New laws shut door on developers tearing up off-the-plan contracts without justification

Ian Bushnell 3 December 2021 32
Fencing around 'Vivace' residential construction site in Throsby

3 Property Group’s ‘Vivace’ development in Throsby is one of several projects in which the company rescinded off-the-plan contracts. Photo: Michelle Kroll.

Off-the-plan homebuyers will be better protected from developers walking away from contracts with new ACT laws limiting the use of rescission clauses.

The ACT Legislative Assembly has agreed to the government’s Civil Law (Sale of Residential Property) Amendment Bill 2021, which aims to protect homebuyers from sunset and development delay clauses in illegitimate and unjustifiable circumstances.

The need for legislation similar to that in other Australian jurisdictions was highlighted by Canberra developer 3 Property Group tearing up multiple contracts without giving sufficient reasons, according to customers.

The developer is facing legal action from buyers who claim it has used the rescission clauses to take advantage of Canberra’s rising housing market and sell previously sold properties at higher prices.

ACT Attorney-General Shane Rattenbury said the new laws would increase confidence for all parties involved in off-the-plan contracts.

“The recent trend of developers rescinding contracts has led to great personal distress for some buyers, as well as undermining confidence in the off-the-plan property purchase market,” he said.

“The housing market is already stressful for buyers, and it is often first-home buyers who are looking at off-the-plan purchases. It was important to act swiftly to address these concerns and protect consumers from rescissions occurring in bad faith.”

Under the legislation, developers will only be able to use sunset and development delay clauses to rescind a contract if the buyer consents, or if they’re permitted by an order of the ACT Supreme Court.

A developer wanting to rescind a contract must provide 28 days written notice to the buyer, setting out the reasoning behind the proposed rescission under the clause.


READ ALSO: Last terraces released in $260 million Red Hill development


“If the buyer does not agree, the developer may seek an order from the Supreme Court permitting the rescission,” said Mr Rattenbury. “However, the developer must satisfy the court that the order is just and equitable in the circumstances.”

The ACT Supreme Court must consider a range of factors, including the impact of rescission on both the buyer and seller.

If a developer wants to pursue the matter in the Supreme Court, it will be liable to pay the costs of the buyer unless they are able to establish that the purchaser has unreasonably withheld their consent.

The new laws are taken to have been in effect since they were introduced into the ACT Legislative Assembly on 9 November, 2021.

“Commencing the reforms from the bill’s introduction was necessary to protect buyers and prevent opportunistic rescissions under these clauses from occurring during the time between introduction and passing of the amendments in the Legislative Assembly,” said Mr Rattenbury.

The 3 Property Group said it had been hit by rising costs and supply chain issues that had affected the commercial viability of projects.

Master Builders ACT had also warned against possible unintended consequences of the legislation, including higher prices.

The organisation’s CEO, Michael Hopkins, said unprecedented building material cost increases, labour shortages and time delays caused by COVID-19 lockdowns had made many projects planned pre-pandemic unviable.

He said no developers would proceed with unviable projects so it was often preferable to rescind a contract and then go back to the drawing board rather than starting a project and then going broke mid-construction.


What's Your Opinion?


Please login to post your comments, or connect with
32 Responses to New laws shut door on developers tearing up off-the-plan contracts without justification
Andrew Shaun Andrew Shaun 8:57 am 07 Dec 21

And just like that, the builders in Canberra put up their prices again.

Debbie Maz Debbie Maz 6:36 am 07 Dec 21

Perhaps a review of the contract for sale T&Cs and the ‘cookie cutter’ conveyance practices next.

Frank Walmsley Frank Walmsley 12:21 pm 06 Dec 21

This is great news/ what happens if the price drops can buyers terminate contracts or are the locked in also?

assiduous assiduous 10:03 pm 05 Dec 21

The ACT government is culpable for this situation. If the developers couldn’t get $200k more for these properties they would not be reselling. If there was price stability due to competition, sensible regulation and adequate supply, off-the-plan purchasers wouldn’t be so up in arms, they could just take their cash and go elsewhere. The government acts quickly to punish developers, and hopes no one notices they are responsible for the bigger problem of a poor affordability, a supply squeeze and lack of competition. The developers caught out here by a public backlash from buyers are an easy target for a government seeking to capitalise by casting blame elsewhere for price rises that are in fact the result of their own policies.

Oiledpengu Oiledpengu 6:46 am 05 Dec 21

here we go again….another rise in the cost of housing due to meddling by the government.

    rosebuddy rosebuddy 11:40 am 05 Dec 21

    As a victim of this conduct, the only people trying to increase prices are greedy developers. The townhouse I bought in February 2021 is being sold for about $250k more than we paid… and still no valid reason for the rescission. There are developers that are doing the right thing, this just stops predatory and unfair behaviour.

    thehutch thehutch 8:51 am 07 Dec 21

    Yes, we should remove all regulation because it costs money. That should be the key factor when making decisions in an industry which is purely profit driven. No disasters waiting there.

