What Property Developers Must Disclose in NSW Off-The-Plan Contracts

Introduction

For property developers in NSW, navigating the specific disclosure requirements for off-the-plan contracts is essential for legal compliance and fostering transparency in property transactions. These obligations, primarily established under the framework of the Conveyancing Act 1919 (NSW) and associated regulations following significant updates effective from 1 December 2019, are designed to ensure that purchasers are well-informed before entering into a plan contract.

This guide provides a straightforward overview of what a developer must disclose when selling property off-the-plan in NSW. It aims to clarify the key components of the mandatory disclosure statement and other critical information that developers need to provide, helping them meet their legal duties effectively.

The Mandatory Disclosure Statement For NSW Off The Plan Contracts

Understanding the Disclosure Statement Requirement Post 1 December 2019

For off-the-plan contracts involving residential lots in NSW exchanged from 1 December 2019, vendors (developers) face a significant new requirement. They must attach a specific Disclosure Statement, in the approved form, directly to the contract before the purchaser signs it. This mandatory disclosure aims to provide greater transparency for individuals buying off the plan.

This requirement applies specifically to contracts for the sale of residential lots that have not yet been created when the contract is entered into. It forms part of enhanced protections designed to give purchasers a clearer understanding of the agreement they are making.

Importantly, failure by the developer to attach the required Disclosure Statement can give the purchaser a right to rescind the contract within 14 days after exchange.

Understanding Developer Disclosure Obligations in NSW Off-The-Plan Contracts

Property developers in NSW have significant disclosure obligations when selling properties through an off-the-plan contract. Adhering to these requirements is a key aspect of a developer’s legal responsibilities.

These obligations serve to:

• Ensure transparency
• Provide greater protection for the purchaser throughout the process of buying off the plan

The legal framework that defines these disclosure duties is primarily found in:

• the Conveyancing Act 1919 (NSW)
• the Conveyancing (Sale of Land) Regulation 2022 (NSW)

Significant changes to this framework became effective on 1 December 2019, introducing more comprehensive responsibilities for developers. These reforms aim to ensure a more balanced and transparent process when entering into an off-the-plan contract.

Under this framework, a developer must provide extensive information to a potential purchaser before they enter into an off-the-plan contract. This significant requirement ensures that the purchaser is well-informed about the property they are committing to buy, often well before construction is complete.

The specifics of what must be disclosed—including the mandatory disclosure statement and various draft documents—are detailed in subsequent sections.

The Mandatory Disclosure Statement for Your Off-The-Plan Contract

Key Information Outlined in the Disclosure Statement

When a developer sells a property off-the-plan in NSW, the contract must include a Disclosure Statement. This document is crucial as it provides the purchaser with essential details about the property and the contract itself. The primary purpose of the Disclosure Statement is to ensure transparency, allowing buyers to make informed decisions.

The Disclosure Statement must outline key information, including but not limited to:

• Sunset dates: These are critical dates by which certain conditions, such as the registration of the plan, must be met. The statement should clarify if the vendor can extend these dates.
• Other conditional events: Any other significant conditions that could affect the contract or the development progress must be detailed.
• Development approval status: The developer must disclose whether development approval has been obtained for the project.
• Rescission rights for major events: Information regarding whether the vendor can rescind the contract if a major event prevents the development from proceeding as planned.

Additionally, the Disclosure Statement must be accompanied by several draft documents that provide a clearer picture of what the purchaser is buying. These include:

• A draft plan prepared by a registered surveyor
• Any proposed schedule of finishes
• Any proposed Section 88B instrument, which details easements or restrictions

For strata schemes specifically, draft by-laws and other scheme-specific documents are also required.

Consequences of Failing to Provide the Disclosure Statement

The requirement for a developer to provide a comprehensive Disclosure Statement along with all prescribed documents is a significant obligation in an off-the-plan contract. Failing to meet this requirement carries substantial consequences for the developer.

