Incoming legislation designed to give ‘off-the-plan’ property buyers more safeguards is a big – and some might argue long-overdue – win for purchasers in NSW.
But what about vendors? How will the changes affect their obligations, and, ultimately, their bottom line? If not addressed carefully, these new laws could turn out to be very costly for property developers.
So let’s take a close look at the changes, which have been in the legislative pipeline since 2015. They were assented in NSW Parliament last November, and will come into force at a date to be advised shortly.
The Conveyancing Legislation Amendment Bill 2018 (NSW) was passed to protect buyers from unforeseen changes to their newly-purchased unit, townhouse or home. State Finance minister Victor Dominello conceded there had been “horror stories” surrounding off-the-plan purchases, which have exploded in NSW from 2,000 in 2006/7 to 30,000 last financial year.
A large proportion of these have involved developers using sunset clauses to rescind contracts amid suspicion they want to re-sell at a higher price than originally sold.
Now, vendors can only trigger a sunset clause with the purchaser’s permission, or via an order from the NSW Supreme Court. And when the Amendment does come into force, purchasers will gain a host of new rights to rescind on their terms.
These are likely to include:
• Absence of a disclosure statement in the contract containing a draft plan drawn up by a surveyor, as well as other documents including details of any easements and restrictive covenants.
• Subsequent changes to the draft plan that would have prevented the purchaser from entering the contract had they been in place when it was agreed upon.
• Subsequent changes to the draft plan that prejudice the buyer.
• Inaccuracies arising from the final, registered plan, which must be sent to the purchaser no less than 21 days before settlement.
For most property developers, correctly abiding by these strict obligations will represent unchartered territory. Even a single false move could equal a failure to comply, which would automatically give the purchaser the right to rescind. In short, not having a full and proper understanding of the new requirements could expose developers to costly and unwanted setbacks.
With the Central Coast experiencing a boom in new developments, our property law specialists can assist vendors by ensuring their new legal obligations are correctly met.
No matter what the outlook, Tonkin Drysdale Partners can offer advice to give vendors peace of mind.