Scottie Zuxkerberg Scottie Zuxkerberg 1:45 am 05 Dec 21

About 10 years too late...

Joel Byatt Joel Byatt 12:39 am 05 Dec 21

Most important part of the article at the end.

The 3 Property Group said it had been hit by rising costs and supply chain issues that had affected the commercial viability of projects.

Master Builders ACT had also warned against possible unintended consequences of the legislation, including higher prices.

The organisation’s CEO, Michael Hopkins, said unprecedented building material cost increases, labour shortages and time delays caused by COVID-19 lockdowns had made many projects planned pre-pandemic unviable.

He said no developers would proceed with unviable projects so it was often preferable to rescind a contract and then go back to the drawing board rather than starting a project and then going broke mid-construction.

    Peter Jovanovic Peter Jovanovic 9:05 am 05 Dec 21

    Why would anyone take this whining seriously when going broke is inherent to developers' business model.

    Sheridan Burnett Sheridan Burnett 11:42 am 05 Dec 21

    Joel Byatt Would be nice if they can provide proof to the victims. Other developers seem to have been able to operate under these market conditions.

    Jimbo Lambert Jimbo Lambert 7:07 pm 06 Dec 21

    Joel Byatt what they need to do is nominate prices for certain items and if the price rises by mire than 5%, they can claim the difference.

Robert Downie Robert Downie 9:31 pm 04 Dec 21

About time excellent news.

Hristo Vizovitis Hristo Vizovitis 7:30 pm 04 Dec 21

Taking advantage of the rising house market, nothing to do with the major increase in costs of materials?

    Sheridan Burnett Sheridan Burnett 11:44 am 05 Dec 21

    Hristo Vizovitis Well if they could provide the victims with proof that this happened then they would have nothing to worry about regarding their conduct. Other developers seem to have been able to honour contracts under the same market conditions.

    Kate Eliza Kate Eliza 12:07 pm 05 Dec 21

    Hristo we are building a farm house right now and can Def attest to the huge increase in costs of building materials.. and difficulty in finding structural timber etc.

    Codi Barry Codi Barry 10:00 pm 05 Dec 21

    Yep we are building a brick garage and the price has gone up alot timber and steel have all had huge price increases

Jack Taylor Jack Taylor 5:38 pm 04 Dec 21

Kate love this

Tramcar Trev Tramcar Trev 5:30 pm 04 Dec 21

Gutsy play at anytime buying off the plan. You always get stung, the taps you chose are no longer available, likewise flooring, lighting and even tiles, kitchen cabinetry etc. No longer available but the newer versions are always much more expensive.

Adri Anna Adri Anna 4:43 pm 04 Dec 21

Dane Chappell Jesus there not naming and shaming 🤣🤣

JimCharles JimCharles 4:33 pm 04 Dec 21

warnings of higher prices. titters.
I know a young couple now with a child who lost their package just a few weeks ago..they made the contractual committment a year ago.
They’ve been trying to complete, they knew it was coming, were even prepared to pay more not to lose the land, but they could do nothing about it.
It was all about what spurious reason the builder would use after dragging their feet purposely to delay works, because they’d rather take a few hundred thousand off somebody else. If these people had any decency or morality, we would not need laws.

Emily Rodgers Emily Rodgers 4:05 pm 04 Dec 21

Was passed Logan Hareb

Tan Choi Heng Tan Choi Heng 4:04 pm 04 Dec 21

Brad Fraser mirror of Housing Developers (Control and Licensing) Act and the many subsidiary legislations in Singapore?

    Brad Fraser Brad Fraser 4:33 pm 04 Dec 21

    Tan Choi Heng Singapore would be a good model for Canberra for follow. Especially when it comes to a model for affordable housing.

Garrie Irons Garrie Irons 3:00 pm 04 Dec 21

About time.

Alex Kerr Alex Kerr 12:04 pm 04 Dec 21

Jack aye look at that

Fred Pilcher Fred Pilcher 11:44 am 04 Dec 21

What took them so long?

Shane Jasprizza Shane Jasprizza 10:34 am 04 Dec 21

Is “we thought we could cancel and sell for $100k more to someone else” a justification?

    Kevin Hingston Kevin Hingston 11:58 am 04 Dec 21

    Shane Jasprizza it’s not just pure greed. The supply side cost has gone through the roof last two years. I’m told the increased appearance of those blue steel structural frames is due to a near inability to even get structural timber. CraY if true.

    (None of the above excuses the behaviour of these developers - just might explain it. IMO that’s the risk of doing business and signing a contract - good work act gov)

    John Tozer John Tozer 1:00 pm 04 Dec 21

    Kevin Hingston - Happy to share the windfall profits from price rises too? No? Didn’t think so…! So why do they get to share the losses around?

    Kevin Hingston Kevin Hingston 2:09 pm 04 Dec 21

    John Tozer they don’t anymore. It’s good.

CBR Tweets

Sign up to our newsletter

 Top
Region Group Pty Ltd

Search across the site