This article discussing “Off the Plan” Purchase Regrets has been supplied by David Bannerman, Bannermans Lawyers.
Sale of strata apartments “off the plan”, i.e. before they are built, are common with new developments. In a rising market, purchasers are keen not to miss out or to lock in a price which they expect to be less than the value of the apartment when completed.
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However, in the current market, purchasers of apartments in unfinished buildings may be regretting their purchase and looking to a way out of the contract, especially given that they:
- are now faced with a weaker property market, undermining the expected benefits of their purchase.
- may be locked in for long periods of time, possibly after they become liable to pay stamp duty, with no certainty that the building will actually be completed.
- may be faced with changes which adversely affect their apartment, but about which they have no legal rights or no rights which they can practically enforce.
There may well be a solution and it is well worthwhile for purchasers in this situation to obtain legal advice about their options. For example:
- The vendor or its agent or other representatives may have made misrepresentations or engaged in misleading conduct, in relation to which the purchaser has rights.
- Although “off the plan” contracts typically limit purchasers’ rights, even a pro vendor contract will require a vendor to disclose and do many things and a vendor may have overlooked one or more of these, possibly giving the purchaser rescission or other rights.
- Conveyancing legislation gives purchasers various statutory rights, which the contract generally cannot override. In particular:
- a vendor is required to attach a number of prescribed documents to a draft contract before it is executed by the purchaser, failing which the purchaser may have a right of rescission.
- the legislation imposes a number of implied warranties in the sale contract, generally that a number of specified adverse matters do not apply to the apartment. A vendor must disclose any such matters, if applicable, as a purchaser may otherwise have a right of rescission.
- Home building legislation requires a developer, in most cases, to attach to the contract a certificate evidencing home building compensation insurance, failing which the purchaser will have a right of rescission. Where the relevant work has not commenced, it is sufficient to include in the contract a provision disclosing specified matters and giving the purchaser a right of rescission if the certificate is not provided within 14 days of the insurance being effected. Either way, if the certificate is overlooked, the purchaser may be able to rescind the contract.
- Pending amendments to the conveyancing legislation will take this even further for contracts signed after they commence, requiring a vendor to:
- Make available to prospective purchasers, prior to marketing the apartment for sale, a disclosure statement containing specified information, including a copy of the draft strata plan prepared by a registered surveyor and any additional information required by the regulations, which may require additional information, such as a schedule of finishes and details of unit entitlement allocations. Failure to comply will be an offence.
- Include the disclosure statement in the contract. The regulations will specify the consequences of failure to comply and it is expected that these will include a right of rescission.
- Notify the purchaser if the supplied disclosure statement was or has become inaccurate, which may give the purchaser a right of rescission, generally where the purchaser is materially prejudiced by the change and would not have entered into the contract if aware of the change. However, the developer will not be required to do this promptly, only being required to do this at least 21 days before completion.
- Give the purchaser a copy of the registered plan and any other document registered with the plan, e.g. by-laws, easements & covenants, the purchaser not being required to settle until 21 days after this is done and possibly having a right of rescission if an inaccuracy in the supplied disclosure statement is identified.
We have considerable experience in this area and can help purchasers who require assistance with these issues.
Read next:
- NSW: A Loophole To 4 Extra Years on An Owners Defects Warranty
- NSW Strata Title, Strata Scheme, Strata Plan. What is the difference?
Bannermans Lawyers
P: 02 9929 0226
Suite 702, 2 Elizabeth Plaza
North Sydney NSW 2060
***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
This post appears in Strata News #260
This article has been republished with permission from the author and first appeared on the Bannermans Lawyers website.
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