An off the plan contract means a contract for the sale of a residential lot that has not been created at the time the contract is entered into. Developers of new residential units usually enter into off the plan contracts with purchasers to sell units before they are built.
Under the Conveyancing Legislation (Amendment) Act 2018, off the plan contracts must comply with new requirements including the following.
1. Disclosure Statement
From 1 December 2019, off the plan contracts must attach a new disclosure statement including various prescribed documents (including draft plan, draft strata by-laws, proposed schedule of finishes, etc.)
If the required documents are not attached to the contract, purchasers can rescind the contract within 14 days of exchange.
2. Notice of Changes to material particulars and rescission of contract
Vendors of off the plan properties musts notify purchasers of changes that make what was disclosed inaccurate in a ‘material particular’. These include changes to the draft plan, draft by-laws, schedule of finishes, easements or covenants, etc.
Purchasers can rescind or claim compensation (up to 2% of the purchase price) for some changes to material particulars if they can show that they would not have entered into the contract had they been aware of the change, and that they are materially prejudiced by the change. Affected purchasers must exercise their rights to rescind or claim compensation within 14 days of being notified of the change to a material particular, or of being served with the registered plan that reveals the inaccuracy, as the case may be.
3. 10 Business day cooling-off period
The cooling-off period for off-the-plan contracts have been extended from 5 business days to 10 business days. The cooling-off period for contracts to purchase existing properties is not changed.
Off-the-plan contracts must use new cooling off warning notice form from 1/12/2019 but contracts for established properties (i.e. not off-the-plan) may use the old warning notice till 1/6/2020. From 2 June 2020, all property contracts must use the new form of cooling off warning notice.
4. Purchaser to be given registered plans 21 days before settlement
A vendor under an off the plan contract must provide the purchasers with a copy of the final registered plan and any other documents that was registered with the plan at least 21 days before settlement. Purchasers are not required to settle earlier than within that 21 day period.
5. Deposit and instalments to be held as trust or controlled money
Any money paid by the purchaser by way of deposit or instalment under an off the plan contract must be held as trust money or controlled money and the monies cannot be released to the vendor before settlement.
6. Stronger sunset clause protections
The new laws extend the definition of a sunset clause to include other events which may trigger termination of the contract including the issuing of an occupation certificate. The purchaser may rescind the contract should these events not occur by the date stipulated in the contract.
For more details, please visit the website of the Office of the Registrar General (https://www.registrargeneral.nsw.gov.au/news/new-requirements-for-off-the-plan-contracts-from-1-december-2019)