APARTMENT developers who attempt to profiteer by rescinding off-the-plan contracts under controversial ‘sunset clawbacks’ have been put on notice.
The NSW Government says it will introduce new laws this month requiring developers to justify any sunset clause termination of an off-the-plan sale in the Supreme Court if the purchaser does not give their consent.
It follows a wave of cases of developers rescinding contracts under sunset clauses only to resell the properties at higher prices, leaving buyers priced out of the market with their original deposits.
Last month, a group of 34 buyers lost a class action launched in a bid to prevent their developer cancelling their contracts for apartments in Wolli Creek. Buyers in suburbs including Werrington, Kellyville and Penrith have also been affected.
In response, the NSW Government requested feedback from consumers to determine the scale of the problem, with 639 people coming forward during the three-week public consultation.
“The NSW Government has listened to the concerns of its citizens and is taking action,” said NSW Minister for Innovation and Better Regulation Victor Dominello.
“We are committed to ensuring certainty in the property market and to protecting the rights of those who purchase off the plan properties.”
The proposed legislation is not retrospective and will only apply to contracts made after the law comes into effect, or to contracts still in operation.
For buyers who have already been burnt, the reforms are too little, too late. The Wolli Creek group has lodged an intention to appeal form, giving it until early January to decide the best course of action.
“The announcement is great but it doesn’t apply to us,” said one buyer. “The group would still have to take a huge risk, go through the appeal process and we still won’t know if we will ever get our homes back.
“For me, there is still no justice, not yet anyway.”
Another of the group said the proposed changes were a win for the public, but the Aussie dream of owning a home “has diminished for us” and justice had not been served.
“We all had to sacrifice a lot in terms of personal and financial sacrifices tied up with years worth of saving for the deposit, and then paying legal costs, and after losing the case, it still has not stopped,” he said.
The group was ordered to pay costs for the developer and could face a damages claim for lost rental income.
“The NSW Government is putting developers on notice that from this day forward if they use a sunset clause for no other reason than to reap a windfall profit at the expense of the purchaser — then they do so at their own peril,” Mr Dominello said.
“The overwhelming majority of developers are reputable and do the right thing, and their industry makes an important contribution to our state’s economy.”
Stephen Albin, NSW chief executive of the Urban Development Institute of Australia, said the devil would be in the detail of the legislation but that the government appeared to have struck the right balance.
“We think people that aren’t undertaking business dealings in good faith in our industry need to be stamped out, and these laws do provide better protection in giving the buyer right of refusal,” he said.
“Our initial concern was [these changes] would impact developers’ ability to obtain financing, but we’ve had indications from the Australian Bankers’ Association that it won’t do that.”
Mr Albin said the number responses to the inquiry shows the behaviour was at the margins of the industry — even if the 639 submissions represented 639 developments, that was less than 2.3 per cent of the market.
This Content was originally posted on: Frank Chung