Off-the-plan purchasers in New South Wales will now be afforded greater protections after new legislation was passed through the state parliament.
The NSW Minister for Innovation and Better Regulation, Victor Dominello, has introduced legislation into NSW Parliament to provide purchasers under off-the-plan contracts with greater protection against rescission by the developer under sunset clauses.
Under the current law, a developer may rescind a contract if the sunset date for the completion of the building has passed and it is not complete. However, some developers were deliberately delaying works so they can rescind contracts, refund deposits and sell the units for higher prices at a later date.
“Developers cannot take advantage of their own deliberate delays but current case law has placed the onus of proof on purchasers to prove this. Given the knowledge of the construction program lay with the developer, this was difficult for a purchaser to do, effectively having to commit to expensive court action and then find the evidence to support a claim of deliberate delay,” an update from Gaden’s law firm explained.
According to Gaden’s, under the new amendments being introduced by the Conveyancing Amendment (Sunset Clauses) Bill 2015 (NSW), developers will only be permitted to rescind contracts under a sunset provision if they can justify the termination of the off-the-plan sale.
This means the developer will be obliged to serve a notice on the purchasers of the development outlining their reasons for rescission at least 28 days before the proposed rescission date. The purchasers will then have to give their consent to the rescission.
“Effectively, this Bill reverses the onus of proof and makes the developer rather than the purchaser prove that the delay was beyond its control,” Gadens said.
The new law is effective as at 2 November 2015 and will apply to contracts regardless of whether they were entered into before on or after commencement of the Bill.