The Victorian Government has made important amendments to the notices that are required to be included in contracts of sale for off the plan sales and to entitlements to the cooling-off period.

Although these amendments to the Sale of Land Act are not yet operative, they are to come into force from 1 September 2011 or earlier if proclaimed. The provisions can be proclaimed at any time and therefore it is important to be prepared for them well ahead of September.

All developers, big or small, should familiarise themselves with the requirements now.

Front Page Notices

3 prominent notices are required to be placed on the "front page" (see paragraph below as to what a "front page" means) of the contract of sale for off the plan sales. The notices required read as follows: 

The limit of the deposit for an off the plan contract is still 10%.

If these notices are omitted or not included on the front page, a purchaser may be able to rescind the contract at any stage until the plan of subdivision is registered.

More importantly, there are developers who have issued off the plan contracts that sit with the purchasers or agents for weeks and sometimes months. Once the notice requirements become operational - all of those off the plan contracts that are in circulation but entered into after the changes to the Act come into effect, will be at risk.

Cooling-Off Period

Purchasers will be entitled, once the amendments are enacted, to terminate the contract during the cooling-off period even if they have received legal advice prior to signing the contract of sale, which is currently not the case.

When is a "front page" not the front page?

A conservative approach should be adopted when interpreting what the front page of the contract is. That is - it should be the physical front page of the document - which has tended lately to become the developer's marketing material or even the agent's/ lawyer's advertising coversheet.

It is only the new notices that need to be included on the front page so it may even be incorporated in the sales material if a developer insists on having it as the front page. Of course, it is important that the warnings appear in a suitable size font to ensure it is not difficult to read. I would recommend nothing smaller than 11 point.

What developer's should do now?

I suggest that all developers take the following actions:

1. Review all contracts for off the plan sales that are in circulation (This may be a good time to chase up those errant purchasers as well).
2. Consider inserting the required notices on the first page where the existing "Important Notices to Purchasers" are located on all new off the plan contracts now. That may involve some changes to the format of the contracts in terms of the marketing material involved. 
3. Consider preparing all new off the plan contracts with a modified cooling-off exceptions that reads:

"Unless the Consumer Affairs Legislation Amendment (Reform) Act 2010 has come into effect, you receive independent advice from a solicitor before signing the contract."

Once the amendments come into effect, this whole line can be deleted.

I lean towards the view that these changes have the effect of penalising developers more than protecting consumers, which was the intention of the legislators. But this is not the first off the plan requirement and it certainly won't be the last. I feel that a pragmatic outlook of this is required - at the end of the day, this is not the hardest requirement to meet and the developer's ability to make a return has not been diminished, provided you get sound advice.

Derrick Toh, Solicitor
Septimus Jones & Lee
Solicitor

Level 5, 99 William Street
Melbourne VIC 3000

p. (03) 9613 6555       f. (03) 9613 6500

30 May 2011