The amended Conveyancing (Sale of Land) Act and Conveyancing (Sale of Land) Regulation have raised the standard of conduct for developers and are ultimately targeted at providing purchasers with greater protection when they enter into off-the-plan contracts.
Disclosure Statements and Draft Documents
All developers must now attach a disclosure statement in the approved form (Disclosure Statement) to the contract for sale (Contract) before the purchaser signs the Contract. A draft plan showing certain details and any other associated documents e.g. Proposed Schedule of Finishes, section 88B Instrument, Draft Strata Management Statement, Draft By-Laws must be attached to the Disclosure Statement.
Settlement Date
Settlement cannot occur until 21 days after registration of the plan.
At least 21 days prior to settlement the developer must:
- Serve the registered plan and its associated documents on the purchaser
- Notify the purchaser of any changes in 'material particulars' to the subject lot
Purchaser's Right to Rescind – Change in Material Particular
Significantly, purchasers now have the right to rescind the Contract if the notified change or inaccuracy revealed by the registered plan in the Disclosure Statement:
- Is a change in 'material particular'
- The purchaser would not have entered into the Contract had they been aware of the change
- The purchaser is materially prejudiced by the change
Specifically, a 'material particular' is a change that will or is likely to adversely affect the use or enjoyment of the subject lot.
If the purchaser elects to rescind, they must serve a notice of rescission within 14 days of being notified of the change or receiving the registered plan. Otherwise the Disclosure Statement is taken to be amended in accordance with changes and/or inaccuracies.
Alternative Recourse for Purchasers – Compensation Framework
Significantly, the Regulations have provided a compensation framework for purchasers (Compensation Framework).
If a purchaser has a right to rescind the Contract but elects to proceed to settlement, they can seek compensation of up to two percent of the purchase price from the developer under the Compensation Framework.
To trigger the Compensation Framework, the purchaser must serve a compensation notice (Compensation Notice) within 14 days of being notified of the change or receiving the registered plan.
The Compensation Framework also provides a dispute resolution mechanism, where parties must refer the matter to arbitration if it is not resolved by the earlier of one month from the Compensation Notice being served or settlement.
While the Compensation Framework may encourage purchasers to proceed to settlement and make a claim in cases where the market price of the property has increased since exchange of the Contract, the legislation was refined after public consultation with industry stakeholders and legal professionals to allow the arbitrator to make a decision as to 'costs'. This should go some way in preventing purchasers from making frivolous claims.
Other changes to legislation
There were a number of other significant changes to off-the-plan conveyancing legislation, which include the following:
- In order to prevent contracts from being drafted to avoid triggering a sunset clause, the definition of a 'sunset event' now includes events such as the issue of an occupation certificate and any other event that may be prescribed by the Regulation.
- The cooling-off period for off-the-plan contracts has been extended to 10 days and the standard form of the Contract for the Sale and Purchase of Land will be updated to reflect this.
- All deposits must be held in a controlled money or trust account. This will prevent the early release of the deposit.
Conclusion
These changes will take effect from 1 December 2019. While Parliament has emphasised the balance to be struck between the rights of developers and purchasers, the amended legislation will ultimately require developers to take more precaution before proceeding to launch.
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