On 23 July 2019, REINSW made a submission to the NSW Government proposing a regulatory change in response to a Discussion Paper on proposed off-the-plan contract reforms and the public consultation draft Conveyancing (Sale of Land) Amendment Regulation 2019 [NSW].
At the end of 2018, the NSW Government passed legislation to give stronger protections and greater transparency to residential property purchasers under off-the-plan contracts. These changes were introduced by the Conveyancing Legislation (Amendment) Act 2018 (NSW).
In REINSW’s July submission, REINSW recommends and supports the inclusion of protective financial risk provisions applicable to all parties involved in off-the-plan contracts (and not just the purchaser).
“There has never been a harder time to build and develop,” says REINSW Director, Braden Walters.
Walters explains that every year developers face more and more restrictions with the increase in building codes and requirements.
“We have seen councils change plans and requirements only to the cost and detriment of the consumer/developer. We asked why only the purchaser gets compensation and the vendor is not allowed to gain compensation when they are not at fault,” he says.
“If we make it too hard for developers to create land or housing, then we will find they stop doing it. And that’s worse for everyone.”
New disclosure regime
Before these off-the-plan protections can commence, regulations need to be made that set out the detailed requirements of a new disclosure regime.
As per the Discussion Paper, the proposed Conveyancing (Sale of Land) Amendment Regulation 2019 [NSW] (Draft Amendment Regulation) includes detail about:
- The new form of disclosure statement and additional disclosure documents to be attached to off-the-plan contracts
- Remedies where the vendor has not met new disclosure obligations
- Guidance on when a purchaser may rescind a contract or option
- The alternative remedy of compensation where changes have rendered the disclosure statement inaccurate as to a material particular
- Guidance as to what constitutes a ‘material particular’
- A new form of prescribed warning statement to reflect the extension of cooling off periods for off-the-plan contracts to 10 business days (from 5 business days, for other residential transactions)
REINSW has considered the circumstance where a purchaser may take issue with changes that may be made to a property subject to an off-the-plan contract, typically with respect to changes to the plan that ultimately affect the quality and size of the developed property. As these changes are not always made at the request of the developer, REINSW has recommended that the NSW Government considers how consumers and developers deal with the circumstance where the property when built is not the same as the off-the-plan contract through no fault of the developer.
REINSW recommends that the NSW Government needs to:
- set out the process in the Draft Amendment Regulation where a material particular changes as a result of the relevant council’s specific regulations and restrictions which could not have been known to the parties at the time of the agreement; and
- consider the need for a developer to claim compensation in these circumstances and amend the Draft Amendment Regulation appropriately.
Consequences of non-disclosure
A vendor’s failure to comply with the new mandatory disclosure regime carries the same consequences as a breach of existing disclosure requirements. The Draft Amendment Regulation proposes to amend clause 17 to allow a purchaser to rescind the contract within 14 days after exchange where the vendor has not attached the disclosure statement (and included documents to the contract).
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