By Janelle Metcalf (Associate)
The Sustainable Planning and Other Legislation Amendment Bill 2011, which was passed as an Act with amendments on 14 February 2012, makes a key change to the circumstances under which off-the-plan contracts for property sales may be avoided under the Land Sales Act 1984.
This amendment will provide some comfort to developers and financiers in times when neither can afford for contracts to be avoided due to a purchaser's default.
Here, partner Tony Baldwin and associate Janelle Metcalf outline the change the Act has introduced.
Key change to off-the-plan contract sales under the Land Sales Act 1984
Until now, section 27 of the Land Sales Act 1984 required a vendor to provide a purchaser of property under an off-the-plan contract with the registrable instrument of transfer for a lot within the sunset period of 3.5 yearsi from the contract date, failing which a purchaser could avoid the contract.
The Sustainable Planning and Other Legislation Amendment Act 2012 clarifies that the purchaser's right in section 27 to avoid the contract will not apply if the vendor is unable to provide the transfer due to the purchaser's default.
Significantly, this will not only apply to contracts entered into after 15 February 2012 (the commencement date of the amendment), but also to contracts entered into before 15 February 2012 where they remain in force and settlement has not yet taken place. This applies regardless of whether the sunset period has elapsed, and includes circumstances where the vendor has commenced an action for specific performance that has not yet been determined.
This amendment will close a potential loophole used by purchasers to avoid contracts in circumstances where the vendor is ready, willing and able to settle, but is prevented from handing over the transfer due to the purchaser's default. In these circumstances, the vendor would have previously been obliged to return the deposit to the purchaser under the requirements of the Land Sales Act - essentially allowing the purchaser to avoid a contract for its own default and receive a full refund of the deposit.
For more information about the changes the Sustainable Planning and Other Legislation Amendment Act 2012 makes to the Sustainable Planning Act 2009 and the Urban Land Development Authority Act 2007, please see our Alert issued 20 February 2012.
Footnote
IThis period may be extended by regulation to not more than 5.5 years in certain approved circumstances.
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