ByLawyers News and Updates

Off the plan – sunset clauses – VIC

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Vendors face new restrictions when seeking to activate sunset clauses to end off the plan contracts in Victoria.

Amendments for off the plan contracts

The Sale of Land Amendment Act 2019 commenced on 4 June 2019. It amends the Sale of Land Act 1962. The amendments require vendors wishing to end residential off the plan contracts pursuant to a sunset clause to either obtain the purchaser’s consent, or an order from the Supreme Court.

New notice requirements created by section 13 of the amending Act for off-the-plan contracts for residential land including a sunset clause, have yet to commence.

The changes do not affect the existing statutory rights of purchasers to end a contract if the plan of subdivision is not approved by the sunset date.

Rescission

Section 10A of the Sale of Land Act 1962 provides that if a sunset clause in a contract allows the vendor to rescind the contract, then rescission must be in accordance with the Act. Section 10C overcomes any inconsistent contractual provision.

Purchaser’s consent

Section 10B of the Sale of Land Act prohibits a vendor from relying on a sunset clause unless the vendor obtains the purchaser’s written consent to any such rescission.

A vendor seeking to obtain the purchaser’s consent must give the purchaser 28 days notice setting out the reason that the vendor proposes to rescind, the reason for the delay in registration of the plan and that the purchaser is not obliged to consent to the proposed rescission.

A precedent ‘Notice of rescission of off the plan contract’ in accordance with s 10B(3) can be found on the By Lawyers matter plan.

Court order

Section 10D of the Sale of Land Act provides that the vendor may apply to the Supreme Court for an order permitting the vendor to rescind a contract pursuant to a sunset clause. The Court must consider a wide variety of matters relating to the contract and the property, including increase in value. If an order is made it may include compensation to the purchaser and the vendor will be liable for the purchaser’s costs.

Notice

Section 10F, created by section 13 of the Amendment Act, has yet to commence. This new section will require residential off-the-plan contracts that include a sunset clause to include a notice informing the purchaser that:

  • the vendor may give a notice proposing to rescind the contract;
  • the purchaser may consent to rescission, but is not obliged to consent;
  • the vendor may apply to the court for an order permitting rescission;
  • the court may make such an order.

A precedent notice in compliance with s 10F will be included in General Condition 9 of the By Lawyers contract on commencement of s 10F.

By Lawyers contract

The general conditions and particulars of sale in the By Lawyers Contract satisfy all of the statutory requirements when selling prior to registration, relying on the default sunset period of 18 months.

Family Law Rules – changes as of 1 March 2018

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As of 1 March 2018, changes came into effect in relation to consent orders in the Family Court.

The relevant By Lawyers publications, Children and Property Settlement, have been updated. The new forms have been linked to the matter plans and the commentary additions consist of the following:

Children changes

What was previously the annexure to consent parenting orders is now incorporated into the Application for Consent Orders form. A separate annexure is no longer required.

Three new forms were added for use in the Family Court.

The Notice of Child Abuse, Family Violence or Risk of Family Violence (Application for Consent Orders) must be filed with the Application for consent orders if parenting orders are sought and a party has said at item 25 of the Application there has been, or is a risk of child abuse, neglect or family violence.

The second form is the Notice of Child Abuse, Family Violence or Risk of Family Violence (Current Case). This form is now only for where cases are on foot: not for consent orders.

A third new form is the Submitting Notice. This form may be filed in Family Court proceedings if a party has been served with an Initiating Application, Response to Initiating Application, Reply or a Notice of Appeal, and does not want to contest the relief sought: Family Law Rules r 8.07.

Property Settlement changes

Previously, if the consent orders contained a provision for a superannuation splitting order, you had to ensure that a superannuation information form had been completed by the Trustee of the relevant super fund or a valuation had been obtained to the superannuation interest. However, as of 1 March 2018, a superannuation kit is no longer required. Proof of value of the interest is required to be filed with the Application.

Priority notice

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Land Titles Office will introduce the Priority Notice in December 2016

As part of the shift from paper-based conveyancing to electronic conveyancing the Land Titles Office will introduce Priority Notices in December 2016. This facility is viewed by the LTO as an important tool in the prevention of fraud in the electronic environment and is supported by s 91C Transfer of Land Act.

Traditionally the paper title has been a bulwark against fraud, with a person dealing with the title having an expectation that the paper duplicate would be produced at settlement. However, removal of the paper title in the electronic environment, hastened by the bulk conversion of over 2 million titles held by the Big Four banks on the weekend of 22 October 2016, means that the ‘protection’ provided by a paper title is diminishing. Priority Notices are intended by the Registrar to constitute a ‘unique baton’ to provide protection during the settlement period.

It is intended that a person dealing with the registered proprietor of land will lodge a Priority Notice to foreshadow that a dealing will be lodged at a future time and will thereby ‘protect’ that dealing. The Priority Notice can only be lodged electronically (presently using PEXA) whether the foreshadowed transaction will be conducted in paper or electronically.

Priority Notices resemble the familiar caveat in many ways. Indeed, there is little difference between the two and practitioners may be hard pressed to decide which of the two to lodge.

Virtues of the Priority Notice are:

  • will appear on any search of the relevant title;
  •  gives notification to the world of an intended dealing;
  •  may be lodged in respect of any intended dealing;
  •  temporarily prevents the registration of any other dealing; and
  • gives priority for 60 days from recording of the Priority Notice on the Register to the instrument foreshadowed in the Priority Notice;

A person lodging an instrument, such as a Transfer of Land, within 60 days of lodging a Priority Notice foreshadowing that Transfer is therefore entitled to expect that the Transfer will be registered in priority to any other dealing lodged during that 60 day period.

Disadvantages of a Priority Notice are:

  • cannot be amended;
  • consent cannot be given to registration of a dealing not protected by the Notice;
  • can be withdrawn and re-lodged, but priority will be lost to any dealing awaiting registration;
  • lapses after 60 days; and
  • a subsequent competing dealing lodged in the 60 day period will be registered immediately the Priority Notice expires.

From the Registrar’s point of view, the Priority Notice regime is an improvement on Caveats as the Registrar is NOT obliged to give notice to the registered proprietor of lodgement of a Priority Notice. There is no doubt that the obligation to give notice (often to an old address) imposes a considerable administrative burden on the Registrar, as does the need to play a role in the removal of caveats by disgruntled registered proprietors. The Priority Notice regime involves much less participation by the Registrar and refers all disputes immediately to the court, with the potential to make orders for removal and compensation. Presumably, as the Priority Notice has a limited life span of 60 days, disputes may be resolved by the effluxion of time, although there will no doubt be circumstances where a registered proprietor may need to seek the assistance of the court.

Caveats appear to provide all of the benefits of Priority Notices and few of the disadvantages in that caveats:

  • may be amended;
  • consent can be given to registration of a dealing: and
  • do NOT automatically expire.

It is this latter point that will have practitioners thinking. 60 day settlements are common, as are 90 day settlements. Both can unexpectedly blow out and so lodging a Priority Notice when entering into a 60 or 90 day contract may find the Priority Notice expiring shortly, or even well, before final settlement leaving the Transfer unprotected. A protocol of lodging 30 days prior to the anticipated settlement date may overcome this problem, but leaves the prior contractual period unprotected.

The small price differential between lodging a Caveat or a Priority Notice will not affect this decision.

Like many of the changes flowing from electronic conveyancing, we will just have to see how they work out at the coalface.

Tip Box

  • Whilst written for Victoria this article has interest and relevance for practitioners in all states.
  • Priority Notices are intended to provide protection against fraud.
  • The limited lifespan of Priority Notices may cause concern.

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