Off-the-plan sales are common in new residential Torrens and strata subdivisions, where a purchaser buys a property prior to registration of the subdivision and construction of the new dwelling. They account for around 11% of the residential sale market in New South Wales* . On 1 December 2019, changes to off-the-plan contracts came into effect. Read about the changes below, and get into contact with us to see how they might affect your property transaction.
What type of contracts are affected by the changes?
- The changes affect residential off-the-plan contracts exchanged on or after 1 December 2019.
- “Off-the-plan” is defined as a contract for the sale of a residential lot that has not been created at the time the contract is entered into.
- The changes do not apply to commercial, industrial, or registered lots.
What are the changes?
- An off-the-plan contract must now contain a disclosure statement.
- Contracts must also contain a copy of the draft plan of subdivision and section 88B instrument prepared by a registered surveyor, and any proposed schedule of finishes. There are additional requirements for strata, community, precinct, and neighbourhood schemes.
- The vendor must serve a copy of the registered plan of subdivision 21 days before completion.
- Purchasers can rescind after receiving the registered plan if the disclosure statement includes any inaccuracy in relation to a material particular (i.e. if the registered plan is different to the draft plan in a way that would constitute a “material particular”) such that the purchaser would not have entered into the contract had the purchaser been aware of the inaccuracy, and would be materially prejudiced by the inaccuracy.
Deposit and cooling off period
- Purchasers now have the benefit of a 10 business day cooling off period for off-the-plan contracts.
- Any money paid by a purchaser as a deposit or instalment under the contract must be held in a trust or controlled money account – it cannot be released to the vendor prior to settlement.
Changes to the proposed lot or dwelling
- If there is a change to the proposed lot or design of the dwelling (and that change constitutes a “material particular”), the vendor must issue a Notice of Changes.
- A “material particular” includes a change to the draft plan, proposed strata by-laws, easement or covenant, a change to schedule of finishes, or any other matter prescribed by the regulations.
- The notice must be served at least 21 days prior to completion.
- A purchaser can rescind the contract if they would not have entered into the contract had the purchaser been aware of the change, and would be materially prejudiced by the change.
- A purchaser may make a claim for compensation from the vendor of up to 2% of the purchase price of the property instead of rescinding the contract.
Stricter sunset provisions
- Legislation has tightened as to when a vendor can rescind an off-the-plan contract under a sunset clause (where a sunset event has not occurred by the sunset date).
- “Sunset event” is defined as the creation of the subject lot, issue of the occupation certificate in relation to the subject lot, or another event prescribed by the regulations.
- A vendor can rescind under a sunset clause, but only if:
- Purchaser agrees in writing; or
- Vendor has obtained an order of the Supreme Court permitting the vendor to rescind the contract; or
- The regulations otherwise permit the vendor to rescind (currently no regulations with additional provisions)
- A sunset clause cannot automatically rescind an off-the-plan contract.
- A vendor who is proposing to rescind a contract must serve a notice 28 days prior to proposed rescission specifying why the vendor is proposing to rescind and the reason for the sunset event not occurring by the sunset date.
If you are a purchaser buying off-the-plan, a real estate agent, or a developer selling off-the-plan, contact us today for expert guidance on how the legislative changes affect you.
*Discussion Paper, Off-the-plan contracts, Office of the Registrar General, June 2019