ByLawyers News and Updates

Avoiding off the plan contracts – A sequel

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

Avoiding off the plan contracts is a common topic for this column. March 2019 and July 2018 considered sunset clauses, October 2015 looked at avoiding for quality defects and May 2015 considered the various statutory avoidance rights.

Harris v K7&@Surry Hills P/L [2019] VSC 551 is a decision of the Supreme Court that considers the purchaser’s right to terminate an off the plan contract for the sale of a residential unit and two car parking spaces. The contract was preceded by lengthy negotiations between the purchaser, the agent and the vendor as the purchaser wished to combine two of the proposed lots into one occupancy, although the contract related to 2 lots (lots 306 & 307). These lots each had a car space and a full length (as opposed to an ‘over the bonnet’) storage cage as part of each lot on the proposed plan. The contract, having identified the property sold as lots 306 & 307, included a provision that the proposed plan would be revised so as to incorporate the combined lots as one lot on the final plan.

As is often the case when purchasers seek to ‘fiddle’ with off the plan contracts, the contract ended up containing conflicting terms, some that were standard terms for the sale of lots on the plan generally and which give the vendor wide powers to amend the plan, and some that were specific to this contract that were designed to protect the changes that the purchaser had negotiated. One such specific term added to the contract as Special Condition 38 required the vendor to provide “two (2) car parks that are adjacent”.

The vendor undertook the task of revising the plan to accommodate the purchaser’s wishes, but disputes arose. In particular the revised plan only included one ‘over the bonnet’ storage cage (instead of the two full length storage cages the purchaser believed it was entitled to) and one car space on title and the right to share a car stacker for a second space. The purchaser sought assurances that the plan would be amended to provide the purchaser with 2 full length storage cages and 2 adjacent car spaces and the vendor declined to do so stating that “allocation of car spaces and storage spaces are only finalised at the time of construction completion”. It is fair to say that this is a common approach amongst developers who seek to rely on Special Conditions giving them wide ranging powers to adjust the plan of subdivision to accommodate construction needs. This case is important as it indicates that developers need to take account of specific needs of purchasers and that purchasers need to be specific in specifying those needs in the contract.

The purchaser terminated the contract on three bases:

  1. that the vendor had repudiated the contract;
  2. that there was a ‘material change’ to the plan invoking s.9AC(2) Sale of Land Act; and
  3. that the vendor had engaged in misleading and deceptive conduct contrary to s.18 Australian Consumer Law.

Repudiation – the Court accepted the purchaser’s argument that by submitting an amended plan that did not include “two carparks that are adjacent” in accordance with Special Condition 38 the vendor repudiated an essential term of the contract and that the purchaser was entitled to end the contract. The vendor argued that the amended plan might not necessarily be the final plan, but the Court held that a purchaser in such circumstances is entitled to assume that an amended plan is intended to constitute a final plan.

Material change – the Court also accepted that by submitting the amended plan that did not included a full length storage cage the vendor gave the purchaser the right to terminate the contract pursuant to s.9AC(2) as that plan contained a ‘material change’.

ACL – the Purchaser’s argument based on the ACL alleged that the vendor’s agent had, immediately before contracts were exchanged and as an incentive for the purchaser to sign, represented that the purchaser would receive 2 full length storage cages and that in breach of that representation the amended plan did not include those storage cages. The plan in the contract in fact did not include 2 full length storage cages but the Court accepted that the representations had been made and rejected the argument that Special Conditions allowing the vendor wide discretion to amend the plan could be used to overcome those representations.

Developers tend to ride rough-shod over complaints made by purchasers of off the plan apartments but this case confirms that if a purchaser is prepared to see it through, the law will often provide a remedy, or three.

Tip Box

  • Specific amendments to off the plan contracts will prevail over standard conditions
  • The application of s.9AC will be judged on plans submitted from time to time
  • The ACL will provide a remedy for misrepresentation

Off the plan amendments – NSW

by

Off the plan amendments

Off the plan amendments for residential properties are being introduced by the Conveyancing Legislation (Amendment) Act 2018 and the Conveyancing (Sale of Land) Amendment Regulation 2019. The bulk of the amendments will commence on 1 December 2019, however, the provisions affecting statutory cooling off commenced on 25 October 2019, introducing a transition period until 30 November 2019.

The cooling off period for off-the-plan contracts has been extended from 5 to 10 business days. The cooling off warning notice form, prescribed by Schedule 5 of the Conveyancing (Sale of Land) Regulation 2017, has also been amended to reflect this change. A contract for the sale of residential property entered into during the transitional period may include the new cooling off warning notice form or the old form in force immediately before the amendment. There is no obligation for a contract to include the new form of notice until 1 December 2019. 

