Changes to Disclosure Requirements in off the plan sale contracts
With a growing population comes a need for new houses and apartments. Many of these new houses are sold “Off the Plan” meaning entering a contract to purchase a house/apartment or vacant land when the property does not yet exist as its own parcel.
On 22 November 2018 the NSW Government passed the Conveyancing Legislation Amendment Bill 2018, which changes to the legal requirements for off the plan contracts, it has not yet commenced and will commence on a date proclaimed by the minister. Whilst the accompanying regulations are yet to be published it does not appear that the changes will apply retrospectively. Here is a brief look at the changes:
Extended Cooling off period.
Currently in NSW Contracts for Sale of Land there is a 5 business day cooling-off period. This means that the purchaser has until 5pm on the 5th business day after the contract date to withdraw from the contract. If the purchaser exercises this right they forfeit to the vendor 0.25% of the purchase price.
The new legislation extends the cooling-off period for off-the-plan contracts to 10 business days.
The new legislation still provides a mechanism for the cooling-off period to be waived if the purchaser instructs their solicitor to sign a section 66W certificate which states that the contract has been explained to the purchaser, and they agree to waive their cooling-off rights.
Another change is the vendor under an off-the-plan contract will be required to make a disclosure statement available for inspection, with the contract, before the property can be advertised for sale.
The disclosure statement will need to include documents such as:
- Copy of the draft subdivision plan and section 88b instrument
- Proposed strata by-laws,
- Proposed community or neighbourhood management statements
- Schedule of finishes.
Once a contract is exchanged, if the vendor becomes aware that the disclosure statement contains inaccuracies in a “material particular”, a notice of changes must be served on each affected purchaser at least 21 days before completion of the contract. Each purchaser will have the right to rescind (withdraw from contract without penalty) if any change notified in the notice of changes is such that the purchaser would not have entered into the contract had the purchaser been aware of the change and would be materially prejudiced by the change.
In a practical sense, the disclosure statement and the material attached to it will not differ greatly from the documents and information already provided in Contracts by most developers. The new legislation is set to provide a minimum standard of information that all developers will need to supply to purchasers.
The legislative changes will require developers to finalise in the early stages of a project, matters such as by-laws which may not be as important to the developer but will be of great interest to potential buyers looking for a future home. In addition developers who go to market without a development consent will need to be confident consent conditions when granted will not cause issues.
If you are planning on selling property off the plan and think that this will affect you, please contact our property law team to find out more.