NEW RIGHTS OF RESCISSION FOR PURCHASERS OF OFF THE PLAN PROPERTY
The Conveyancing Legislation Amendment Act 2018 (NSW) does not as yet include the draft Regulations with key details on how these amendments will operate and be implemented.
Changes to the rescission rights in NSW
The Act gives purchasers buying apartments or residential lots off-the-plan more protection by requiring vendors to:
- attach a disclosure statement to off-the-plan contracts; and
- notify the Purchaser of any inaccuracies to the disclosure statement at least 21 days before completion.
Purchasers will have a right to rescind the sale contract, if certain criteria are met.
Developers marketing off-the-plan residential properties for sale without a disclosure statement may face penalties of $1,100 per property.
Notice of changes to Disclosure Statements
Developers will be required to notify purchasers, at least 21 days prior to completion, if they become aware the disclosure statement:
- is inaccurate in relation to a “material particular” at the time the contract was signed; or
- has become inaccurate in relation to a “material particular” after the contract was signed.
A “material particular” includes any change to:
- the draft plan of subdivision;
- a provision of draft by-laws;
- an easement or covenant; or
- the schedule of finishes in respect of the property,
that will, or is likely to, adversely affect the purchaser’s use or enjoyment of the property.
There may be further matters which are defined as ‘material particulars’ prescribed by the Regulations at a later date. The Act does not prescribe any penalties where a developer does not give notice to the purchaser of any change.
Developers and their financiers should be aware of the possibility for slight changes to the property potentially allowing a purchaser to claim that their particular use or enjoyment has been adversely affected, by a change to a ‘material particular’, therefore satisfying one of the requirements and giving a purchaser right of rescission.
Once a change to a “material particular” under the Disclosure Statement is established, in order to have a right of rescission, a purchaser would need to prove that they:
- would not have entered into the contract if the purchaser had been aware of the change; and
- would be materially prejudiced by the change.
The Act refers to the purchaser’s “use or enjoyment’ of the property which is subjective and the purchaser would need to prove what the intended use and enjoyment would be and that the changes would adversely affect that use and enjoyment, in order to seek the protection under the new legislation.
How will a purchaser rescind the contract?
The Act does not specify a procedure for claims for rescission by the purchaser. It is not clear whether the purchaser or the vendor will have the onus of proof.
To date Key details setting out obligations on developers and how the proposed legislation will operate have not been released.
Developers, financiers and agents dealing with off-the-plan sales should be ready to update their sales contracts as necessary when the legislation takes effect.
Important Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.