The proposed Conveyancing (Sale of Land) Regulation 2022 (proposed Regulation) has been drafted with the intention to replace the existing Conveyancing (Sale of Land) Regulation 2017 which is due to be repealed on 1 September 2022.
The proposed Regulation, whilst maintaining the objectives of the current Regulation will be updated with small amendments which address gaps in the treatment of Contracts that arise from certain Options and updates existing provisions through modern and simplified legal language that is in line with conveyancing and current practices
This proposed Regulation provides for the following key changes:
1. Prescribed Documents, Prescribed Warranties and Off the Plan Contracts for Sale
Part 2 Section 4 of the Regulation has been amended. This section requires a vendor to disclose certain documents as prescribed by ‘Schedule 1 Prescribed documents’ to include a reference to the detailed certificates required to be disclosed and separating the Schedule into two parts (Part 1 and Part 2). The existing Regulation comprises of only Part 1 detailing the prescribed documents. It is proposed that Part 2 of Schedule 1 will set out the additional disclosure requirements for off the plan contracts with specific reference to the documents relating to the land to be subdivided and proposed documents relating to the development. Such documents may include, where applicable:
- Draft building management statement;
- Draft strata management statements;
- Draft by-laws; and
- Proposed Schedule of finishes.
Whilst Part 2 of the proposed Regulation sets out the additional disclosure requirements that apply for off the plan purchasers. No additional disclosure documents and warranties are prescribed and it is noted that the same documents such as the Disclosure Statement, specific documents relating to the development and the land to be subdivided are required to be annexed to off the plan Contracts for Sale.
Outdated legislative wording have also been removed making terms and warranties more specific and easier to identify. The current Regulation makes reference to ‘prescribed warranties’ under Schedule 3 Part 1. There are no specific changes to any existing prescribed documents required to be disclosed or warranties whether implied or expressed but rather the sections and schedules have been rearranged for ease of reference.
Section 6 of the proposed Regulation has also been inserted providing clarity to the application of the vendors disclosure requirements under to Contracts for Sale arising from options to purchase the land.
2. Imposition of Cooling Off Periods in Options to Purchase
Section 17 of the proposed Regulation addresses the recent decision of BP7 Pty Ltd v Gavancorp Pty Ltd [2021] NSWC 265 (BP7)through the addition of section 17 subclause (3) suggesting that ‘The Act, section 66s does not apply to a contract made in consequence of the exercise of an option to compel the purchase of land’.
Section 66S of the Conveyancing Act 1919 (the Act) provides for cooling-off rights for contracts for the sale of residential property unless an exemption under section 66T applies and as such there is no cooling off periods for contracts that are made in consequence of the exercise of an option to purchase property. In BP7 the purchaser was allowed to exercise their cooling off rights and withdraw from the Contract as a result of the put option being characterised as an option to compel a purchase. The Court considered that an option to purchase property as described in the Act is to be given the ordinary meaning ‘an option able to be taken to purchase certain property’. A put option is not an option of the same character and does not involve the exercise of a choice to purchase property.
In order to overcome the dilemma faced by the vendors in BP7 (in which the developer purchasers obtained a cooling off period in respect of the contract which arose subsequent to the exercise of the put option), vendors need to insist on purchasers providing not only a section 66ZF certificate waiving the cooling off period for the option deed, but also a section 66W certificate waiving the cooling off period for the contract for sale which will arise in future when the put option under the deed is exercised
In response to this decision, the proposed Regulation addresses the decision in BP7 through the addition of subclause (3) by confirming that a Contract for Sale arising from an option to ‘compel’ a purchase (i.e a Put Option), is not subject to a cooling –off period in s66 of the Act thus extending the exemption in s66T.
3. Remedies to Purchasers
Through the inclusion of Part 5 titled as ‘Purchaser’s Remedies’, the proposed Regulation clearly sets out the circumstances in which a Purchaser may rescind a contract for the sale of land or an option to purchase residential property. This is a refreshing addition to the Regulation which is clear and provides a clear and straight forward direction in the event a Purchaser should exercise their right to rescind. Some instances for which a purchaser may rescind a contract or option include:
- The vendors failure to attach prescribed documents to the Contract for Sale;
- Vendor’s failure to attach a disclosure statement to an off the plan contract;
- Breach of a warranty prescribed under the Act section 52A(2)(b); and
- Purchaser under an option to purchase residential property to which a contract is attached may also rescind the option for breach of a warranty prescribed.
Conclusion
In conclusion the proposed Regulation supports and acts in conjunction with the Conveyancing Act 1919 (NSW) by providing for a strict vendor disclosure regime that reduces the opportunity for delays and aims to facilitate an early exchange of Contracts for Sale. This regime requires Vendors to make certain warranties in, and attach prescribed documents relating to issues of title and the property’s use thus providing adequate remedies for Purchasers who enter into a Contract for Sale relying on these Vendor warranties and prescribed documents.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
