New Laws for Off-the-Plan Purchases

Off-the-plan property buyers will soon get better protection when new laws come into effect on 1 December 2019. They will give purchasers greater rights and more certainty and will stop rorts like developers selling a one bedroom apartment off-the-plan that turns into a studio or attempting to cancel a contract to take advantage of higher prices.

Vendors will have to attach a Disclosure Statement to the Contract containing key information like when settlement is to take place and the sunset date by which either party may terminate the Contract if the development has not been completed.

Numerous documents must be attached to the Contract as well including a draft plan showing the proposed lot and area, a schedule of proposed finishes and draft by-laws. Vendors will need to notify purchasers of material changes which affect the lot being purchased including changes to the draft plan, the schedule of finishes or the by-laws.

Purchasers may be able to rescind the contract in the event of a material change or claim compensation if they wish to proceed provided they exercise their rights within 14 days of being notified of the material change.

In the case of off-the-plan purchases the normal 5 business day cooling off period which applies to existing properties will be extended to 10 business days.

The practice of developers having the 10% deposit released to them after exchange of Contracts will end to prevent purchasers losing their deposit if the developer goes into liquidation.

These long overdue reforms have been introduced due to the vulnerability of off-the-plan buyers. The new laws will create a more transparent contractual process, set minimum standards of disclosure and provide statutory remedies when the final property differs from what was promised.

In light of recent examples of poor building practices employed in new home unit developments in Sydney, whether the public’s confidence in off-the-plan purchases will be restored quickly is something only time will tell.

October 2019