Off the Plan – Your New Rights!

On 17 November 2015 the NSW Government passed the Conveyancing Amendment (Sunset Clauses) Act 2015 to provide further protections for purchasers in off the plan property contracts in New South Wales. This Act inserts a new Division 10 into the Conveyancing Act 1919 entitled “Off the plan contracts”.

An ‘off the plan’ contract is a contract for the sale of a lot that does not have a separate title at the time the contract is entered into. Off the plan contracts are used by developers to presell vacant land lots or strata units before the necessary building and contract works have been finalised.

Sunset clauses are common in off the plan contracts and allow for the purchaser and/or vendor to rescind the contract if the lot is not created by the sunset date. In the present property market, developers could stand to gain a substantial benefit by rescinding the contract in the event of a subsequent increase in the value of the property.

The new Division 10 of the Conveyancing Act 1919 aims to prevent developers from unreasonably rescinding off the plan contracts for residential property under a sunset clause. Under the new protections, a vendor must give each purchaser notice in writing at least 28 days prior to rescission under a sunset clause. The notice must state why the vendor is proposing to rescind and give reasons for the delay.

The vendor then can only rescind under a sunset clause if:

The purchasers give written consent to the vendor’s proposed rescission; or
The vendor obtains an order from the Supreme Court permitting the rescission; or
The reason for the rescission comes within a category prescribed by the Regulations under the Act.

The factors the Supreme Court will consider when deciding whether to approve the vendor’s proposed rescission will include:

The terms of the Contract;
Whether the vendor acted unreasonably or in bad faith;
The reason for the delay in creating the lot;
The likely date on which completion will be achieved;
Whether the subject lot has increased in value;
The effect that the rescission will have on the purchaser.

The vendor is liable to pay the purchaser’s costs of the application to the Supreme Court, unless it can be shown that the purchaser’s refusal to consent to the rescission was unreasonable.

The new laws apply to any purported rescission that takes place on or after 2 November 2015. This means that the new law applies to all existing off the plan contracts which have not yet completed.

The amendments do not affect the entitlement of a purchaser to rescind under a sunset clause.

Saada Iskandar

Conveyancing Co-ordinator