The New South Wales Government has announced the Conveyancing Legislation Amendment Bill 2018, which, amongst other things, proposes to:
- introduce a requirement for vendors of off-the-plan contracts to attach a disclosure statement to their contract before commencing their marketing
- extend the cooling-off period for off-the-plan contracts to 10 business days (up from five business days)
The Bill had its second reading in the Legislative Council on 17 October 2018. While the Bill must now make its way through the Legislative Assembly, developers selling off-the-plan should start to think about what changes they will need to make to standard contracts so they are ready should the Bill pass.
The vendor under an off-the-plan contract will be required to make a disclosure statement available for inspection, with the contract, before the property can be advertised for sale.
The disclosure statement will need to include a copy of the draft subdivision plan and other prescribed documents. Exactly what other prescribed documents will be required is unknown but they are likely to include proposed strata by-laws, proposed community or neighbourhood management statements and perhaps a schedule of finishes, as applicable.
Once a contract is exchanged, if the vendor becomes aware that the disclosure statement contains inaccuracies in a “material particular”, a notice of changes must be served on each affected purchaser at least 21 days before completion of the contract. Each purchaser will have the right to rescind if any change notified in the notice of changes is such that the purchaser would not have entered into the contract had the purchaser been aware of the change and would be materially prejudiced by the change.
In a practical sense, the disclosure statement and the material attached to it will not differ greatly from the documents and information already provided by most developers. In essence, the new obligation prescribes a minimum standard of information that all developers will need to meet. However, the legislative changes will cause developers to consider more deeply, in the early stages of a project, matters such as by-laws which may not be as important to the developer but will be of great interest to potential buyers looking for a future home. In addition developers who go to market without a development consent will need to be confident consent conditions when granted will not cause issues.
Another proposed change will be to the statutory cooling-off period. Currently, the legislation provides purchasers a five business day cooling-off period that commences on the day the contract is exchanged. This will be extended to 10 days for off-the-plan contracts.
The new legislation still provides a mechanism for the cooling-off period to be waived if a solicitor signs a section 66W certificate which states that the contract has been explained to the purchaser. The position will not change in regards to the purchaser forfeiting 0.25 per cent of the purchase price of the property to the vendor.