Australia: Sale of proposed off-the-plan lots in Queensland to be simplified

Last Updated: 25 June 2014
Article by Oliver Meehan and Rhett Oliver

In brief - Sale of community title scheme lots to be covered by Body Corporate and Community Management Act

Under a draft bill introduced into Queensland parliament, it is contemplated that allowable deposits to be paid by buyers of off-the-plan lots will increase, deposits will no longer be paid directly to developers, red tape will be reduced and non-strata lots will be able to be sold before development approval is obtained.

Separate treatment of strata and non-strata lots

While the bill is designed to amend a number of existing pieces of legislation, its primary intent is to remove from the Land Sales Act 1984 (Qld) the sections regarding off-the-plan lots to be included in a community title scheme ("CTS lots"). The intent is that the relevant sections will be moved into the Body Corporate and Community Management Act 1997 (Qld) (BCCMA), while the Land Sales Act will remain solely to deal with off-the-plan lots that will not be included in a community title scheme ("non-CTS lots").

Increase in allowable deposits from 10% to 20%

If the bill is passed, developers of both CTS lots and non-CTS lots will be allowed to take deposits from buyers of up to 20% (previously 10%) of a contract price. This will no doubt assist developers in obtaining construction funding.

Removal of requirement for development approval to be in place

It is intended to remove the requirement that the sale of a non-CTS lot can only occur once a development approval is in place, although developers of non-CTS lots will still be required to effect settlement within 18 months of a contract date.

Buyers will have the right to terminate a contract for a non-CTS lot if they are materially prejudiced as a result of any changes between the initial disclosure plan for a non-CTS lot and the final survey plan that is registered to create title.

This will remove the technical provisions regarding the giving of a "significant variation notice" for changes to a non-CTS lot between pre-contract disclosure and registration.

Removal of need to seek exemption

Currently, buyers of non-CTS lots in a small subdivision (i.e. less than five non-CTS lots to be created) are required to seek exemption for the transaction from the Office of Fair Trading. The proposal is that the need to obtain an exemption will be removed, with sales of non-CTS lots in a small subdivision to be automatically exempt from the application of the Land Sales Act.

Buyers and sellers involved in large transactions (i.e. the sale of six or more non-CTS lots in one transaction) will continue to be exempt from compliance with the Land Sales Act.

Clarification regarding options

If a buyer and a seller enter into an option for a CTS lot or a non-CTS lot, and relevant disclosure requirements are complied with before the option is entered into, the intent is that the seller will not need to repeat the disclosure requirements if the same buyer enters into a contract arising from an exercise of the option.
The seller will be required to comply with the disclosure requirements if a nominee buyer enters into a contract arising from an exercise of the option.

Inclusion of proposed survey plan in disclosure statements for CTS lots

It is proposed that a disclosure statement for a CTS lot will now be required to include the proposed survey plan that will create the CTS lot. We note that the prudent developer should already be doing this, but some developers are instead currently including architectural drawings in disclosure statements.

The current practice of combining disclosure requirements under the Land Sales Act and the BCCMA for the sale of CTS lots will discontinue, as all requirements for the sale of CTS lots will be included in the BCCMA.

Further, unless the developer specifies otherwise in the sale contract, an automatic sunset date of five and half years will apply from the contract date. The current requirement relating to three and half years (with the potential of an extension) will be removed.

Deposits no longer to be paid directly to developers

The proposal is that deposits must be paid directly to a real estate agent, a law firm, or the public trustee - if the bill is passed, developers will no longer be able to take any type of deposit (including for an expression of interest) for a CTS or non-CTS lot and then forward the deposit to the real estate agent or law firm at a later date.

Consultation process to continue

The Queensland government will continue its consultation process regarding the draft bill. We will let you know as the law changes in this area.

Oliver Meehan Rhett Oliver
Property development, acquisition and sale
CBP Lawyers

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