A peak real estate body has said the review of legislation surrounding off the plan property agreements in New South Wales is vital.
Last week, NSW Minister for Innovation and Better Regulation Victor Dominello said the NSW Office of Fair Trading will conduct a review into off the plan agreements, especially the use of sunset clauses.
Sunset clauses in off the plan agreements allow the developer or buyer to cancel the contract if work is significantly delayed and Dominello has expressed his fears that developers are deliberately delaying work to cash in on capital growth.
“We applaud the government for their proactive response to this issue,” Real Estate Institute of New South Wales president Malcolm Gunning said.
“The current legislation is allowing developers to take advantage of a fast moving property market that has exceeded expectations in recent times.
“The issues facing consumers need to be fully explored and the legislation amended to ensure they are protected financially and emotionally. Purchasing a property is a huge commitment, and sunset clauses in their current form can see consumers exploited.”
The proposed changes have also been welcomed by others in the property industry, with Rich Harvey, managing director of Sydney based buyer’s agency Property Buyer, saying he has long held concerns about sunset clauses being used during a market's boom period.
“I always advocate caution in buying off the plan in a rising market because as projects near completion you see contracts being cancelled so developers can resell them at much higher prices while the buyers miss out on the extra equity,” Harvey said.
Dominello said the government is considering two methods of reform to sunset clauses; the first would allow only the buyer to use a sunset clause to rescind a contract, while the second would allow developers to utilise the clauses, but they would then be required to pay the original purchaser a sum equal to the difference on the sale price between the two contracts.