In brief - the government has proclaimed 1 December 2019 as the day on which the Conveyancing (Sale of Land) Regulations 2019 (NSW) will commence
Disclosure statements must be attached to every off the plan contract
An "off the plan contract" is a contract for the sale of a residential lot that has not been "created" at the time that the contract is entered into. A lot is created when the plan for creating a lot becomes a registered plan.
Generally, the following must be attached to the disclosure statement:
- the draft plan showing the lot number, location and area of the property
- the draft floor plan and draft location plan for the property
- the site of any proposed easement, profit à prendre, restriction on the use of land or positive covenant and the proposed terms (ie draft section 88B instrument)
- any proposed bylaws, development contract and management statement. It also includes a reference to a strata development contract
- the schedule of finishes.
A change to any of the above is treated as a change of a "material particular". However, there are some exceptions. The following are not considered to be a change of a "material particular":
- a change to a lot number
- a change in the street name
- a change to, or the inclusion of a provision for the allocation of the costs of shared expenses under a management statement, subject to ensuring "the fair allocation of the costs of shared expenses relating to parts of the building"
- a change to the location of a strata parking or storage area, but only if the change is made in accordance with the terms of the contract.
If there is a change to a "material particular", a "notice of changes" must be served at least 21 days before completion.
In relation to all plans, "substantial compliance" with the titles office lodgement rules is required.
A document included in the contract is taken to be included in the disclosure statement if it is attached to the contract.
Failure to comply may give a purchaser rescission rights
It is important to fully comply with the above requirements. If you do not, or if you comply and subsequently make changes to any "material particular", a purchaser may rescind and seek compensation if the purchaser:
- would not have entered into the contract if the purchaser was aware of the inaccuracy; and
- would be materially prejudiced by the inaccuracy all.
Statutory cooling off period is now 10 business days
The contract must also include a new warning statement as the statutory cooling off period applicable to residential property is being extended from 5 business days to 10 business days.
Updated warning statements are required. If not, purchasers may have a right to rescind the contract.
Deposits and instalments must be held in trust or controlled monies accounts
It is now a mandatory requirement that deposits or instalments to the purchase price must be held in a trust or controlled monies accounts and may be invested in accordance with the terms of the contract.
There is no requirement as to the amount that must be paid as a deposit or instalment.
New implied terms introduced to off the plan contracts
New implied terms have been introduced:
- a purchaser that has a right to rescind on an off the plan contract, may instead of rescinding, issue a "claim notice" and claim compensation of up to 2% of the purchase price of the property. An arbitrator may also award the purchaser costs
- the claim must be made within 14 days of the purchaser becoming aware of the relevant matter, which normally occurs by you issuing a "notice of changes", or upon receipt of all registered documents. It will otherwise lapse 14 days after completion
- there is a new requirement that all registered documents must be served on the purchaser at least 21 days before the due date for completion
If a "claim notice" is served by a purchaser under the regulation, it must be determined by an arbitrator if unable to be resolved by agreement.
If the parties are unable to agree on who will be the arbitrator within the earlier of two months after receipt of a "claim notice", or one month after completion, the NSW Department of Customer Service will select one.
The claim amount plus any further interest earned on it is held by the deposit holder until the claim is determined or withdrawn. A claim is withdrawn if it is not determined within the earlier of four months of service of the claim notice three months after completion.
Rescission under sunset clauses (proposed amendments not yet Regulation)
The vendor may rescind an off the plan contract under a sunset clause if the residential lot is not created by the sunset date but only if:
- each purchaser consents in writing;
- an order is obtained from the Supreme Court; or
- the regulations permit it.
The vendor must serve notice at least 28 days before the proposed rescission that specifies why the vendor is proposing to rescind and the reason for the delay in creating the residential lot.
At 25 October 2019, the proposed regulation to broaden the scope of these provisions to cover an occupation certificate had not yet been proclaimed. We will continue to monitor the regulation and issue a further update in the event there are any changes to the above information.
The advantage of Electronic Contract Exchange Systems
Compulsory disclosure statements will apply from 1 December 2019.
If you are using an electronic contract exchange system, disclosure statements can easily and instantly be added to any existing off the plan contract.
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.