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We signed a contract and paid a deposit on an apartment (yet…

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We signed a contract...

We signed a contract and paid a deposit on an apartment (yet to be built) in a retirement village. Originally we were told that the build would start in March 2017. That didn't happen. Then we were officially told that the build would start in June 2018. Now that isn't going to happen. It may start in Jan/Feb 2019. We received correspondence today advising that they are changing the plans and that our apartment may be changing and therefore our purchase price may also be changing.

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

We are in Victoria. My question is, what about the contract that we have signed. Are they allowed to change what we have already sign up for?

Lawyer's Assistant: Has anything been filed or reported?

What do you mean?

Submitted: 1 month ago.Category: Australia Law
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Answered in 5 minutes by:
3/13/2018
Solicitor: John Melis, Lawyer replied 1 month ago
John Melis
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Experience: Principal Lawyer at Legal AU Pty Ltd
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Hi, my name is***** solicitor in Melbourne. Thank you for using Just Answer, and I will answer your question today, and ask various questions to narrow the issues in your post raised.

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Solicitor: John Melis, Lawyer replied 1 month ago

off the plan contracts have have various clauses that allow the developer to change the development as the need to in accordance with town planning requirements.

where the variance of the apartment exceed a certain limit subject to the wording of the contract you may be able to cancel that agreement.

off the plan contracts are risk documents and do require careful review.

did you have a lawyer or conveyancer review the contract before you sign the agreement

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Solicitor: John Melis, Lawyer replied 1 month ago

Where the plan of subdivision is detailed in the contract as a staged subdivision, the developer under a staged subdivision does have the power to make changes in the earlier stages. The developer does not require the consent of yourself make a number of the changes that are required to enable future stages to be carried out.

If you are seeking to rescind the contract the following may assist you.

Section 9AC Amendments to plan

(1) If after a prescribed contract has been entered into and before the registration of the relevant plan of subdivision an amendment to the plan is required by the Registrar or requested by the vendor, the vendor shall within 14 days after the receipt of the requirement of the Registrar or the making of the request by the vendor (as the case requires) advise the purchaser in writing of the proposed amendment.

(2) The purchaser may rescind a prescribed contract of sale within 14 days after being advised by the vendor under subsection (1) of an amendment to the plan of subdivision which will materially affect the lot to which the contract relates.

The main point about section 9AC of the Act for the purchaser, is to read and understand the contract of sale, including all attachments, such as building elevations, floor layouts, measurements, easements and other restrictions. The contract and attachments will form the basis of raising arguments for recision under the signed agreement, if there has been, or will be a material change to the plan of subdivision.

The vendor’s obligation under the contract of sale is to deliver the property as per the contract signed.

The purchaser of an off the plan subdivision needs to be aware that the vendor’s are given sufficient latitude to change the plan and specifications, which could result in the land, or apartment, or common areas being substantially different to the plan and specifications that were signed for in the contract. How this can occur, is that the contract will have a special condition clause, which will state that the vendor can make changes or variations to the plan and specifications. Then the more broad this special condition clause is, the greater the risk to the purchaser that what they thought they were buying, may not be the case because of the special condition clause. The purchaser when they sign the contract accepts the special conditions that are included, unless they are crossed out and initialed by both the purchaser and vendor. The argument point for recision by a purchaser under section 9AC of the Act will be based on how significant and material the change was under the agreed contract.

In Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1984) the court said:

Of course, it would be quite unjust if minor changes or adjustments in these areas were to entitle a purchaser to avoid the contract. On the other hand, if the changes are not insignificant and have the effect of changing the substance of that contracted for, the intention of the legislature would seem to be plain.

If a standard contract of sale form is used, and where there are special conditions, understanding these conditions are important. This is because the purchaser may think what they are getting is one thing, when in fact it may be different, due to carefully drafted special condition clauses that allow for changes of what is being built.

Section 9AE Recession of prescribed contract

(1) If the vendor under a prescribed contract of sale of a lot fails to comply with section 9AA(1) or (2) or 9AB the purchaser may rescind the contract of sale at any time before registration of the plan of subdivision.

The standard contract of sale condition 11.2 complies with the requirement of section 9AA(1) of the Act. If a standard contract form is not used, there is a strict compliance that the vendor must comply with section 9AA(1) of the Act, and if they do not, the purchaser may exercise the avoidance right under the section 9AE(1) of the Act. Section 9AA(2) is a requirement that the deposit paid does not exceed more than 10% of the purchase price. This is usually not at issue in off the plan purchases. The purchaser should keep in mind when they are negotiating an off the plan sale, they can offer to pay less than 10% as a deposit, as the same legal rights will apply under a 5% deposit paid. Section 9AB concerns disclosure and if it does not properly occur by the vendor under the contract, the purchaser may apply the provisions under section 9AE to rescind the contract.

Section 9AE(2) says:

(2) If the plan of subdivision is not registered within 18 months after the date of the prescribed contract of sale of a lot on that plan of subdivision, or if the contract specifies another period, before the end of that specified period, the purchaser may, at any time after the expiration of that period but before the plan is so registered, rescind the contract.

The main point about section 9AE(2) is that if the contract of sale has a special condition detailing that the purchaser agrees to a different time, which may be longer than 18 months, the purchaser will be bound by that time frame in the special condition in the contract. There are various issues that occur under section 9AE(2) and caution is warranted before signing the contract of sale.

The main point about section 9AE is that if the contract is to be rescinded, it must be done so before the plan of subdivision is registered. Once the plan is registered, the rights of the purchaser to terminate no longer exist.

Usually off the plan sales are straight forward. However, sometimes things do change, whether the apartment is not what was expected, or valuations do not stack-up, or finance cannot be obtained, which result in the consequence of considering a possible way out of the contract.

Rescinding a contract under either section 9AC or 9AE of the Sale of Land Act 1962, requires diligence to ensure the facts are correct and that any recision is justified. However, the best solution is the prudent one, which is to act in advance before the contract is signed by understanding the terms and conditions of the contract so a fully informed decision can be made. Otherwise, call me, to get that legal advice to protect your legal rights and interests.

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