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Major changes to off-the-plan sales in NSW

Significant legislative changes come into effect from 1 December 2019 for all off-the-plan residential sales in NSW. It is important to note that the changes do not apply to commercial or industrial off-the-plan sales.

The changes will require developers to dedicate more time at the start of the project to ensure the disclosure document is accurate and reduce the likelihood of significant changes that would see disclosure amended mid-project and buyers potentially prejudiced by the changes, terminating contracts.

From 1 December 2019: –

  • A purchaser under an off-the-plan residential contract in NSW will have a 10 day cooling off period (currently 5 days) although this can still be waived or shortened if the purchaser provides a certificate under section 66W of the Conveyancing Act.
  • All deposits under off-the-plan contracts must be held in a trust account of a solicitor, conveyancer or real estate agent until completion. Developers will no longer be able to negotiate an early release of deposits to use for funding the project.
  • A purchaser cannot be required to complete the off-the-plan contract earlier than 21 days from the date they receive copies of the registered plan and other documents lodged with the plan. This will alter the financier’s existing standard requirement that settlement be completed within 14 days.
  • A disclosure statement in the approved form must be attached to the off-the-plan contract before it is signed by the buyer, containing certain information relevant to the project. A failure to attach the disclosure document or relevant information will give the buyer a right to rescind the contract within 14 days of the contract date.
  • Developer’s must notify buyers if they become aware that the disclosure attached to the contract is no longer accurate. If the change in the disclosure material materially prejudices the buyer, they will have a right to rescind the contract.

The changes bring the NSW regime for off-the-plan residential sales largely into line with the existing Queensland regime. For example, when it comes to determining what ‘materially prejudiced’ means, this terms has been applied in Queensland for over 20 years and there are numerous court cases giving examples of when a buyer is materially prejudiced and setting out the objective view to be taken of the purchaser’s circumstances in each particular case.

The key difference to the materially prejudiced test in NSW will be that the purchaser will be required to show that they would not have entered into the Contract had they have been aware of the inaccuracy. This will give developers some level of comfort around the buyer’s new rights to terminate off-the-plan contracts.

No doubt November has been a busy month for developers selling residential stock off-the-plan in NSW as contracts issued from next week will need to be compliant with the new regime.