Justin Lucas reports that "off the plan" contracts for the sale of land in Victoria are under attack again. The Victorian Supreme Court determined this month that the registration period specified in off the plan contracts is not capable of being extended. Such contracts routinely provide a right for the developer to extend the registration period in order to allow sufficient time for the plan of subdivision to be registered. The decision means that developers cannot rely on time extension clauses but must, before signing up purchasers, ensure that their contracts specify a sufficient period for registration or risk purchasers having an entitlement to avoid the contract.
In Victoria, unsubdivided land may be sold "off the plan" subject to compliance with certain rules aimed at consumer protection provided in the Sale of Land Act. One rule is that the contract "specify" a period for the registration of the plan of subdivision after which either party may terminate the contract (if the plan has not been registered). Since this requirement was introduced in the early 1990s, off the plan contracts have routinely provided a right for the developer to extend the stated time frame due to delays or as of right for a specified period.
The case involved a multistorey apartment project. The land sale contracts for the project specified a 30 month period for registration of the plan ending around late January 2009. The developer gave notice on three occasions purporting to extend the registration date, in aggregate, to 31 May 2009. Each extension notice was given before the expiry of the registration period as extended.
On 27 March 2009, the purchaser purported to terminate the contract arguing that the extensions were invalid. The developer sought to enforce the contract.
In the decision published on 5 June 2009, a single judge of the Victorian Supreme Court held that the period for registration under an "off the plan" contract, once stated in the contract, cannot be changed.
After reviewing the history of the introduction and progressive amendment of the relevant consumer protection provisions, the Court concluded that the purpose of the provisions was to provide purchasers with certainty. Accordingly, the Court determined that the time frame, once stated in the contract, is not capable of being subsequently changed in a way that binds the purchaser. This was held to apply even where the purchaser subsequently agrees to the change. Equally, it extends to defeat the operation of any provision of the contract that would have the effect of changing the registration date.
An appeal against the decision was lodged on 19 June, so it is not yet clear whether the decision will ultimately stand.
As market leaders in property law, we will be raising the impact of this decision with government, through appropriate industry bodies, seeking legislative reform to protect projects, jobs and security of the industry.
Until the appeal is determined, developers and other vendors of land off the plan should ensure that the period allowed for registration is more than ample or risk purchasers having an entitlement to terminate.