On 22 November 2018, the Conveyancing Legislation Amendment Act 2018 was passed which has amended the Conveyancing Act 1919 insofar as it relates to off the plan sales and electronic conveyancing. Whilst the bulk of these changes have not yet come into effect, they will have an impact on the way in which we conduct our conveyancing transactions in the future, particularly for off the plan sales.
Off the Plan Contracts
For clarification, an “off the plan” contract is a contract for the sale of a residential lot that has not been created at the date of the contract. As such, the term covers the majority of contracts for sale for residential subdivisions being sold by developers.
The changes in respect of off the plan contracts will not come into effect until proclamation, meaning that they we will not be required to comply with these changes until the parliament has set a date. At this stage, this date is unknown but it is expected to occur in 2019.
We have set out below a summary of the changes and the way in which they may effect our procedures:
- Cooling Off Period
Off the plan contracts will now have a statutory cooling off period of ten (10) business days as opposed to the current five (5) business days.
- Mandatory Disclosure Statement
In addition to the current statutory prescribed documents, a vendor who sells an “off the plan” property must attach to the relevant contract what is called a “disclosure statement” before the contract is executed by the purchaser.
The “disclosure statement” must be in the form prescribed by the act and include in it a copy of a draft plan which has been prepared by a registered surveyor, together with any other document prescribed by the regulations.
Whilst there are no regulations currently in force to accompany this Act, we would anticipate such documents would likely include the section 88B instrument, schedule of finishes and/or draft by-laws (if any) to be registered with the plan.
- Notification of Changes
If, at any time prior to completion, the vendor becomes aware that the “disclosure statement” is inaccurate or has become inaccurate (i.e. if the draft plan has become inaccurate) in respect of a material particular then they must notify the purchaser at least twenty-one (21) days before completion.
The purchaser is entitled to rescind the contract if the change is such that they would not have entered into the contract or materially prejudices the purchaser.
- Registered documents to be served on purchasers prior to completion
The vendor must serve on the purchaser no less than twenty-one (21) days before completion of the contract a copy of the registered plan and any other document registered with the plan (including the section 88B instrument).
As such, all contracts will be required to provide that completion is to be twenty-one (21) days from notice of registration, as opposed to the fourteen (14) days that is generally standard in our “off the plan” contracts.
Should the registered plan differ from the draft plan included in the “disclosure statement” such that the purchaser would not have entered into the contract or would be materially prejudiced by the change, the purchaser is entitled to rescind the contract.
- Rescission under sunset clauses
The legislation now provides that a vendor may only rescind an off the plan contract under a “sunset clause” if the purchaser consents in writing to that rescission or the vendor has sought an order from the Supreme Court to permit the vendor to rescind.
“Sunset clause” is defined as a provision of an off the plan contract that provides for the contract to be rescinded if a “sunset event” does not occur by a specified date. A “sunset event” is further defined as “the creation of the subject lot, the issue of the occupation certificate for the lot or another event prescribed by the regulations.”
You may recall in mid 2015, section 66ZL was inserted into the Conveyancing Act 1919 which limited the vendor’s ability to rescind under a sunset clause. This new clause further limits that ability for vendors to rescind by widening the definition of sunset event to beyond just a date by which the plan of subdivision must be registered to include the issuance of an occupation certificate and any other event prescribed by the regulation.
Further, should the vendor wish to rescind under the sunset clause with consent of the purchaser, they must provide the purchaser with at least twenty-eight (28) days written notice specifying why they are proposing to rescind and the reason the sunset event did not occur.
- Deposit monies
Any deposit monies paid under an off the plan contract must be held in trust or be invested. Effectively, this restricts the deposit being released to the vendor for their use prior to completion.
You may be aware that conveyancing in NSW is moving rapidly towards a wholly electronic system. It is expected that all of NSW “standard conveyancing transactions” should be conducted electronically by 1 July 2019. In this respect, the new Act also makes a number of changes to ensure that the transition to electronic conveyancing runs smoothly.
It is expected that regulations to support these new changes will become available in early 2019. At such a time, we will inform you whether the regulations make any further changes that you need to be aware of.
For more information on the above, please contact Peter Crittenden or Ben Wong on (02) 4626 5077.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.