New laws proposed for Canberrans buying off-the-plan properties: ACT government

Canberrans purchasing off-the-plan properties will have greater protections after the ACT government announced proposed new laws that will make it harder for developers to rescind contracts.

The changes come after mounting complaints from buyers whose off-the-plan contracts were torn up earlier this year, leaving many buyers out of pocket.

Under the current law, a sunset clause or rescission clause — a common term in off-the-plan contracts — allows developers to rescind a contract if certain timeframes are not met.

ACT Attorney-General Shane Rattenbury tabled the Civil Law (Sale of Residential Property) Amendment Bill 2021 to the Assembly this morning that aims to ensure the rescission clause will only be actioned for “legitimate purposes”.

“Under the proposed changes, developers will still be able to include sunset and development delay clauses in off-the-plan contracts, but they will only be able to use these clauses to rescind a contract if the buyer consents or if they’re permitted by an order of the ACT Supreme Court,” he said.

“The developer must provide 28 days written notice to the buyer, setting out the reasoning behind the proposed rescission under the sunset or delay clause. 

“Then, the buyer may or may not give written consent to the rescission. If the buyer has not given written consent, the developer may seek an order from the Supreme Court to rescind a contract.”

Should the developer seek an order from the Supreme Court, the Supreme Court will take into account the impact that the revoked contract will have on both the buyer and seller. The developer will be liable to pay costs to the buyer unless the buyer had unreasonably withheld their consent.

The new laws were adapted from similar legislation in NSW and Victoria but will apply to both delay and sunset clauses.

“The evidence we have is that delay clauses give the same opening for inappropriate opportunistic conduct,” Mr Rattenbury said.

Kenneth Kong of TP Dynamics, which has developments in Bruce, welcomed the new changes noting that the recent complaints around off-the-plan properties had made buyers wary.

“We’ve personally never rescinded any contract and never thought to once they’d been exchanged. Whether you’re buying or selling, it’s a 50-to-50 per cent power to both parties involved so we have to ensure we’re doing everything that we’ve agreed upon,” Mr Kong said.

“There’s always a risk when buying and selling but we always have to ensure we are in control of the situation, no matter what the market looks like, so everything is right for all parties involved.

“I think protections for buyers should be there and think it’ll be very beneficial. It’s unfortunate that it’s taken an incident to bring about those protections but we welcome it nonetheless.”

Mr Rattenbury said the current laws were unfair to buyers who were “losing the homes they had set their hearts on, now inconvenienced and potentially out of pocket”.

“This shouldn’t be allowed to occur except in legitimate, justifiable circumstances, and certainly not just because a developer has determined they can make a greater profit elsewhere,” he said.

The new laws come after the Domain House Price Report for the September quarter showed Canberra’s median house prices reached a record-high $1,074,187, making it the second most expensive city in which to buy a house, after Sydney.

“These new protections for home buyers will help increase confidence from all involved in the off-the-plan process and create a more fair and equal system for all Canberrans,” Mr Rattenbury added.