A summary of the amendments that will commence 1 December 2019 include:

  • Increased vendor disclosure requirements including a Disclosure Statement and draft documents to be attached to the contract. Purchasers can rescind the contract within 14 days of exchange if the Disclosure Statement or relevant prescribed documents are not attached to an off-the-plan contract before it is signed. These new requirements are additional to the existing disclosure regime imposed by Part 2 of the Conveyancing (Sale of Land) Regulation 2017. There is no need to attach more than one copy of the same document to the contract and the Disclosure Statement;
  • Vendors to notify changes to ‘material particulars’. Purchasers can rescind or claim compensation for some changes to material particulars. Notification of changes must be made on an approved form which will be available on the By Lawyers Sale matter plan soon;
  • 10-Business-Day cooling-off period. All contracts for sale of land may use either the old form or new form of warning notice until 30 November 2019. Contracts for established properties may use the old form or new form of warning notice for 6 months after commencement. From 2 June 2020, all contracts for sale, whether for off-the-plan or established properties, will need to use the new form of cooling off warning notice;
  • Purchasers to be given registered plans 21 days before settlement;
  • Deposit to be held in trust. Any money paid by the purchaser by way of deposit or installment under the contract must be retained by the stakeholder in a trust or controlled money account during the contract period. This money cannot be released to the vendor before settlement. This measure will ensure deposit and instalment monies are protected in the event of the developer’s insolvency;
  • Stronger sunset clause protections. The amendments extend the definition of a sunset clause to capture other events which trigger termination of the contract, like the issue of an occupation certificate. Changes also confirm that the Court can award damages if the vendor is permitted to end the contract under a sunset clause. These changes are contained in new Section 66ZS introduced by the Conveyancing Legislation (Amendment) Act 2018. New sunset clause provisions will apply to all off-the-plan contracts, irrespective of whether they were signed before or after commencement.

The By Lawyers Conveyancing (NSW) Publication will be updated accordingly. This will include new provisions in the By Lawyers Contract for the sale of land 2019, precedents and commentary.

Letter to client after exchange – All states

by

A precedent update has followed recent user feedback. Significant amendments have been made to the Letter to client after exchange in the Purchase of Real Property Guide, for all states.

This useful precedent letter now includes headings and better reflects the process of payment of duty.

The areas covered, now organised under the new headings, are as follows:

  • GST
  • Investigation of title
  • Duty and concessions
  • Insurance
  • Pre-settlement

At By Lawyers we love to receive feedback from our users and they are often the reason that we update our precedents.

Letter to strata manager – NSW

by

The By Lawyers conveyancing precedent Letter to strata manager requesting Section 184 certificate has been amended to include a settlement date and contact details for the purchaser’s representative.

It is the experience of practitioners that with electronic settlements, sending the section 22 notice to strata managers can often be overlooked. For this reason, the letter requesting the s 184 certificate now includes a settlement date, contact details for the purchaser’s representative and a reminder that if there is a problem after settlement the strata manager should contact the purchaser’s representative in the first instance.

This improvement was the result of user feedback. At By Lawyers, we pride ourselves on the cooperative and collegiate relationship we have with the firms using our commentary and precedents daily. We value the feedback that we receive as it helps us to continually improve our publications.

This enhanced precedent letter is available on the matter plan in the Conveyancing – Sale of real property Guide (NSW).

Retail shop lease disclosure – QLD

by

The By Lawyers To do list precedent has been updated in the By Lawyers Leases (QLD) Guide to include a section on retail shop lease disclosure requirements of both the lessor and lessee.

New leases

At least seven days before a retail shop lease is entered into, a lessee must have been given a disclosure statement and a copy of the lease by the lessor.

If the disclosure statement is not given, is incomplete, or contains information that is materially false or misleading, the lessee may terminate the lease by notice in writing at any time within six months.

The lessor’s disclosure statement includes a lessee’s disclosure statement, allowing the lessee to set out representations made to the lessee. The Act requires the lessee to complete and give to the lessor this statement at least seven days before entering into the lease.

Sublease

Where a sublessor has requested a head lessor disclosure statement, the lessor must provide it within 28 days.

Renewal

On renewal of a retail lease the lessor must provide a copy of a current disclosure statement to the lessee within 7 days of receiving a renewal notice.

Precedent update

The new section of the To Do list covers the time limits for retail lease disclosure in relation to:

  • new leases;
  • sublease; and
  • renewal of existing leases.

Thanks

This enhancement was the result of user feedback. At By Lawyers, we pride ourselves on the cooperative and collegiate relationship we have with the firms using our commentary and precedents daily. We value the feedback that we receive as it helps us to continually improve our publications.

Retail premises lease disclosure – VIC

by

The By Lawyers To do list precedent has been updated in the By Lawyers Leases (VIC) Guide to include a section on retail premises lease disclosure requirements.

New retail premises leases

At least seven days before a retail premises lease is entered into, a lessee must have been given a disclosure statement and copy of the proposed lease by the lessor. The maximum penalty for failing to comply is 50 penalty units.

Renewal of retail premises leases

On renewal of a retail lease the lessor must provide a disclosure statement to the tenant at least 21 days before the end of the current term of the lease where option to renew applies, or no later than 14 days after the entering into an agreement to renew.

Assignment of retail premises leases

If a lessee assigns a retail shop lease it is relieved from liability to pay money under the lease if it serves upon both the lessor and the assignee a copy of a disclosure statement.

