The Sale of Land Act Amendment Act 2019 (Vic) (the amending Act) introduced several important consumer reforms to the Sale of Land Act 1962 (Vic) (the SL Act). The amending Act makes amendments to the operation of sunset clauses in residential off the plan sales contracts (ROTP contracts).
Sunset clauses in residential off the plan sales contracts are governed by provisions in the Sale of Land Act 1962 (Vic).
The legislation prevents a vendor rescinding ROTP contracts based on a sunset clause without:
- at least 28 days’ written notice to purchaser
- a purchaser’s consent.
The ‘notice’ and ‘consent’ provisions apply to sunset clauses in all ROTP contracts from 23 August 2018
Sunset clauses in contracts from 23 August 2018 purporting to provide for automatic rescission will be taken to be substituted by the new requirements.
A sunset clause is a provision in a ROTP contract that provides for the contract to be rescinded if the relevant plan of subdivision has not been registered or occupancy permit has not been issued by the nominated sunset date.
The amending Act introduced five provisions into the SL Act for regulating sunset clauses in ROTP contracts to prevent a vendor from unjustly rescinding such contracts.
- Section 10A
A sunset clause in a ROTP contract on foot at 23 August 2018 that purports to automatically rescind the contract on the part of the vendor will be taken to permit the contract to be rescinded only in accordance with new sections 10B – 10E.
- Section 10B
Section 10B prohibits a vendor from rescinding a ROTP contract under a sunset clause unless the written consent of each purchaser to the rescission has been obtained and each purchaser has been given at least 28 days’ written notice before the proposed rescission.
The notice must specify:
- the reason why the vendor proposes to rescind the contract
- the reason for the delay in registering the plan of subdivision or the issuing of the occupancy permit
- that the purchaser is not obliged to consent to the proposed rescission.
- Section 10C
Any attempt to contract out of sections 10A and 10B will be of no effect.
- Section 10D
Any attempt to rescind an off the plan contract in contravention of the above provisions will be taken to be a breach of the contract. This entitles the purchaser to take all contractual remedies available to them for a breach of contract such as issue a default notice and rescind the contract and claim damages.
- Section 10E
A vendor can apply to the Supreme Court for an order permitting rescission of a ROTP contract under a sunset clause if it is just and equitable in the circumstances. Section 10E details matters the court must take into account when determining whether it is just and equitable to order rescission of the contract.
- Section 10F
All new ROTP contracts entered into after 1 March 2020 (proclamation of the amending Act) must include a statement that:
- the vendor is required to give notice of a proposed rescission of the contract under the sunset clause
- the purchaser has the right to consent to the proposed rescission but is not obliged to consent
- the vendor has the right to apply to the Supreme Court for an order permitting the vendor to rescind the contract
- the Supreme Court may make an order permitting the rescission of the contract if satisfied that making the order is just and equitable in all the circumstances.
The amending Act also contained other significant consumer reforms including:
- the requirement that a vendor not fraudulently conceal material facts in relation to a sale of land (Sale of Land Act 1962 section 12d) was broadened to a requirement not to knowingly conceal material facts. Consumer Affairs Victoria issued guidelines to assist vendors and agents to understand what a material fact is likely to be. The court may take such guidelines into account when hearing a case.
- prohibiting certain terms contracts
- prohibiting certain rent-to-buy arrangements
- amendments concerning options to purchase under certain land banking schemes – requiring payment for the option to be paid to a legal practitioner, conveyancer or licenced estate agent acting for the vendor to hold on trust for the purchaser until registration of the plan of subdivision or expiry of date for exercise of the option.