New laws introduced in Victoria will prevent vendors / developers from relying on sunset clauses in off-the-plan contracts to purposely delay residential building projects to the detriment of the buyer.
The Sale of Land Amendment Act 2019 (Vic) requires vendors to obtain written consent from a purchaser, or alternatively seek permission from the Supreme Court, to exercise certain rescission rights under a sunset clause in an off-the-plan contract.
These laws operate retrospectively affecting all off-the-plan residential contracts entered from 23 August 2018.
Buyers and vendors / developers should be aware of their respective rights and obligations.
Why the new laws?
The new provisions enable a vendor to rescind a residential off-the-plan contract only in circumstances where:
- the contract contains a sunset clause purporting to give the vendor rescission rights; and
- the relevant plan of subdivision has not been registered or an occupancy certificate has not issued by the sunset date; and
- at least 28 days before the vendor proposes to rescind the contract, written notice is provided to each purchaser of the vendor’s intention to do so.
The notice must include the reason for the delay in registration of the plan or issue of the occupancy permit, and a statement that the purchaser is not required to consent to the proposed rescission.
If the purchaser does not consent, the vendor may apply to the Supreme Court for an order to rescind the contract in accordance with the sunset clause. The Court may make such an order if it is satisfied that it is just and equitable to do so in all circumstances. In determining the application, the Court must consider:
- the contractual terms;
- whether the vendor has acted unreasonably or in bad faith;
- the reason for the delay in registration of the plan or issue of the occupancy permit and, if relevant, the likely date on which the plan will be registered, or occupancy permit issued;
- whether there has been an increase in the value of the subject property;
- the effect of the rescission on each purchaser;
- any other prescribed or relevant matter.
Key takeaways
Vendors / developers of residential subdivisions should review their contract terms and practices to ensure they are consistent with the new laws. Contracts containing a sunset clause must also include a prescribed statement noting the vendor’s requirements and the purchaser’s rights under the laws. Significant monetary penalties apply for non-compliance.
Given the retrospective nature of the new laws, vendors / developers wishing to rescind an existing off-the-plan contract under a sunset clause should obtain appropriate advice.
The new sunset provisions cannot be avoided by contrary contractual terms.
Purchasers of residential off-the-plan property should seek legal advice if they receive notification from a vendor / developer purporting to rescind the contract.
If you or someone you know wants more information or needs help or advice, please contact us on 03 9772 2100 or email info@victorylaw.com.au.