The Conveyancing Amendment (Sunset Clauses) Bill 2015
introduced on 2 November 2015 by Victor Dominello MP, Minister for
Innovation and Better Regulation, has now been passed by
the NSW Parliament. The Bill inserts s 66ZL in the
Conveyancing Act 1919, which applies to the sale of
residential strata units and lots in a proposed residential land
subdivision. The Bill primarily intends to prevent developers from
unjustly benefitting at the expense of the purchaser.
Under the new section, a developer may only rescind a contract
if they have given the purchaser 28 days' written notice of the
vendor's intention, explained the reasons for delay and
rescission, and either:
the purchaser has provided their consent in writing, or
the vendor obtains an order of the Supreme Court permitting
them to rescind the contract under the sunset clause.
If the vendor seeks an order from the Supreme Court, the vendor
must satisfy the Court that the rescission is just and equitable in
all circumstances. The Court is required to consider a number of
factors to determine whether rescission is "just and
the terms of the contract
whether the vendor has acted in bad faith or unreasonably
the reason for delay
the likely date the lot will be created
whether the subject lot has increased in value
the effect of rescission on each purchaser
any matter prescribed by regulations, and
any other matter the Court considers relevant.
In the Second Reading speech, Minister Dominello noted that a
major factor to be considered by the Court is the increase in value
of the subject lot and suggests that "if the value of the lot
has increased significantly, the exercise of the sunset clause is
prima facie unfair". This factor is not included in
the specific terms of the Bill but, upon interpretation considering
the Minister's comments, this may pose a significant issue for
developers in the current market.
The new legislation is hot on the heels of the recent case of
Kaymet v Wang, which confirmed the prior position that the
onus was on the purchaser to prove that a developer's delay in
registering plan documents was unreasonable. The Bill reverses this
onus, requiring the vendor to substantiate the delay instead of the
purchaser and to seek the purchaser's consent before rescission
is allowed or, failing this, to seek an order of the Court.
Where vendors seek orders of the Court they will be liable to
pay the purchaser's costs of proceedings, unless the
purchaser's refusal to consent is considered unreasonable by
The provisions have a retrospective application and developers
are bound by the new requirements from 2 November 2015, regardless
of when a contract was entered into.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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