Chapter News

Inside Fair Trading: Selling off the plan

By Rod Stowe - NSW Fair Trading Commissioner
 

  Ensure you understand the parameters of selling off the plan.

According to the latest predictions by the Housing Industry Association, by the end of this year new housing starts in NSW will have increased 14 per cent from 2012.

That’s a lot of new stock coming on to the market.

 

 
In the current financial year, construction on almost 60,000 new multi-units is expected to commence and it would be fair to assume a large proportion of these will be sold off the plan.

There are few basic, but very important, rules to remember when selling off the plan on behalf of vendors or developers.

Misrepresentation

First, a Licence or Certificate holder must not misrepresent the characteristics of a property for sale or planned development.

NSW Fair Trading have issued guidelines to assist agents in avoiding the types of statements or actions that may be interpreted either as a misrepresentation or a concealment of material fact, and information on the circumstances in which they might arise.

However these guidelines are not exhaustive, nor are they intended to constitute legal advice. Section 52 of the Property, Stock and Business Agents Act 2002 emphasises the importance of the agent informing the purchaser “of matters which could not be revealed through undertaking usual enquiries”.

Opinion

Second, a sales agent must keep in mind that they are not qualified to offer potential buyers an opinion on a building proposal and whether the development complies with the relevant building codes. Nor can they offer advice on the legality of a structure, building or other, or on changes made to the development. The best advice an agent can give a buyer is that they should conduct their own enquiries with due diligence when it comes to these matters.

Cooling off rights

Third, if the agent exchanges contracts with the purchaser on behalf of the vendor, it is essential that the agent advises their buyer of their cooling off rights under the Contract for Sale and whether these rights have been waived by signing a 66W certificate.

Once again, it is essential that the agent advises their client to obtain legal advice concerning their rights and obligations and to ensure they understand what may happen to their deposit should they rescind or fail to complete the contract.

Trust accounts

Finally, the agent must ensure that all deposit monies are held in their trust account in accordance with the Act. Where a contract provides for the release of the deposit monies to a party nominated by the vendor (usually their legal representative) or the developer, the agent must ensure that this does not occur until instructions are received from both the vendor/developer and the purchaser.

Visit www.fairtrading.nsw.gov.au for more information.

This article was first published in the November 2013 edition of the REINSW Real Estate Journal.