Recent amendments to the Sale of Land Act 1962 (Vic) affecting off-the-plan contracts

Recent amendments to the Sale of Land Act 1962 (Vic) (“the Act”) limit the ability of a vendor to rescind a residential off-the-plan contract based on a sunset clause.

A sunset clause is a provision in a residential off-the-plan contract that provides for the contract to be rescinded if the relevant plan of subdivision has not been registered or an occupancy permit has not been issued by the nominated sunset date.

Under the new provisions, before rescinding an off-the-plan contract under a sunset clause the vendor must obtain the written consent of the purchaser and give notice to the purchaser at least 28 days before the proposed rescission setting out:

• the reason why the vendor proposes to rescind the contract; and
• the reason for the delay in registering the plan or issuing an occupancy permit; and
• that the purchaser is not obliged to provide its consent.

If the purchaser does not provide its consent, the vendor may apply to the Supreme Court for an order to rescind the off-the-plan contract. The Court must be satisfied that making the order is just and equitable in all the circumstances and will take into account a number of matters including:

• the reasons for the delay;
• whether the vendor has acted reasonably or in bad faith; and
• whether the relevant lot has increased in value.

In seeking an order from the Court, the vendor may be liable to pay the purchaser’s costs relating to the proceeding or the Court may make an order for reasonable compensation of the purchaser.

Notwithstanding the new provisions in the Act, a vendor may still be able to terminate an off-the-plan contract under other clauses in its contract which may, for example, allow for termination if the vendor fails to procure a planning permit or finance for the development.