When material changes in an option deed trigger rescission rights – practical insights for developers and buyers

For projects in the planning or DA stage, uncertainty is a risk all parties take on. When that risk materialises through rising construction costs, zoning changes, or altered plans, parties turn to their option deed to evaluate their rights and explore solutions, and in some cases, a way out.

The NSW Supreme Court's decision in Boardman Super Fund Pty Ltd v Home & Land Centre Pty Ltd [2026] NSWSC 433 offers important insights into when a material change in a subdivision plan annexed to an option deed will trigger a right to rescind and when it won't.

The option deed and material change

A Put and Call Option Deed was entered into between the parties in respect of 20 lots in a residential subdivision. The subdivision plans annexed to the Deed were incomplete and soil classifications noted in the registered s88B instrument (in place of question marks in the draft instrument) triggered the Purchaser to rescind the Deed noting the "Material Change" provisions. The Purchaser also claimed they had rescinded the Deed pursuant to Division 10 of the Conveyancing Act and section 243 of the Australian Consumer Law (ACL).

The Vendor disputed the rescission, contending that its notice of change did not identify a "material change" and that the notice of rescission was invalid. The Purchaser's rescission was upheld by the Court, which found the changes materially impacted the Purchaser and satisfied the test for a "Material Change." The Court however rejected the Purchaser's estoppel and ACL claims, rectified drafting errors in the Deed, and ordered repayment of the Security Amount ($600,000) with costs.

Material Change provisions under the Option Deed

The Court found that the change in soil classifications from "unknown" (question marks) to "P" constituted a "Material Change" as defined under the Deed. The Court applied an objective test to determine materiality. The provision under the Deed setting out the Purchaser's rescission rights had two limbs:

1. Whether the Purchaser would not have entered into the Deed had it been aware of the change in the Disclosure Statement.

2. Whether the Purchaser would be materially prejudiced by the change.

On the second limb, the Court accepted that the "P" classification posed real risks of increased building costs, which were deemed materially prejudicial. It's notable that the Vendor had contended that there was no contractual benchmark in the Deed to ascertain whether there was a material prejudice by the change. The Court rejected this argument and held that the benchmark is the position of uncertainty of the site classification measured against the certainty of a “P” classification for a number of the lots.

To avoid this, consider defining benchmarks in the Deed, such as:

• particular site classifications that automatically constitute a Material Change;

• specified zoning changes or planning instrument amendments that affect the permitted use or density of the land; or

• a reduction in the number of developable lots below a stated minimum.

Drafting in these parameters gives both parties greater certainty from the outset and significantly reduces the scope for dispute.

Option deeds ≠ off-the-plan contracts

The Vendor's solicitors served a notice of change in the statutory form approved for the purposes of s 66ZN of the Conveyancing Act (the form used for off-the-plan contracts). The Purchaser contended this imported Division 10 rescission rights.

The Court found that Division 10 of the Conveyancing Act could not be relied on in this instance as Put and Call Option Deeds are not “off the plan contracts. The sale contract only arises on exercise of the option.

Misleading and deceptive conduct under the ACL

The Purchaser's ACL claim alleged that the CDS Plans were misleading in that they represented a scope of earthworks different to that actually carried out on the site. The claim failed on two grounds.

1. The expert evidence was fatal to the claim. The CDS Plans disclosed earthworks over the whole site and not the limited areas the Purchaser contended. The representations alleged were not made out on the evidence.

2. The CDS Plans were not provided by the Vendor or the Vendor's agent. They were provided by a referral agent (Mr Broadstock of Macquarie Project Marketing) who acted as an intermediary for a referral fee. The Court found that mere authorisation by the Vendor's principal to provide documents to potential purchasers was not sufficient to establish that the referral agent's representations were attributable to the Vendor. The referral agent was not a "representative" of the Vendor for the purposes of the ACL.

The Court also observed that cases involving misleading and deceptive conduct may arise "where an incomplete document is provided (or where a true statement is made but without disclosure of a relevant qualification)" but that was not the position here. There was no evidence to suggest that the site classifications being unknown at the time of the Deed was not an accurate representation of the position at that time. The original Disclosure Statement on its face made clear that the site classifications for the subject lots were unknown and were to be completed in due course.

Drafting errors can lead to disputes

The Deed contained errors including incorrect references to the "Grantee" instead of the "Grantor" and the "Call Option" instead of the "Put Option." The Court was willing to rectify these, applying the principle from Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11:

"Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been."

While the Court was prepared to correct these errors in this case, not every court will do so, leading to costly disputes and delays.