An update on Sale of Land Act changes
In May 2019, we published an article about the proposed changes to the Sale of Land Act 1962 (Vic) (Act). The changes have now come into effect.
At the time of writing our May 2019 article, details had not yet been released on:
- what constitutes material facts for vendor statement disclosure purposes
- rent to buy and terms contract restrictions.
Recently, additional guidelines and regulations were released on these items. We explain below what the regulations and guidelines mean for developers.
Increased vendor disclosure requirements when selling land – material facts
Changes to the Act mean vendors’ disclosure obligations have increased. As of 1 March 2020, a person must not ‘knowingly’ conceal material facts in any statement, promise or forecast with the intention of inducing any person to buy land. Until now:
- this obligation was limited to ‘fraudulently’ concealing material facts
- there was no specific guidance about what constituted ‘material facts’.
Consumer Affairs Victoria has now published a detailed analysis of how to determine if something is a ‘material fact’ that should be disclosed. The following are just a few of the examples of possible material facts given in the guidelines:
- prior investigations have revealed a defect in the structure of the building such as termite infestation, combustible cladding or asbestos;
- the underlying cause of an obvious physical defect that is not readily apparent on inspection (for example, whilst a large uncovered crack in a wall would be obvious to a purchaser on inspection, the underlying reason for the crack, such as defective stumping, may not);
- where the property has a history of use as a drug laboratory or of pesticide use, or is the site of a homicide;
- building work has been done without a permit or that is otherwise illegal;
- neighbouring properties that have development proposals that may affect the use and enjoyment of the property being sold to a greater extent than usual.
The key takeaway is that when selling property, you should talk to your lawyer about any matter that might be considered a material fact.
Rent to buy restrictions
The recent changes to the Act mean that rent to buy arrangements are prohibited unless the arrangement complies with the regulations. Rent to buy arrangements are those that involve a purchaser renting the dwelling for a period of time before purchasing it.
New Sale of Land (Exemption) Regulations 2020 (Vic) (Regulations) have recently been made which prescribe requirements for rent to buy arrangements.
The requirements address matters such as:
- the need for a written rent to buy agreement, called a sale deed;
- details of what the sale deed must specify;
- how the rent to buy payments must be treated by the vendor
- the circumstances in which the vendor refunds payments to the purchaser.
On the back of COVID 19 and impacts on the market, if developers are looking at alternative models to sell product and are considering rent to buy, pay careful attention to these guidelines.
The Act now says that a person must not knowingly sell residential land under a terms contract where the sale price is less than a particular amount. The Regulations now prescribe that amount to be $750,000. The penalties for failing to comply are fines and imprisonment.
As a reminder, any off the plan residential contracts signed on or after 1
March 2020 that contain a sunset clause, must be modified to include the
new statements to purchasers. Failing to have the new statements in a
contract attracts a penalty of 120 penalty units (currently $198,264) for
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