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Big off-the-plan reform push launched by REINSW

14 August 2019 Reporter
Parliament of NSW

In response to government proposals for off-the-plan contracts, the REINSW has called for protective financial risk provisions to be extended to all parties involved in these contracts, not just purchasers.

At the end of 2018, the NSW government passed legislation to give stronger protections and greater transparency to residential property purchasers under off-the-plan contracts. These changes were introduced by the Conveyancing Legislation (Amendment) Act 2018 (NSW).

Before the off-the-plan protections can commence, regulations need to be made that set out the detailed requirements of the new regime. The government conducted a consultation process on the details of the new regime in July after releasing a discussion paper.

One of the regulatory changes being proposed in clause 19A of the draft amendment regulation would allow a purchaser to, rather than rescind the off-the-plan contract, claim from the vendor up to 2 per cent of the property’s purchase price in compensation “should a material particular change”.

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In its submission to the discussion paper, the Real Estate Institute of New South Wales (REINSW) noted that there may be circumstances where a purchaser takes issue with changes made to a property subject to an off-the-plan contract, particularly where they impact the quality and size of the developed property.

However, the submission pointed out that these changes are not always made at the request of the developer.

“Accordingly, the REINSW recommends that the government further consider how consumers and developers deal with the circumstance where the built property is not the same as the off-the-plan contract through no fault of the developer,” it stated in the submission.

The submission explained that there are council regulations specific to the area in which a property is being built which may have certain restrictions with respect to zoning, overlays, dwellings, plumbing and drainage systems, landscaping requirements and increased erosion and sediment practices.

“No doubt the government appreciates that these are factors which are unforeseen at the time of entry into an off-the-plan contract but become apparent throughout the building process,” the submission stated.

While the REINSW acknowledged in the submission that the discussion paper and the draft amendment regulation had attempted to clarify what constitutes a material particular relating to a purchaser’s compensation claim, there needed to be further clarification around this in regard to council regulations.

“The REINSW recommends that the government set out the process in the draft amendment regulation where a material particular changes as a result of the relevant council’s specific regulations and restrictions which could not have been known to the parties at the time of the agreement,” it stated.

“[The government should also] consider the need for a developer to claim compensation in these circumstances and amend the draft amendment regulation appropriately.”

The submission also requested that the government consider the instance where the land on which a property is built increases in size due to changes requested by a council.

“This ultimately increases the property’s value. The REINSW, therefore, urges the government to amend the draft amendment regulation to include certain instances where a developer may reasonably charge the purchaser for an amount reflecting any increase in land size, particularly when the land size is estimated in the contract,” it stated.

“In the interests of fairness and consumer protection, the REINSW recommends and supports the inclusion of protective financial risk provisions applicable to all parties involved in off the-plan contracts and not just the purchaser. It further recommends that the government reflect this position in the draft amendment regulation.”

Big off-the-plan reform push launched by REINSW
Parliament of NSW reb
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