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Posted 22 November 2019
Amongst the recent raft of changes to the residential building industry, on 1 December 2019 the Conveyancing (Sale of Land) Regulations 2019 (NSW) will commence with a view to providing greater protections to purchasers of residential property from off-the-plan contracts.
Buying a property “off-the-plan” essentially means that a purchaser is buying a property that has not yet been constructed. The contract will generally include a detailed description of the property and may include a copy of the draft strata plan, preliminary plans lodged with the local council and a list of finishes to be used in the property.
There are, of course, both advantages and disadvantages to buying off-the-plan. Advantages to the purchaser include buying a property at today’s prices and, often, at lower prices than the general market value of a “finished product”. On the flip side, disadvantages of buying off-the-plan include buying a property where the end product may differ from the draft plans included in the contract.
To make matters worse, unfortunately, there is no “standard” contract for sale for off-the-plan contracts and so these types of contracts can contain a number of unusual clauses. The major change in the Conveyancing (Sale of Land) Regulations 2019 (NSW), in addition to increasing the cooling off period from 5 business days to 10 business days, is to provide some uniformity to off-the-plan contracts by requiring that they include specific disclosure statements in a standardised form.
A disclosure statement is essentially a one page summary of specific details and attaches certain documents required by the new regulations, which include a:
Before a purchaser signs an off-the-plan contract, a disclosure statement must be attached to the contract and, failure to attach a disclosure statement, entitles the purchaser to “rescind” (or cancel) the contract within 14 days of signature date.
Further, if there is a change to a “material particular” of the property, the developer of the property must serve the purchaser with a “notice of changes” at least 21 days before completion of the off-the-plan contract. A “material particular” includes a change in the draft plan of the property, its draft by-laws, schedule of finishes, strata management statement and strata development contract.
Service of a “notice of change” may trigger a purchaser’s right to rescind the contract in 14 days or claim compensation (up to 2% of the purchase price) from the developer. However, the purchaser may only rescind if, as a result of the change in the “material particular”, the purchaser would have not entered into the off-the-plan contract and he or she would be materially prejudiced.
If you are buying off-the-plan or receive a “notice of changes”, you should seek advice on the contract and your rights. If you are selling by way of an off-the-plan contract, it is important that you reissue all contracts issued prior to 1 December 2019 with the new disclosure statements and prescribed documents. We have years of experience with off-the-plan contracts and dealing with residential property issues and are always happy to assist.
***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.