In addition to the changes detailed in our previous newsletters, further changes to the Land Sales Act and the Body Corporate and Community Management Act for the sale of “off the plan” property are:
1. Sunset date for settlement remains calculated from the date the “buyer enters into the contract”
The Act still requires that the sunset date be calculated from the date “the buyer enters into the contract” i.e: the date the buyer signed the disclosure statement, not the contract date. It’s important to know when the buyer signed the contract.
We recommend that the execution section of the contract contain a date field for the buyer to date when they signed the contract. This will enable the sunset date as required under the legislation to be clearly calculated by sellers, and assist in avoiding any potential disputes.
The legislative sunset date is: for body corporate:
- a date specified in the
- contract (up to a maximum of 5 ½ years) or;
- 3 ½ years if no date specified in the contract
- for land subdivisions: 18 months
The Act has changed from the seller being required to provide the buyer with a “registrable instrument of transfer” by the sunset date and replaces it with “settlement”.
This may reduce the sellers ability to provide extended settlement time frames to buyers as they may provide buyers with termination rights for failing to settle by the sunset date.
Previously, if under a current contract a vacant land lot was registered 16 months after signing of the contract, with extended settlement time frame of twelve months from plan registration, the seller could still comply with the sunset date requirement by providing the registrable transfer document. Settlement could then occur at any time after, as per the contract or as agreed between the parties. At settlement, the buyer would get the release of mortgages and pay the purchase monies.
However, this flexibility is no longer available. The legislation now specifically provides that settlement must occur by the sunset date. Accordingly any extended settlement time frames must be considered carefully, and developments conducted as quickly as possible to ensure compliance and reduce risks.
2. Maximum Deposit increase in amount to 20%
The Act increases the deposit maximum to 20% of the purchase price for lots sold off the plan prior to plan registration and separate title issuing.
This will offer greater protection for developers, as they will now be able to have higher deposits to claim if the buyer defaults. This change will assist with proving financial viability of developments to financiers and obtaining finance to progress the development.
It will be interesting to see if the changes will result in higher deposits being paid by a majority of buyers, so as to provide a real beneft to developers.