NSW Minister for Innovation and Better Regulation, Victor Dominello has introduced legislation into NSW Parliament to provide purchasers under off-the-plan contracts with greater protection against rescission by the developer.
Currently, subject to the terms of a contract, a developer may rescind a contract if the sunset date for the completion of the building works has passed and the building is not complete. The changes proposed by the government are in response to claims that some developers are deliberately delaying works so they can rescind contracts, refund deposits and sell the units for higher prices. Developers cannot take advantage of their own deliberate delays but current case law has placed the onus of proof on purchasers to prove this. Given the knowledge of the construction program lay with the developer, this was difficult for a purchaser to do, effectively having to commit to expensive court action and then find the evidence to support a claim of deliberate delay.
Under the amendments being introduced by the Conveyancing Amendment (Sunset Clauses) Bill 2015 (NSW), developers will only be permitted to rescind contracts under a sunset provision if they can justify the termination of the off-the-plan sale. The developer will be obliged to serve a notice on the purchasers of the development outlining their reasons for rescission at least 28 days before the proposed rescission date. The purchasers may then give their consent to the rescission or,if a purchaser does not give its consent to the rescission, the developer may, at its cost, seek a court order from Supreme Court of NSW in order to rescind and is also liable to pay the purchaser’s costs of the proceedings unless the court is satisfied that the purchaser has unreasonably withheld its consent. The bill also specifies a number of circumstances the court is to take into account including whether the lot has increased in value and the effect of the rescission on the purchaser.
Effectively this Bill reverses the onus of proof and makes the developer rather than the purchaser prove that the delay was beyond its control.
The new law is effective as at 2 November 2015 and will apply to contracts regardless of whether they were entered into before on or after commencement of the Bill.