New laws in relation to “off the plan” contracts

The Sale of Land Amendment Bill 2019 (Vic) has been passed by Parliament and will affect a vendor’s ability to terminate a residential “off the plan” contract under a sunset clause. A residential off-the-plan contract is an off-the-plan contract for a lot which is “proposed to be used for residential purposes”.

A sunset clause in an off the plan contract is a clause which allows the contract to be ended if the plan of subdivision has not registered or the occupancy permit issued by the stated sunset date.

The new laws will apply to sunset clauses in all residential “off the plan” contracts with retrospective operation from 23 August 2018. In other words the amendments will affect not only new contracts but also existing contracts.

The new laws will mean a vendor can no longer end a residential “off the plan” contract on or after a sunset date without:

  1. Giving at least 28 days written Notice to the purchaser; and
  2. Obtaining the purchaser’s consent.

The Notice must include certain information including:

  1. The reason why the vendor wishes to end the contract;
  2. The reason for the delay in registering the plan of subdivision or issuing the occupancy permit; and
  3. Confirmation that the purchaser is not obliged to consent to the vendor’s request to end the contract.

Vendors will not be permitted to exclude the operation of the new laws and if a vendor does not comply with the new laws it will be taken to be in breach of the contract.

Vendors can apply to the Supreme Court for an order permitting the contract to be ended if it is “just and equitable” in the circumstances. This is however a relatively costly process and unlikely to be undertaken by a vendor without good reason. In determining whether to make the order requested by the vendor, the Court must have regard to the following:

  1. The terms of the contract;
  2. Whether the vendor has acted unreasonably or in bad faith;
  3. The reason for the delay in registering the plan of subdivision or issuing the occupancy permit;
  4. The likely date on which the plan of subdivision will be registered or the occupancy permit issued;
  5. Whether the lot has increased in value;
  6. The effect of the termination on the purchaser;
  7. Any other matter the Court considers relevant or prescribed by regulation.

Author: Cathy Drake

Published: 5 July 2019

 

The information in this article is general in nature and is not to be relied upon as legal advice. As always, we recommend you seek thorough legal advice to consider your own circumstances and determine whether the information contained in this article is applicable to you.  This article is current as at the date of publishing but will not be updated as circumstances change.