The law on off the plan contracts has been reviewed by the New South Wales government. The effective date was set for 1st December 2019. The new legislation imposes greater transparency as well as disclosure obligations for contractors and more robust protection for purchasers.
Those considering future off the residential plan investments will welcome this move with open arms.
This has been one of the most popular ways for purchasers to join the real estate market for an extended period.
Buyers usually pay their deposits once agreements have been exchanged in order to commit to the purchase, and they often get a couple of years before the time expected to pay the full amount is due.
For buyers, the most significant risk is often the fact that they are unable to inspect physically an off the plan property before penning down an agreement. In this case, they are left to rely on written information that is usually provided by the developer.
Fundamental changes to the new law
Venders will be required to give buyers relevant information regarding the development. This information will consist of copies of the proposed plan schedule of finishes, proposed by-laws before signing of the deal.
Secondly, vendors will be expected to notify buyers of any modifications to what may have been revealed. This is crucial because, in the past, a lot of vendors would make adjustments without informing purchasers resulting in them incurring massive losses.
Offers more Freedom
Thirdly, those buying will have the freedom to end the agreement or demand damages in some situations in case there is a breach of contract, such as being impacted materially as a result of changes made far from what was revealed.
Sellers will also be expected to produce a copy of the final plan at least three weeks before the buyer can be compelled to settle.
Further, the current law was extended to explain that the highest court in the land, the supreme court, has the powers to compensate in a situation where the seller annuls under a sunset clause.
This is precipitated by the fact that in the past, developers would purposely delay the registration of plans beyond the Sunset dates provided in the Sale agreement.
These delaying tactics would be to give them leeway to revoke the buyer’s contract and sell the property to a new buyer at a much higher price. It results in not only inconveniences for the purchaser but a situation where they wait for years expecting to get their property only for them to end up without the property and now have to contend with different markets to the those they entered into the contract.
The proposed changes seek to provide stricter rules that will ensure that the buyer is better protected from this kind of manipulation as developers invoke sunset clauses.
As for the cooling-off period, it was increased from 5 working days to 10 with any deposit being held in trust or a controlled account until settlement.
With the introduction of these changes, it is hoped that in the future, homebuyers can buy off-the-plan with a higher degree of confidence and security than what they have previously.