Stephen Teale & Stephanie Price | December 2012 | Corporate & Commercial
From 1 December 2012 amendments to section 9AA of the Sale of Land Act 1962 introduce further requirements to protect purchasers of off-the-plan properties. Vendors will now be required to include a notice in the contract of sale containing various warnings to purchasers.
Who does this impact? Vendors and purchasers of ‘off-the-plan’ properties.
What action should be taken? Vendor/developers will be required to amend their standard contract of sale for off-the-plan properties following amendments to the Sale of Land Act 1962 (Sale of Land Act), so that they contain the new required ‘conspicuous’ notice to purchasers.
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Vendor Off-the-Plan Sale Disclosure Requirements
Background In off-the-plan property purchases, the purchaser buys the property prior to or whilst it is still under construction. It is a popular way to purchase property, given considerable stamp duty savings on completion and potential for capital gain due to long settlement lead times. It is common in Victoria for the contract for sale in an off-the-plan property sale to contain a provision for the settlement to be within either 14 days of the Plan of Subdivision being registered or the Certificate of Occupancy being issued, whichever is the later. Generally a deposit (in the form of cash, guarantee or bond) is payable upon entering the contract and settlement can occur sometime thereafter, depending on the stage of planning and building of the development. Despite their popularity and potential benefits, nonetheless, there are risks for purchasers of these properties, brought about by the considerable time lapse between the payment of the deposit and obtaining title to the property. Under the Sale of Land Act 1962 (Sale of Land Act), section 9AA(1) provides that when a purchaser (other than an authority or statutory body) enters into a contract of sale of a lot prior to the Plan of Subdivision being registered, their deposit must be paid on trust to a legal practitioner, conveyancer or licenced estate agent acting for the vendor, until the registration of the plan and the deposit must not exceed 10% of the purchase price of the lot.
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Vendor Off-the-Plan Sale Disclosure Requirements
Section 57 (2) of the Consumer Affairs Legislation Amendment (Reform) Act 2010 (Vic) (Consumer Amendment Act),1 proposed changes to section 9AA of the Sale of Land Act, increasing the protection for purchasers by inserting a provision requiring that on the front page of a contract of sale for an off-the-plan property, there be a warning that: •
the purchaser may negotiate with the vendor about the amount of deposit moneys payable under the contract (subject to the limit set by section 9AA(1)(b) of the Sale of Land Act 1962 (Vic));
•
a substantial period of time may elapse between the day on which the purchaser signs the contract of sale and the day on which the purchaser becomes the registered proprietor of the lot;
•
the value of the lot may change between the day on which the purchaser signs the contract of sale and the day on which the purchaser becomes the registered proprietor. (the Warnings)
Under section 9AE of the Sale of Land Act, failure to comply with any of the provisions in section 9AA entitled purchasers to rescind the contract of sale prior to registration of the plan. Therefore, following the amendments to section 9AA, developers, by not giving notice of the above Warnings on the contract, would have entitled purchasers to rescind their contracts. These amendments were due to come into operation in December 2012, however a further amending Act has amended these proposed provisions and the Sale of Land Act.
section 9AA(1A), the Warnings must be placed as a ‘conspicuous notice’ in the contract.2 The Residential Amendment Act also amends section 9AE of the Sale of Land Act, to remove the right to rescind a contract in the event that a vendor fails to include the Warnings in the contract for the sale of an off-the-plan property.3 Vendors will be subject to a fine where they fail to comply with the Act. According to the Victorian Minister for Consumer Affairs, this removes the disproportionate remedy against the vendor/ developer.4
Implications The provisions in the Residential Amendment Act are intended to protect purchasers of off-theplan properties, whilst removing the availability of disproportionate remedies against developers.
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Stephen Teale & Stephanie Price | December 2012
Vendor/developers will be required to amend their standard contract to include the Warnings and while the Warnings do not have to be on the front page of a contract, they are required to be ‘conspicuous’ (i.e. in a font size and in a position where they are likely to be seen). Even though purchasers will be notified of their right to negotiate the deposit, this will be subject to the provision that the deposit is not to be over 10% of the purchase price of the lot. If the Warnings are not conspicuous, it will constitute an offence and vendor/developers will be liable to pay a fine (currently $1,408.40).
All other parts of Part 7 of the Consumer Amendment Act came into operation on 21 December 2011 - Victorian Government Gazette No. S423 Wednesday December 2011. 1
Residential Tenancies and Other Consumer Acts Amendment Act 2012 (Vic)
Section 239, Schedule 6, Item 9.1 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) amended the default start date of the Consumer Amendment Act from 30 June 2012 to 1 December 2012 (unless proclaimed earlier). 2 3 4
Clause 26 of the Residential Amendment Act Clause 27 of the Residential Amendment Act Victoria, Legislative Assembly (2012) Debates, 15 August, Book 10, p. 3146
From 1 December 2012, the Residential Tenancies and Other Consumer Acts Amendment Act 2012 (Vic) (Residential Amendment Act), will amend section 57(2) of the Consumer Amendment Act to remove the requirement that Warnings to purchasers of offthe-plan lots/properties be required to be placed on the front cover of the contract. Now, under
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Vendor Off-the-Plan Sale Disclosure Requirements
For more information, please contact: Stephen Teale Partner T: 03 8600 5008 M: 0419 374 728 stephen.teale@turkslegal.com.au
Stephanie Price Lawyer T: 03 8600 5017 M: 0400 445 427 stephanie.price@turkslegal.com.au
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Stephen Teale & Stephanie Price | December 2012
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