The Victorian Government has released the Sale of Land Amendment Bill (Bill), which is currently at the second reading stage.
If the Bill is passed in its current form, it will restrict a vendor’s ability to rescind a residential off-the-plan contract of sale on the grounds that a sunset date has lapsed. A vendor will be required to go to the Supreme Court if a purchaser does not agree to the rescission. Sunset date is defined in the Bill as a date that is set out in a residential off-the-plan contract by which the plan of subdivision must be registered, or occupancy permit issued.
In its current form, these Sunset Date restrictions will apply retrospectively, and so will capture any residential off-the-plan contracts entered into before the commencement date of the Bill.
Note that the sunset date restrictions apply to residential off-the-plan contracts only, so there should be no change to existing sunset date termination rights in off-the-plan contracts for industrial, retail or office product.
The Bill does not, at this stage, appear to restrict other termination rights that a vendor may include in a residential off-the-plan contract. For example, it may still be possible for a vendor to rely on contractual rights to terminate a contract where a planning permit has not issued or if a vendor has not been able to obtain finance or engage a builder by a certain date.
The Bill would bring Victorian law in line with recent legislative changes in NSW to regulate the rescission of residential off-the-plan contracts on the grounds that the sunset date has lapsed as follows:
- Sunset clauses in residential contracts must contain certain information set out in the Bill. A sunset clause is defined in the Bill to mean a provision that allows the rescission of a residential off-the-plan contract when the relevant plan of subdivision has not registered, or the occupancy permit has not been issued, by the sunset date.
- A vendor must obtain the purchaser’s prior written consent if the vendor wants to rescind a residential off-the-plan contract under a sunset clause.
- A contract may only be rescinded under a sunset clause if the plan of subdivision has not registered, or an occupancy permit has not yet issued.
- A vendor must provide the purchaser with at least 28 days’ notice and the notice must set out:
- reasons why the vendor is proposing to rescind the contract; and
- the reason for the delay in either obtaining registration of the plan or issuing of the occupancy permit.
- A purchaser is not required to accept the vendor’s proposed rescission. The only avenue available to a vendor if the purchaser does not accept is to apply for an order from the Supreme Court.
- The Supreme Court may make an order permitting the vendor to rescind the contract if it believes it is “just and equitable in all the circumstances.” The Bill sets out various items which the Court may consider in determining whether to make this order.
- The vendor must pay the purchaser’s costs in relation to the proceeding, unless the Court is satisfied the purchaser unreasonably withheld consent to the rescission.
The Bill will also amend one of the offences in the current version of the Sale of Land Act 1962, so that it is a criminal offence for a person to knowingly conceal a material fact with the intention of inducing a person to buy land. This change potentially has wide ranging implications for vendor’s statements and other vendor disclosure material.
Other changes in the Bill
The Bill also contains provisions that regulate and restrict or prohibit land-banking options to purchase, rent to buy regimes and terms contracts. Interestingly, guidelines are proposed for types of rent to buy regimes that would be permissible, and may provide opportunities for rent to buy schemes in the future. At the moment, these further provisions are expected to come into effect from 1 December 2019, unless the government proclaims an earlier effective date.
We understand that Property Council of Australia and UDIA, with which we have close ties, are both lobbying for amendments to be reconsidered. We will issue more detailed commentary as the Bill progresses. In an ever-changing environment, it is more important than ever for developers and others in the property industry to stay on top of these changes to manage risk and minimise exposure.