By Emma Smythies*
New legislative reforms for off-the-plan contracts for sale in NSW will become effective from 1 December 2019. The reforms in the Conveyancing Legislation Amendment Act 2018 and Conveyancing (Sale of Land) Amendment Regulation 2019 are intended to provide purchasers with greater transparency and stronger protections when they buy property off-the-plan.
Developers should start preparing now to ensure they are able to issue compliant off-the-plan contracts from 1 December 2019.
A key change will be the requirement for vendors to attach a disclosure statement to the contract. The disclosure statement is in an approved form and summarises the key information such as the title structure, completion date and sunset dates.
Prescribed documents must be attached to the disclosure statement. The prescribed documents include the draft plan, s88B instrument, schedule of finishes, by-laws and any management statement.
Failure to attach a disclosure statement entitles the purchaser to rescind the contract within 14 days of the contract date.
Notice of Changes, rescission and compensation rights
Vendors will be required to notify purchasers of any changes that make the information disclosured inaccurate in a ‘material particular’. The Act and Regulations set out what constitutes a ‘material particular’.
In some circumstances, purchasers will be able to rescind the contract because of a change to a ‘material particular’. This relief will only be available to purchasers who can show that they would not have entered into the contract had they been aware of the change, and that they are materially prejudiced by the change.
If the purchaser has a right to rescind, the purchaser may instead claim compensation (capped at 2% of the purchase price).
Cooling off period
The cooling off period for off-the-plan contracts will be extended from 5 business days to 10 business days. The cooling off period remains 5 business days for all other residential contracts.
Copy of registered plan to be provided 21 days before settlement
Developers should be aware that they will need to provide purchasers with a copy of the final registered plan, and any associated documents, at least 21 days before settlement. Developers will be unable to compel a purchaser to settle until 21 days after the registered documents have been provided.
Contract for Sale and Purchase of Land 2019 Edition
The NSW Law Society has also now released the new Contract for Sale and Purchase of Land 2019 Edition.
If you would like to know more about these changes and how they may affect your development, please contact one of our team.
* Emma Smythies is a Special Counsel from our Sydney office and is part of our development consulting team.