Following recent changes to planning regulations in New South Wales, vendors entering into contracts for sale need to be vigilant in ensuring that section 149 planning certificates comply with the new regulations and the requirements of the Conveyancing Act 1919 (NSW) or run the risk of having the contract rescinded.
A new General Housing Code has been introduced along with amendments to the Environmental Planning and Assessment Regulation 2000 (NSW) (EPA Regulation). The amendments change the information to be included in section 149(2) planning certificates that are required to be attached to a contract for sale under the Conveyancing Act 1919 (NSW) (the Act).
Section 149(2) planning certificates now need to contain a disclosure as to whether complying development can be carried out on the land. For any contracts for sale entered into on or after 27 February 2009, a purchaser can seek to have the contract rescinded if the vendor fails to provide this information, along with other mandatory disclosures and vendor warranty obligations.
In this update, we look at the reforms, what is now required and what can occur if you fail to comply.
VENDOR DISCLOSURE UNDER THE CONVEYANCING ACT 1919
Section 52A(2) of the Act requires a vendor to attach certain documents to a contract for the sale of land (prescribed documents) including a planning certificate issued under section 149(2) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act).
If a vendor fails to attach a s149(2) planning certificate, a purchaser can rescind the contract anytime within 14 days after the date of the contract for sale, unless the contract for sale has been completed.
Section 52A(2) of the Act also deems a vendor to have included in a contract for sale certain terms, conditions and warranties including a warranty that at the date of the contract for sale, the s149(2) planning certificate attached to the contract specifies the true status of the land, except as otherwise disclosed in the contract (vendor warranty).
If a vendor breaches the vendor warranty, a purchaser can rescind the contract for sale at any time before the contract is completed provided that the following conditions are met:
- The breach constitutes a failure to disclose to the purchaser the existence of a matter affecting the land.
- The purchaser was unaware of the existence of the matter when the contract was entered into.
- The matter is such that the purchaser would not have entered into the contract had he/she been aware of its existence.
WHAT HAS CHANGED?
New General Housing Code
The New South Wales government has introduced a number of reforms in an effort to reduce the time and associated costs of small-scale approvals. This includes a new state planning policy – State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (the Codes SEPP).
The Codes SEPP provides exempt and complying development codes that have State-wide application. If a particular development complies with an exempt development code under the Codes SEPP, then development consent is not required. If a particular development complies with a complying development code under the Codes SEPP, then a complying development certificate can be obtained from an accredited certifier instead of the local council (complying development).
At present, Part 3 of the Codes SEPP contains the first stage of the General Housing Code and specifies how residential developments, including detached single and two storey homes, alterations and additions, can proceed in certain zones on lots 450m2 and greater as 'complying development'.
Future additions are contemplated to the Codes SEPP, which may allow complying development for small-scale development to commercial and industrial properties.
Changes To Planning Certificates
As part of the government planning reforms, the Environmental Planning and Assessment Amendment (Complying Development) Regulation 2009 (the Amending Regulation) came into force on 27 February 2009.
The effect of the Amending Regulation is to amend Schedule 4 of the EPA Regulation which details the information required to be contained in a s149(2) planning certificate.
From 27 February 2009, a s149(2) planning certificate will include details as to whether or not complying development may be carried out on the land under the Codes SEPP. If complying development cannot be carried out on the land, the s149(2) planning certificate must state the reasons why (complying development status).
The Amending Regulation also inserts the new section 279(2) in the EPA Act that allows a council to issue a s149(2) planning certificate that contains only information on the complying development status of the land.
What s149(2) Planning Certificates Are There?
The effect of the Amending Regulation is that a s149(2) planning certificate issued by a council could be either:
- A Pre-Reform s149(2) Planning Certificate – A s149(2) planning certificate issued prior to 27 February 2009 which contains the information set out in Schedule 4 of the EPA Regulation prior to 27 February 2009 but which does not contain the complying development status of the land.
- A Supplementary s149(2) Planning Certificate – A s149(2) planning certificate issued on or after 27 February 2009 setting out only the complying development status.
- A New s149(2) Planning Certificate – A s149(2) planning certificate issued on or after 27 February 2009 which contains all matters set out in Schedule 4 of the EPA Regulation including the complying development status.
HOW TO COMPLY ?
A pre-reform s149(2) planning certificate issued prior to 27 February 2009 will clearly be considered a prescribed document under the Act for a contract dated prior to 27 February 2009, as the requirement for complying development status is not effective until after 27 February 2009.
Legal commentators have taken a broad interpretation that any of the three forms of s149(2) planning certificates referred to above will be a prescribed document. Therefore a s149(2) planning certificate issued prior to 27 February 2009 but annexed to a contract dated on or after the 27 February 2009 enables the vendor to meet its obligations for prescribed documents.
However, there is an opposing interpretation that a s149(2) planning certificate must be a s149(2) planning certificate as defined in the EPA Regulation at the date of exchange, which would mean that a new s149(2) planning certificate or supplementary s149(2) planning certificate should be ordered for contracts exchanged on or after 27 February 2009.
A pre-reform s149(2) planning certificate obtained prior to 27 February 2009 will not on its own satisfy the vendor's requirements with respect to the vendor warranty for a contract exchanged on or after 27 February 2009. This is because the information on this form of s149(2) planning certificate does not specify the true status of the land in respect of complying development.
However, a vendor may meet its obligations concerning the vendor warranty if it specifically discloses to the purchaser that the s149(2) planning certificate attached to the contract does not include the complying development status of the land and that the vendor makes no warranty as to the complying development status.
The safest approach for vendors to ensure that they comply with the prescribed documents and vendor warranty under the Act is to order either a new s149(2) planning certificate or a supplemental s149(2) planning certificate (either one will contain the complying development status of the land).
So what happens if the exchange of contract is urgent and the vendor is not able to obtain a new s149(2) planning certificate or a supplemental s149(2) planning certificate in time? In these circumstances, the vendor may choose to include an additional clause in the contract disclosing to the purchaser that the s149(2) planning certificate attached does not address the complying development status and that the vendor does not warrant the accuracy of the s149(2) planning certificate as to matters concerning the complying development status.
As time passes, a need for such a clause will become less relevant as new s149(2) planning certificates will contain the required disclosures. But in the meantime, containing this clause will help to avoid having a contract of sale rescinded.
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