Issues with Off the Plan Contracts
Off the plan contracts involve purchasing property that has yet to be built. They are crucial in the delivery of new housing and essential infrastructure, but particularly susceptible to extensive or unforeseen delays that prevent occupation and settlement.
Summary of Proposed Reforms
- Mandating sunset clauses in contracts
- Allow buyers to withdraw if the project is not completed or sunset events do not occur by the agreed date
- Benefit: Reduces the risk of delays and provides buyers with an opportunity to rescind the contract and recover their deposit, minimizing financial loss.
- Enhanced disclosure of project progress
- Require developers to disclose project progress against key development milestones and construction timelines
- Benefit: Improves transparency and certainty by setting realistic expectations for buyers and ensuring developers are accountable for adhering to projected timelines
- Restrictions on extending sunset dates
- Restrict the developer’s ability to extend sunset dates except for reasons beyond their control, such as weather or supply disruptions, and impose time limits on such extensions
- Benefit: Protects buyers from unfair exploitation, particularly in cases where developers deliberately delay or cancel contracts to secure a higher bidder or mislead consumers
- Safeguard the buyers’ contractual interests
- Allow a form of caveat to be recorded on the title of the development land
- Benefit: Publicly preserves the purchaser’s rights, preventing other dealings or plans from being registered that could undermine their contractual interests
Issues with Covenants
Restrictive covenants are private agreements between landowners that limit the way land can be used or developed, such as by imposing restrictions on building height or style. They add value to the benefited land but can quickly become outdated, such that they no longer reflect modern building styles and public expectations. Since most covenants remain in effect indefinitely, they can limit the flexibility of building developments.
Summary of Proposed Reforms
- Expanding the class of ‘obsolete’ covenants
- Allow a broader range of outdated covenants to be removed after 12 years. Currently, this is only permitted for building materials, fencing, or structure value
- Benefit: Enables more efficient and effective land use and removes any unnecessary impediment to new development
- Introducing time limits on some new covenants, making it simpler to remove outdated covenants
- Impose time limits on some new covenants, making it easier to remove outdated restrictions
- Benefit: Improves flexibility for future developments and ensures covenants remain relevant to changing community needs
Note that these are proposed reforms and have not yet been implemented. Further legislative changes and detailed review are required before they take effect.
If you or someone you know wants more information or needs help or advice, please call 02 9150 6991 or email admin@vsgeorge.com.au
Important Disclaimer: This content contains general information for reference purposes only. If you are considering buying off the plan and entering into a contract, we strongly recommend obtaining professional legal advice tailored to your circumstances.