The Sale of
Land Amendment Bill 2018 was passed by the Victorian Legislative
Assembly and introduced into the Victorian Legislative Council on 20 September
2018. However, with the Victorian state election in November 2018, the
legislation lapsed.
As the state government was re-elected (with an
increased majority), I expect that the legislation will be reintroduced into
the Victorian Parliament this year.
Off the plan contracts of sale
The 2018 version of the Bill introduced provisions
similar to those in New South Wales that limited the ability of a
developer/vendor to rescind an 'off the plan' contract of sale because either a
plan was not registered or an occupancy permit was not issued before a
nominated sunset date.
The Bill stated that it would apply to all "off the plan" contracts (regardless of when they were entered into), so that the requirement to obtain the purchaser's written consent would apply to any purported rescission after 23 August 2018. I expect that date will change once the Bill is reintroduced.
The 2018 Bill introduced the definition of a “sunset
clause” that applied only to residential contracts which
provided for the contract to be rescinded if either the plan had not been
registered by the sunset date or an occupancy permit has not been issued by the
sunset date.
If the Bill is eventually enacted in the same form as
the 2018 Bill, new sections 10A and 10B of the Act will provide that a vendor
can no longer automatically rescind a contract under a sunset clause unless the
vendor first obtains the written consent to the rescission of each
purchaser after giving at least 28 days written notice before the proposed
rescission. The notice must state:
(a) the reason why the vendor is proposing to rescind
the contract;
(b) the reason for the delay in the registration of
the plan of subdivision or the issuing of the occupancy permit; and
(c) that the purchaser is not obliged to consent to
the proposed rescission.
This right cannot be contractually removed (s 10C).
As in New South Wales, a vendor/developer would be able to obtain an
order from the Supreme Court to rescind the contract if the contract contains a
sunset clause, or if all the purchasers do not agree.
The Bill listed the matters that the Court was to take
into account in determining if such an order should be made, including:
- the
reasons for the delay;
- whether
the vendor has acted unreasonably or in bad faith;
- whether
the lot in question has increased in value; and
- the effect
of the rescission on the purchaser.
The Supreme Court would need to be satisfied that
making the order is just and equitable in all the circumstances. If the order
was granted, the Court would also be able to order that the vendor pay
reasonable compensation to the purchaser.
As a further protection for purchasers, vendors would
need to pay purchasers' costs of Supreme Court proceedings, unless they satisfy
the Court that the relevant purchaser unreasonably withheld consent to
rescission of the contract.
Other amendments proposed in the 2018 Bill required
off the plan contacts to include specific statements about a vendor's right to
seek rescission under a sunset clause.
These statements would set out the need for vendors to obtain purchasers' consent or a Supreme Court Order to rescind a contract of sale pursuant to a sunset clause and also confirm that a purchaser was not obliged to provide its consent. Failure to provide such statements in a contract of sale would attract a fine of 240 penalty units ($38,685.60) for natural persons and 1200 penalty units ($193,428) for bodies corporate.
The 2018 Bill proposed that its provisions were to
come into effect on the day on which the Bill received Royal Assent. If
the provision is enacted in this form, it may mean that the Bill may apply
to existing contracts.
Not surprisingly (as this is consumer legislation),
there is no protection for vendor/developers against purchasers using a sunset
clause to their advantage should the value of the land sold go down (noting
that the property market has recently had a downturn in Melbourne).
Practitioners should note that the 2018 Bill also
contained other amendments to the existing legislation, including the
prohibition of:
-
rent to buy arrangements;
-
terms contracts below a prescribed value; and
-
some land banking arrangements.
It should be noted that the New South Wales Supreme
Court has made at least one decision on an application pursuant to the relevant
NSW provisions (see: DGF Property Holdings P/L v Butros & Ors [2018]
NSWSC 344). That case sent a strong message to developers that the Court will not
easily permit rescission of off-the-plan contracts, even if the vendor’s
conduct cannot be said to be in bad faith or unreasonable. In that case, the
developer had been in dispute with the vendors of the land to the developer,
which was the main cause of delay in the registration of the plan of
subdivision. Despite that, the Court only granted the application on certain
specified conditions being met by the developer.
WG Stark
Hayden Starke Chambers
