Off – the – Plan Changes
The Sale of Land Amendment Bill 2018 was passed by Parliament where specific reforms have been implemented regarding the Sunset clause. This will have an affect anyone buying or selling property Off – The – Plan.
The Sunset Clause
The sunset clause is included in the contract of sale stating the specific time frame in which the developer must have the plan of subdivision registered.
Previously developers had a 24-month period to register their plans of subdivision. This has now been extended to 36 months.
New restrictions have been put in place in order to prevent the exploitation of purchasers with an aim of putting a stop to developer’s old habits attempting to re- sell property at a higher price.
Changes implemented to the Sunset Clause
All off – the – plan contracts must now have an included statement notifying the purchaser that in order to rescind the contract, written consent is required. It must further provide that the purchaser has the right to decline the rescission if the vendor wishes to terminate and further that an order by the Supreme Court can be made for the rescission of the Contracts of Sale. As this is now a key requirement of all contracts, penalties will apply if it is not included.
As of 23 August 2018, developers must give their written notice of termination 28 days prior to rescinding the contract with the reason of termination included, as well as a reason for delaying the plan of subdivision. The developer must also make the purchaser aware that they are not obliged to agree to the rescission. Purchasers are required to provide written consent in order to satisfy their obligations to terminate the contract and show that the purchaser is not exploited in doing so.
If the purchaser does not agree to terminate the Contract of Sale, developers are now required to apply for an order from the Supreme Court. The Supreme Court will consider whether the termination of the contract is just and equitable by examining amongst other things the reasoning for the termination, whether the price of property has increased in value, the effect of terminating on the purchaser and whether the vendor has acted unreasonably.
It is important that all vendors applying to the Supreme Court for an order to terminate a contract to consider that they may be liable to pay compensation to the purchaser if ordered to do so by the court and further they may be ordered to cover court costs.
Purchasers and vendors should be aware that implementation of the new provisions apply to all Off – the – Plan Contracts, including contracts entered prior to August 2018.
What this means for Vendors
The new provisions make it difficult for vendors to attempt the resale of property at a higher price as there is now extra steps required to terminate a contract. Vendors must be aware of their obligations toward the purchaser when entering into a contract of sale, most importantly reflecting that the plan of subdivision must be registered within the new extended period of 36 months.
What this means for Purchasers
Purchasers must wait an extra year for the plan of subdivision to be registered by the developer changing the previous 24-month period to 36- months. However, the new changes are aimed at protecting the consumer. If the plan of subdivision has not been registered in this time frame, the purchaser has the right to rescind the contract of sale and reclaim their deposit.