New rules for the sale of property off the plan come into effect in New South Wales next month, introducing major changes in this contentious area.
The changes will limit the scope a developer has to change or adjust key elements in the development over the life of the project, such as the title and governance structure, the timing of when facilities become available and limitations on how the lot can be used.
Law firm Holding Redlich says in a note to clients: “Developers may now need to dedicate more time and resources at the beginning of a project in order to improve the accuracy of the contract and reduce the likelihood that material changes to key elements of the project will be required.”
The NSW Government has had off the plan contracts under review for some time. In 2015, it announced changes to the Conveyancing Act to restrict the right of vendor from unilaterally rescinding an off-the-plan contract.
An amendment bill was passed last year and regulations were released this year.
Among the changes that will apply to off the plan contracts from 1 December, a purchaser will receive a 10-day cooling-off period, rather than the usual five days.
Deposits and any instalment payments must be held in the trust account of a solicitor, conveyancer or real estate agent until completion.
Holding Redlich says: “This means that developers can no longer look to negotiate the release of a purchaser’s deposit to use in funding their development.”
A purchaser will not be required to complete an off the plan contract earlier than 21 days after receiving copies of the registered plan and other documents registered with the plan.
Holding Redlich says: “It has been common practice for developers to require purchasers to complete within 14 days or 10 business days from the date on which the purchaser is given written advice that registration has occurred, Many developer’s financiers also stipulate this is a maximum timeframe to be included in qualifying pre-sale contracts. This practice will need to change.”
In order for the 21-day period to commence, developers must ensure that full copies of the registered strata plan, plus all other documents registered with the plan, are obtained and given to the purchasers
There are also new disclosure rules, covering information that must be attached to a contract.
The purchaser will have the right to rescind a contract or make a claim if there are inaccuracies in respect of material particulars.