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Change to Sales of Off the Plan Properties in NSW

A change to the Conveyancing Act 1919 in New South Wales has established protection for purchasers from developers rescinding off the plan contracts in bad faith.

An off the plan contract typically includes a clause that allows the purchaser or developer (the vendor) to rescind (cancel) the contract if a title does not issue for the subject property by a certain date. It is suspected that this mechanism for bringing contracts to an end has been misused by developers for financial gain. Off the plan contracts can run for significant periods of time during which the value of the subject property might increase. In those circumstances, a developer might be enticed to deliberately stall a project so that they can bring the off the plan contract to an end and re-sell the property at a higher price.The change to the Legislation requires the developer to serve a notice on the purchaser at least 28 days before the proposed rescission that specifies why the developer is proposing to rescind the contract and the reason for the delay in the title for the subject property issuing.

Following the notice, the developer can then bring the contract to an end, but only if:

  1. Each purchaser under the contract consents in writing to the rescission; or
  2. The developer has obtained an order of the Supreme Court permitting the rescission; or
  3. The regulations otherwise permit the developer to rescind the contract.

The Supreme Court may make the order permitting the developer to rescind the contract, but only if the developer satisfies the Court that making the order is just and equitable in all the circumstances.  In that regard, the considerations for the Court include:

  1. The terms of the off the plan contract;
  2. Whether the developer has acted unreasonably or in bad faith;
  3. The reason for the delay in the title issuing;
  4. The likely date on which the title will issue;
  5. Whether the subject property has increased in value; and
  6. The effect of the rescission on each purchaser.

It is important to note that a purchaser who unreasonably withholds consent to the rescission after having received the notice from the developer will have to bear their own costs of the developer’s application for an order from the Supreme Court.

If you have any questions regarding off the plan contracts, or conveyancing matters in general, you should contact the experienced property lawyers and conveyancers at Burt & Hanke Legal, servicing Albury, Wodonga and surrounding areas.