When off the plan doesn’t go to plan: Part 1 of 2

A Purchaser client contacted me recently after being notified that his property lot had been amended, resulting in a decrease in size.

Plan of Subdivision: Know your boundaries

A Purchaser client contacted me recently after being notified that his property lot had been amended, resulting in a decrease in size. My client was surprised and disappointed to learn of this change; he was not aware that a plan of subdivision (Plan) can be amended after the Contract of Sale has been signed.

Is this possible?

Vendors often protect themselves by having their solicitors draft special conditions into the Contract of Sale to allow them to make any necessary amendments as required by authorities to procure registration of the Plan. This is usually followed by another special condition stating that Purchasers cannot make any requisitions, object or seek compensation if the changes to the plan are not material.

Beware Section 9AC of the Sale of Land Act 1962.

Section 9AC of the Sale of Land Act 1962 requires the Vendor to advise the Purchaser in writing of any amendment to the Plan within fourteen (14) days of the Vendor requesting an amendment from the Registrar, or alternatively, the amendment being required by the Registrar. The Purchaser is then entitled to rescind the Contract within fourteen (14) days if the amendment materially affects the lot to which the contract relates.

The question is – what is a material change?

Contracts of Sale will commonly include a special condition providing that a material change is one that reduces the Purchaser’s lot by 5% or more.  Therefore, a discrepancy of under 5% would not be considered a material change.

In Bella Besser v Alma Homes Pty Ltd [2012] VSC 460, the court held that a change of lot entitlement and liability in the Purchaser’s lot from 25% to 0.5% materially affected the Purchaser’s property and accordingly, the Purchaser was allowed to rescind the Contract.

In Lockwood v PSP Investments Pty Ltd [2013] VSC 10, the Purchaser’s car space was converted into common property on a revised plan of subdivision and the court held that this was a material change, allowing the Purchaser to rescind the Contract.

Whether an amendment to the plan materially affects the lot is a question to be determined objectively from the facts and circumstances.

Further, contracts will commonly contain provisions that owners corporations, easements, covenants or section 173 agreements can be registered on title without giving the Purchaser a right to object, if such registration is required by the relevant authorities. Seek advice from your solicitor if you have any concerns in this regard.

Lessons

Purchasers: It is crucial that Purchasers obtain comprehensive and sound legal advice after being notified of amendments to a Plan. This ensures they can exercise their rights, if any, during the specified period.

Developers: Amendments to a Plan should be kept to a minimum, although at times they may be unavoidable. The proposed amendments should be communicated to the Purchasers as soon as possible, prior to the registration of the Plan.

For more information on this area, please contact us to discuss further.

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