It’s exciting to buy your own home, and it can be even more so to buy one that no one has ever lived in. Buying off-the-plan means you commit to buying a residential property that hasn’t been built. You’re paying a deposit and entering into a legal contract on the basis of brochures and artist’s sketches.
Buying off-the-plan has its pros and cons, but from 1 December 2019, new laws in NSW will better protect people who buy this type of real estate.
The December 1 changes offer greater transparency, minimum disclosure standards, and statutory remedies. The new requirements will apply under the Conveyancing Legislation (Amendment) Act 2018 and Conveyancing (Sale of Land) Amendment Regulation 2019 under the Conveyancing Act 1919.
So what’s changing?
1. Greater rigour around disclosure
A vendor (person or group selling off-the-plan) will be required to provide extra documentation setting out the development specifics.
A disclosure statement must include a draft plan prepared by a registered surveyor – a qualified specialist who interprets and works through legal aspects of land ownership – which includes:
• The proposed number and area of the lot, as well as enough information to identify its location
• If the contract relates to land that in a proposed strata scheme—the draft floor plan and draft location plan
• If the contract relates to land in a proposed community, precinct or neighbourhood scheme—the draft location diagram, draft detail plan and draft community, precinct or neighbourhood property plan
• The site of any proposed easement or profit à prendre (the right for a person to take natural produce grown on someone else’s land) affecting the lot
• The site of any proposed restriction on the use of land or positive covenant affecting only part of the lot
Other prescribed documents covering:
• Proposed schedule of finishes
• Any section 88B instruments (like easements) of the Act that will be lodged with the draft plan
• Drafts of the:
• By-laws if the contract relates to land or lot in a proposed strata scheme
management statement or any proposed development contract for land or lot in a proposed community, precinct or neighbourhood scheme
• Strata development contract for land or lot in a proposed development scheme
• Strata management statement for land or lot in a proposed strata scheme that relates to a part strata parcel, and a strata management statement will be required under section 99 of the Strata Schemes Development Act 2015 for the registration of the strata plan
• Building management statement for land or lot subject to a building management statement under Division 3B of Part 23 of the Conveyancing Act 1919.
These documents must be attached to the contract before it’s signed or a buyer may be able to rescind (cancel) the contract within 14 days of exchange.
2. The vendor must advise of material differences in the build from what was disclosed. This are changes affecting the experience of the development, and cover:
• The draft plan
• Schedule of finishes
• Easements or covenants
• A strata management statement or building management statement
• A management statement for a community, precinct or neighborhood scheme
• A development contract or strata development contract
A buyer may be able to rescind the contract if they can show this material change will impact them or that they wouldn’t have made the purchase had they known. Alternatively they may be able to claim compensation (up to 2% of purchase price). In either circumstance, they must exercise these rights within 14 days of being notified of the change or receiving the plan with any inaccuracy.
Not all changes are material, for example, changes to street name or lot number.
3. The cooling off period has doubled from 5 business days to 10, giving buyers more time to consider
4. Final registered plans and documents must be given to buyers at least 21 days before settlement. If these documents show a material difference that the vendor has not advised, the buyer still has the option of rescinding the contract
5. The buyer’s deposit must be kept in a trust or controlled money account, and not released to the vendor before settlement. This means they’re protected if the developer becomes insolvent
6. The ‘sunset clause’ has been extended and the buyer may also be able to claim damages which describes when the contract is canceled if the developer hasn’t met the agreed timeframe. This has been misused as some developers, during the build, have realised they would benefit from canceling the agreement – especially if housing prices increased during the build. This usually was detrimental to the buyer.
Given the cost of real estate in Sydney
Particularly in the inner west, it’s important to get the right advice before signing a contract to buy an off-the-plan development. If you are looking and need a little help, our property lawyers have a wealth of experience with buying off-plan for first home buyers. Contact us and we can guide you through the purchase process.