Precedent update

The new section of the To Do list covers the time limits for retail lease disclosure in relation to:

  • new leases;
  • assignment; and
  • renewal of existing leases.

Thanks

This enhancement was the result of user feedback. At By Lawyers, we pride ourselves on the cooperative and collegiate relationship we have with the firms using our commentary and precedents daily. We value the feedback that we receive as it helps us to continually improve our publications.

Contract of sale of land – VIC

by

The Law Institute of Victoria has recently released a new version of their contract of sale of land. The By Lawyers Conveyancing Guide has been updated to include references to the current clauses of the 2019 LIV contract.

While no form of contract is prescribed by law any longer, various requirements are prescribed before a contract can be enforced.

The 2019 By Lawyers Contract of Sale of Land also meets these requirements and has a number of advantages over the LIV contract. The sale and purchase commentaries in the By Lawyers Conveyancing Guide include a detailed comparison between the LIV contract and the By Lawyers contract on a clause-by-clause basis, to assist in comparing them.

The By Lawyers Contract of Sale of Land, co-authored by conveyancing guru and By Lawyers author Russell Cocks, provides a vendor’s statement and contract in one document. The By Lawyers  contract is specifically designed for residential conveyancing transactions and seeks to overcome some of the traditional road blocks that arise.

The By Lawyers 2019 Contract of Sale of Land is located in the Contract folder in the Sale of Real Property Guide and is also available to purchase through InfoTrack.

For further information, see the article Seven reasons to use the By Lawyers contract or listen to an informative podcast explaining the features of the By Lawyers contract.

Retail lease disclosure – NSW

by

The By Lawyers To do list precedent has been updated in the By Lawyers Leases (NSW) Guide to include a section on retail lease disclosure requirements of both the lessor and lessee.

New leases

At least seven days before a retail shop lease is entered into, a lessee must have been given a disclosure statement by the lessor. The maximum penalty for failing to comply is 50 penalty units.

If the disclosure statement is not given, is incomplete, or contains information that is materially false or misleading, the lessee may terminate the lease by notice in writing at any time within six months.

The lessor’s disclosure statement includes a lessee’s disclosure statement, allowing the lessee to set out representations made to the lessee. The Act requires the lessee to complete and give to the lessor this statement within seven days of receipt of the lessor’s disclosure statement. There is a penalty of 50 penalty units if this is not done, but there is no right for the lessor to rescind the lease.

Renewal

On renewal of a retail lease the lessor may provide an update together with a copy of the earlier disclosure statement, or a fresh one.

Assignment

If a lessee assigns a retail shop lease it is relieved from liability to pay money under the lease if it serves upon both the lessor and the assignee a copy of an assignor’s disclosure. This must be done at least seven days before the assignment.

Precedent update

The new section of the To Do list covers the time limits for retail lease disclosure in relation to:

  • new leases;
  • assignment; and
  • renewal of existing leases.

Thanks

This enhancement was the result of user feedback. At By Lawyers, we pride ourselves on the cooperative and collegiate relationship we have with the firms using our commentary and precedents daily. We value the feedback that we receive as it helps us to continually improve our publications.

Mine subsidence certificates – NSW

by

Mine subsidence certificates have been abolished in NSW.

From 30 September 2019, certificates of compliance for properties under Section 15 of the former Mine Subsidence Compensation Act 1961 are no longer available from Subsidence Advisory NSW.

Subsidence Advisory NSW’s records indicate the vast majority of developments in mine subsidence districts are approved structures. In the last ten years, only four claims for homes have been refused due to the structure being non-compliant. Due to the extremely low likelihood of a claim being made for a non-compliant property, the significant cost increase to adequately undertake compliance checks prior to issuing certificates was deemed unwarranted.

As a result, the certificates were not carried over to the Coal Mine Subsidence Compensation Act 2017. Property owners are afforded the following alternative protections under the Act:

  • Subsidence Advisory NSW has discretion to pay a claim for subsidence damage to a contravening development in circumstances where the failure to obtain the relevant approvals was not the fault of the property owner or where exceptional circumstances exist.
  • Under Section 23(a) of the Act, buyers have the right to withdraw from a contract of sale for a structure that does not comply with Subsidence Advisory NSW’s development requirements.

Prospective purchasers who wish to ascertain whether a structure is eligible for compensation can do so by obtaining confirmation of development approval through the vendor or council.

Precedent update – Conveyancing – VIC

by

A precedent update has followed recent user feedback. Significant amendments have been made to the ‘Letter to purchaser after exchange‘ in the Purchase of Real Property Guide.

This useful precedent letter now includes headings and reflects the process of payment of transfer duty where settlement is to occur electronically.

The areas covered, now organised under the new headings, are as follows:

  • GST
  • Investigation of title
  • Transfer duty
  • Insurance
  • Pre-settlement

The ‘Letter to purchaser after exchange when no initial letter done’ has also been amended to reflect these changes.

At By Lawyers we love to receive feedback from our users and they are often the reason that we conduct a precedent update.

Connect with us