prejudiced by the change. This could happen if a vendor notifies the purchaser of a change to a material particular or once the building is built and the purchaser inspects the property or the purchaser is served with a registered plan which reveals the change to the material particular.
3.2 Alternatively, instead of withdrawing from the contract, the purchaser will have the ability to remain in the contract but claim compensation of up to 2% of the sale price, in respect of the change. If the purchaser and vendor cannot agree on what amount of compensation is to be paid to the purchaser, the claim for compensation will be referred to arbitration and the arbitrator’s decision is final and the purchase is no longer able to withdraw from the contract because of the change to the material particular.
3.3 The purchaser’s right to withdraw from the contact or claim compensation must be exercised within 14 days of notification of change to the material particular or from when the vendor serves the purchaser with the registered plan that reveals the inaccuracy. If not done within this time, the right to withdraw from the contract or claim compensation is lost.
4. 10 business day cooling off period
The new laws extend the cooling off period for off-the-plan contracts to 10 business days whereas the cooling off period for established homes is unaltered and remains 5 business days.
5. Purchase to be given registered plans 21 days before settlement
5.1 Vendors will need to provide the purchaser with a copy of the registered plan and any associated documents, at least 21 days before settlement. Purchasers cannot be forced to settle within that 21-day period.
5.2 If the registered plan and the associated documents indicate an inaccuracy in a material particular that has not been previously notified to the purchaser, the purchaser still retains the right of withdrawal and the right to seek compensation as may be applicable. However, these rights are still only available to be exercised within 14 days from when the purchaser is served with the registered plan and any associated documents.
6. Deposits to be held in trust.
Any money paid by the purchaser as a deposit or an instalment under the contract must be retained by the stakeholder which is either a real estate agency or the vendor’s lawyer, in a trust or controlled money account until the contract is settled. These moneys cannot be released to the vendor before settlement. However, purchasers may still use deposit bonds or bank guarantees instead of paying a deposit when they enter a contract.
7. Sunset clause
As from the commencement of these new laws, vendors will be prevented from using a sunset clause to end a contact without an order of the Supreme Court unless the purchaser agrees. Sunset clauses allow either party to terminate an off-the-plan contract if a certain event which usually is registration of the plan but could be the obtaining of development consent or finance, has not occurred by a specific date which is referred to as the sunset date. The new law will regard a sunset clause as any clause in the off-the-plan contract which triggers a termination of the contract if it does not occur by the sunset date. The law also allows the court to award damages if the vendor is allowed to end the contract pursuant to sunset clause.
8. When do the amendments to the law apply from
8.1 The changes to the law which introduce the new disclosure obligations and the statutory remedies will apply to residential off-the-plan contracts entered into once the new laws have commenced which is expected to occur on 1 December 2019.
8.2 However, contracts that arise from option deeds that were entered into before the commencement of the new laws, will not be subject to the disclosure requirements of the new laws.
8.3 The new sunset clause provisions will apply to all off-the-plan contracts irrespective of whether they are dated before or after the commencement of the new laws.
The new laws are intended to create more transparent off-the-plan contracts by imposing further obligations of disclosure upon the vendor and providing a purchaser remedies where the final property differs from the property referred to in the off-the-plan contract.