Developers – update your “Off the Plan” contracts

Developers – update your “Off the Plan” contracts

Amendments to the Sale of Land Act are currently proposed which will affect “sunset dates” in “off the plan” contracts. The Sale of Land Amendment Bill 2019 (Vic) was passed in Parliament on 28 May 2019, meaning that the retrospective changes will come into operation as soon as the bill receives royal assent.

The retrospective changes will apply from 23 August 2018.

The amendments only affect the “off the plan” sales of residential properties, that is, where the lot is proposed to be used for residential purposes. 

There are other changes to the Sale of Land Act as well, but in this article, we focus on the changes that affect residential “off the plan” contracts.

In essence, the proposed amendments are as follows:

– New sections 10A to 10D of the Sale of Land Act: if there is a “sunset clause” in the contract, then it is taken to read as follows:

  • If the plan of subdivision has not been registered by the sunset date, or the occupancy permit has not issued by the sunset date, the vendor can only rescind contracts if it has first obtained the written consent of each purchaser;
  • The vendor must give each purchaser 28 days’ notice of attempting to rescind;
  • The written notice must set out (a) the reason the vendor wants to rescind, (b) the reason why there was a delay in registration of the plan of subdivision or issue of the occupancy permit, and (c) that the purchaser is not obliged to consent to the rescission.

– A new section 10E is proposed as follows (this section will not be retrospective and will come into operation after the amending Act receives Royal Assent):

  • If one or more purchasers do not consent to the rescission as per above, the vendor can apply to the Supreme Court for an order allowing the vendor to rescind if the court is satisfied that the order is “just and equitable in all the circumstances”. There are a number of guiding considerations set out in the proposed section (such as the reason for the delay, whether the lot has changed in market value, whether the vendor has acted unreasonably or in bad faith, etc).
  • The court is empowered to make any order “it considers just and equitable in all the circumstances” including an order for reasonable compensation of the purchaser.
  • The vendor must pay the purchaser’s costs in the proceeding, unless it can satisfy the court that the purchaser was unreasonable in withholding consent to the request for rescission.

– Finally, a new section 10F is proposed requiring a contract to include certain notifications of the purchaser’s rights concerning sunset clauses. This amendment does not have retrospective application and as such, future contracts can be amended to include the requisite notifications once the legislation is enacted and this amendment comes into operation (which may be 1 March 2020 unless proclaimed earlier).

Any clauses in a residential “off the plan” contract which are inconsistent with the above, have no effect to the extent of that inconsistency. That means that other rights in the contract which allow the vendor to rescind should still be enforceable however this remains to be tested and is still subject to Consumer Law considerations.