From 1 December 2019, amendments to the Conveyancing Act 1919 (NSW) and the Conveyancing (Sale of Land) Regulation 2017 (NSW) are set to commence in New South Wales which place new disclosure obligations on vendors under off-the-plan contracts for the sale of residential lots (OTP Contracts) and are geared to offer purchasers greater transparency, new remedies and stronger protections when they buy any residential off-the-plan property.
The key changes in relation to OTP Contracts in New South Wales are as follows:
Under the new disclosure requirements, any OTP Contract must be accompanied by a disclosure statement. The disclosure statement will set out information such as any relevant sunset dates or if development approval has been obtained, and must include the following documents:
- a draft plan of the proposed lot prepared by a registered surveyor;
- any proposed schedule of finishes;
- any s88B instrument proposed to be lodged with the plan; and
- if applicable:
- draft by-laws;
- draft management statement and the draft of any proposed development contract;
- draft strata development contract;
- draft strata management statement required for the registration of the strata plan; and
- draft building management statement.
If the relevant prescribed documents are not attached prior to signature, the purchaser will be entitled to rescind an OTP Contract within 14 days of the date of exchange.
Vendors must notify purchasers of any changes that occur during development which make what was previously disclosed inaccurate in a ‘material particular’. A ‘material particular’ will be anything that adversely affects the use or enjoyment of the lot being sold.
If the vendor fails to make a disclosure of any changes to a ‘material particular’, a purchaser will either:
- be able to rescind an OTP Contract if they can show that:
- they have been materially prejudiced by the change to a ‘material particular’; and
- had they been aware of the change to a ‘material particular’, then they would not have proceeded with the OTP Contract; or
- have the option to keep the OTP Contract on foot and claim compensation for the change to the ‘material particular’ in an amount of up to 2% of the purchase price.
Purchasers must either claim compensation or rescind by no later than 14 days after being notified of the change to a ‘material particular’.
Currently, vendors must first obtain an order from the Supreme Court before they are allowed to rescind an OTP Contract using a sunset clause. However, the new laws commencing 1 December further provide that the Supreme Court may award damages to the purchaser even if it permits the vendor to use a sunset clause to rescind an OTP Contract.
Deposits or installments made under an OTP Contract entered into on or after 1 December 2019 must be held:
- as trust money by a real estate agent; or
- as trust money by a licensed conveyancer; or
- as trust money or controlled money by a law practice,
and under no circumstances be released to the vendor before settlement.
Vendors must provide purchasers with the final registered plan of the lot at least 21 days before settlement of an OTP Contract. If the registered plan contains a change or inaccuracy to a material particular that has not been previously disclosed, the purchaser will again be afforded the right to elect, by no later than 14 days after being provided with the final registered plan, to either rescind the OTP Contract or proceed and claim compensation.
Cooling off period
Cooling off periods under OTP Contracts entered into on or after 1 December 2019 will be extended from 5 business days to 10 business days.
If you require further advice on how these changes will affect you or if you require any assistance to ensure compliance with the new disclosure requirements, please do not hesitate to contact us.