We are reviewing laws protecting off-the-plan home buyers from unfair contract cancellations.

An off-the-plan contract is an agreement to buy a property that has not yet been built. As there's always a chance that things may go wrong during the building process, off-the-plan contracts usually contain terms that allow sellers (or buyers) to "get out of" (or cancel) the contract. In legal terms, this is known as a "rescission clause".

In November 2021, the Civil Law (Sale of Residential Property) Act 2003 was amended to prevent property developers or sellers from cancelling, or rescinding, off-the-plan contracts unfairly.

Specifically, the changes prevented sellers from rescinding a contract under a sunset date or delay event rescission clause unless they had obtained either:

• the consent of the buyer, or
• an order from the Supreme Court allowing the rescission.

These changes were designed to prevent unfair cancellations by sellers of off-the-plan contracts, by ensuring that either the buyer agreed to the rescission or that an independent third party (the Supreme Court) thought rescission was fair in the circumstances.

The Government committed to reviewing the changes after 2 years to make sure that they are operating effectively for our community.

Community members who have been involved in buying or selling property of-the-plan were encouraged to provide feedback.

This included off-the-plan home buyers and sellers (previous or current), their family and friends, real estate agents, property developers, lawyers who have represented off-the-plan buyers or sellers and those who would like to purchase off-the-plan or enter the property market.

Before providing feedback, we encouraged you to read our consultation paper: Review of laws protecting off-the-plan home buyers from unfair contract cancellation. The consultation paper describes the 2021 changes and why they were made, and provides some questions to prompt your thinking.

You had your say by:

• making a submission addressing questions from the consultation paper
• completing our survey
• writing to us with comments or a submission at civilconsultation@act.gov.au.

Your feedback will help inform the Justice and Community Safety Directorate's review of the 2021 changes to the Civil Law (Sale of Residential Property) Act 2003.

An off-the-plan contract is an agreement to buy a property that has not yet been built. The contract provides a plan for (or description of) the property once it is built. To buy a property off-the-plan the buyer pays a deposit before the property is built and agrees to pay a final amount on completion. The contract will also estimate how long the build will take.

As many things can go wrong during the building process, sellers bear significant risk. To manage this risk, off-the-plan contracts usually contain terms that allow sellers (or buyers) to “get out of” (or cancel) the contract if things go wrong. In legal terms, this is known as a “rescission clause.”

There are two types of rescission clauses that are commonly used in off-the-plan contracts. These are rescission clauses based on “sunset dates” or “delay events.”

Sunset date

A “sunset date” is a date or timeframe for the completion of a particular stage of the property development process (e.g., registration of the units plan, issue of the certificate of occupancy etc.). A sunset date allows the contract to be rescinded if the relevant stage of the process has not been completed by the sunset date.

Delay event

A delay event is an event that delays or prevents the completion of the contract. It could include something that delays or prevents the construction of the property or related works such as:

• a delay or failure to obtain development approval,
• delays in the supply of building materials,
• delays in construction (e.g. due to bad weather, stop work orders etc.),
• delay or failure to obtain finance approval or insurance,
• delay or failure to obtain a certificate of occupancy.

A delay event allows the contract to be rescinded if a particular type of delay described in the contract occurs.

While rescission clauses are generally designed to protect the interests of buyers and sellers when things go wrong during the sales process, there is a risk that they can also be misused unless adequate protections are in place.

In 2021 the Government became aware that a small number of property developers were rescinding off‑the-plan contracts for the sale of residential properties. While the reasons for these rescissions are not known, the Government understand that in some cases, the properties were re-listed for sale at significantly higher purchase prices than had been agreed in the original off-the-plan contracts.

In late 2021, the Civil Law (Sale of Residential Property) Amendment Bill 2021 inserted a new Part 2A into the Civil Law (Sale of Residential Property) Act 2003. This change introduced restrictions on the use of some (but not all) rescission clauses, where previously there were no limits on using rescission clauses in off-the-plan contracts.

Specifically, the changes prevented sellers from rescinding a contract under a sunset date or delay event recission clause unless they had obtained either:

• the consent of the buyer, or
• an order from the Supreme Court allowing the rescission.

These changes were designed to prevent unfair recissions, by ensuring that either the buyer agreed to the recission or that an independent third party (the Supreme Court) thought recission was fair in the circumstances.