Riding off into the sunset – what you need to know about changes to the Sale Of Land Act 1962 (Vic)

By Alison Kennedy, Sharene Hambur and Kristie Megg

30 Aug 2018

Vendors and developers will both be affected by changes to the laws on off the plan contracts. 

The Sale of Land Amendment Bill 2018 was introduced into the Victorian Lower House on 21 August 2018. There has been some media attention on the provisions of the Bill that will prohibit auctions being conducted on ANZAC Day prior to 1.00 pm. However, the Bill also contains a number of very significant changes that will have an immediate effect on property developers.

Off the plan contracts of sale

The Bill introduces provisions similar to those in New South Wales that limit the ability of a vendor to rescind an off the plan contract of sale because either a plan is not registered or an occupancy permit is not issued before a stated sunset date. If the Bill is passed in its current form, it will apply to all off the plan contracts regardless of when they were entered into so that the requirement for the purchaser's consent will apply to any purported rescission after 23 August 2018. In seeking the purchaser's consent, the vendor will need to:

  • advise the purchaser that it is not obliged to provide consent; and 
  • provide details of the reasons why:
  • the vendor proposes to rescind the contract; and
  • there has been a delay in registering the plan or issuing an occupancy permit.

The purchaser has 28 days to respond to this request.

Further provisions are proposed which will come into effect on the day after this Bill passes Parliament and receives formal assent by the Governor in Council which will allow a vendor to seek a Supreme Court order to end the contract pursuant to a sunset clause. The Bill lists a series of matters that the Court is 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 will need to be satisfied that making the order is just and equitable in all the circumstances. If the order is granted, the Court will also be able to order that the vendor pay reasonable compensation to the purchaser. 

As a further protection for purchasers, vendors will 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.

A third raft of amendments which will come into effect on the earlier of a date to be advised or 1 December 2019, if the Bill is passed, require off the plan contacts to include specific statements about a vendor's right to seek rescission under a sunset clause. These statements will 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 is not obliged to provide its consent. Failure to provide such statements in a contract of sale will attract a fine of 240 penalty units ($38,685.60) for natural persons and 1200 penalty units ($193,428) for bodies corporate.

Offences in regard to the sale of land

The prohibitions in the Sale of Land Act 1962 (Vic) relating to concealing information with regard to the sale of land will be tightened so that, if the Bill is passed, it will be an offence to "knowingly" (as opposed to "fraudulently") conceal any material fact in relation to a property. The Director of Consumer Affairs will publish guidelines to assist vendors and agents to understand what material facts are likely to be for the purposes of this provision. As an example, it is expected that a material fact will include that the property was the site of a past homicide.

Terms contracts of sale

The Bill introduces a new provision that outlaws the entering into of a terms contract of sale for residential land (that is not agricultural land) for a sale price less than a prescribed amount. It is not known at this time what that amount will be. It will be an offence, attracting heavy penalties, to arrange, broker, induce or advertise a sale that breaches these provisions.

These provisions will come into effect on the earlier of a date to be advised or 1 December 2019. However, the Bill contains provisions allowing purchasers under terms contracts entered into before that commencement date, which would contravene the new provisions, to apply to a court or VCAT to terminate their contract. The Bill sets out the considerations that must be taken into account in considering such applications.

Other amendments

The Bill also contains provisions regulating:

  • rent-to-buy arrangements, where a person enters into a contract to purchase residential land requiring them to rent the land before purchasing it; and
  • land banking schemes, where a person contributes money to acquire rights in subdivisional land but does not have day to day control of the scheme or a proprietary interest in the land and is then granted an option to buy some of the land. 

What do vendors and developers need to do?

Vendors under off the plan contracts need to be aware that provisions prohibiting rescission of contracts of sale without consent of the purchaser, if passed, will take effect from 23 August 2018.

Developers of sites involving off the plan contracts need to prepare to amend their contracts to take account of the new statutory disclosure requirements which will come into effect no later than 1 December 2019, and potentially much earlier.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.