South Australians buying homes off the plan could soon have greater protection from developers cancelling contracts and reselling properties at a higher price.
The State Government is proposing changes to the laws governing sunset clauses, which allow an off-the-plan contract to be terminated if a development is not completed by an agreed date.
While the clauses are designed to protect both buyers and sellers when projects run significantly behind schedule, the Government says there have been cases where they have been used by developers to cancel existing contracts before reselling properties at increased market values.
Under the proposed reforms, developers would no longer be able to terminate a contract using a sunset clause without the buyer’s consent unless the Supreme Court determined the cancellation was “just and equitable”.
If a purchaser refused to agree to the termination, the court could consider factors including the reasons for the delay, whether the developer had acted in bad faith and how much the property had increased in value.
Developers taking the matter to court would generally also be required to cover the buyer’s legal costs unless they could demonstrate the purchaser had unreasonably withheld consent.
The proposed laws could also apply retrospectively to off-the-plan contracts that are still current when the reforms come into effect.
Michael Brown said the changes were intended to prevent buyers from losing properties after committing significant amounts of money to a purchase.
“People invest their life savings into buying a home only for developers to run out the clock and cancel their contracts in order to sell the same property for a higher price,” he said.
The Government is also proposing broader changes to the information developers must provide to purchasers.
Buyers would receive more detail about the timing, cost, delivery and viability of projects, while developers would be required to notify purchasers within 14 days of a material change to a development.
That could include significant alterations to the design or draft plan.
Purchasers would then have 14 days to decide whether to accept the changes or rescind the contract.
“We want to ensure that there are strong consumer protections in place for those buying off the plan including timely access to information impacting their build and tougher regulation of sunset clauses,” Mr Brown said.
The proposed legislation will now be subject to consultation before any changes are introduced.
