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  • New provisions have been inserted into the Conveyancing Act 1919 deeming invalid a vendor’s right to unilaterally end an off-the-plan contract by rescission under a sunset clause.
  • The new provisions have retrospective application from 2 November 2015. From this date, if a vendor seeks to rescind an off-the-plan contract under a sunset clause the vendor must first obtain the purchaser’s written consent or an order of the Supreme Court. The new provisions do not affect the purchaser’s rights under the contract.
  • In granting the order for rescission, the Court must be satisfied that rescission is ‘just and equitable’ in all circumstances and must take into account certain considerations.

Recent reports of vendors exercising their contractual rights to rescind off-the-plan contracts by the purposeful manufacture of delays to trigger a rescission right under a sunset clause has resulted in intervention by the legislature.

On 17 November 2015, the NSW Government passed the Conveyancing Amendment (Sunset Clauses) Act 2015. The amending Act inserts the new Division 10 into part 4 of the Conveyancing Act 1919 that prevents vendors of an off-the-plan contract  from rescinding the contract under a sunset clause. Where the sunset clause in the contract reserves the vendor’s right to rescind, the clause is voided and the new provisions will instead apply.

In off-the-plan contracts, the nominated sunset date is usually defined as the last date by which the developer must complete their primary obligation in the contract – to achieve registration of the relevant subdivision plan.

On registration, a plan of subdivision creates legally defined lots and boundaries of land, thereby enabling the vendor to convey the subject lot to the purchaser named in the contract for the price agreed at the time of exchange.

The new provisions are consumer protection-focused and the Minister’s second reading speech provides background to the urgent changes. Ultimately, the provisions seek to prohibit a vendor from rescinding an off-the-plan contract with one buyer under a sunset clause and reselling to someone else at a higher price. If the vendor intends to rescind the contract, they must now do so with the purchaser’s consent or leave of the Supreme Court. If an application is made to the Court by the vendor, the Court will undertake a review of the merits of the vendor’s application against the considerations in the new section 66ZL(7) of the Conveyancing Act 1919.

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