If the Disclosure Statement or any of the legally mandated documents are not attached to the off-the-plan contract before the purchaser signs it, the purchaser gains a specific right to rescind the contract. This cancellation right can be exercised within 14 days of the date of exchange (when the contract is signed by both parties and becomes binding).

This 14-day period gives the purchaser an opportunity to reconsider their purchase if they were not provided with the complete and necessary information upfront. This underscores the importance for developers to ensure all disclosure obligations are meticulously met to avoid potential contract rescissions.

Essential Draft Documents Your Disclosure Statement Must Include

The Draft Plan Prepared by a Registered Surveyor

A crucial component of the disclosure documents for an off-the-plan contract in NSW is a draft plan meticulously prepared by a registered surveyor. This plan must provide clear and detailed information about the property.

Key elements that the developer must ensure are shown on this draft plan include:

• The proposed lot number and the area of the subject lot
• Sufficient information to clearly identify the specific location of the lot
• The site of any proposed easements or profit à prendre that will affect the subject lot
• The location of any proposed restrictions on the use of land or positive covenants that will affect only part of the subject lot

For specific development types, additional requirements apply:

• For lots in proposed strata schemes, the draft plan must incorporate both the draft floor plan and the draft location plan
• For lots intended to be part of proposed community, precinct, or neighbourhood schemes, the developer needs to include the draft location diagram, the draft detail plan, and the draft community, precinct, or neighbourhood property plan

Proposed Schedule of Finishes

Developers are required to include a proposed schedule of finishes with the disclosure statement for an off-the-plan contract. This document outlines the types of fittings, fixtures, and finishes that the purchaser can expect in the completed property.

Providing this schedule helps ensure transparency and allows the purchaser to understand the quality and nature of the materials that will be used. This is an important part of managing expectations when buying off the plan.

Proposed Section 88B Instrument

If the property being sold off-the-plan will be affected by easements, restrictions on land use, or positive covenants, the developer must include any proposed Section 88B instrument with the disclosure statement.

This instrument, under section 88B of the Conveyancing Act 1919 (NSW), is the legal document that creates these interests on the land title. Including the draft of this instrument ensures that the purchaser is aware of any such encumbrances that will apply to their property.

Other Scheme-Specific Draft Documents

Beyond the primary draft plan and schedule of finishes, the disclosure statement must include various other draft documents, the specifics of which depend on the nature of the development scheme. These documents provide further detail about the governance and management of the property.

For instance:

• For lots in a proposed strata scheme, the draft by-laws that will govern the strata community must be attached
• If the lot is part of a proposed community, precinct, or neighbourhood scheme, the developer must provide the draft management statement and a draft of any proposed development contract
• For land that includes a lot in a proposed development scheme, a draft strata development contract is necessary
• In cases of proposed strata schemes relating to a part strata parcel, a draft strata management statement, as required under section 99 of the Strata Schemes Development Act 2015 (NSW), must be included
• If the land will be subject to a building management statement under Division 3B of Part 23 of the Conveyancing Act 1919 (NSW), then the draft building management statement must form part of the disclosure

What Does Not Need to Be Included in the Draft Plan

While the requirements for draft plans are comprehensive, there are specific items that a developer is not obligated to detail in the draft plan provided with the off-the-plan contract.

For proposed strata lots, it is important to note that the draft plan does not need to show:

• The specific location or area of any parking or storage area associated with the lot
• Details regarding the provision for the allocation of the costs of shared expenses within a building management statement or a strata management statement

These exclusions provide a degree of flexibility for the developer during the construction process for certain aspects of strata developments. Purchasers should be aware of these specific exclusions when reviewing the disclosure documents for their off-the-plan contract.

Notifying Purchasers About Changes to Material Particulars

What Constitutes a Material Particular Change

In NSW, a developer has an ongoing legal duty to notify a purchaser about certain changes to an off-the-plan contract that occur after it has been signed. This notification is required whenever a change renders the Disclosure Statement inaccurate in a ‘material particular’.

A material particular is defined as a change that will, or is likely to, adversely affect the use or enjoyment of the lot being purchased. This obligation is a significant aspect of the developer’s responsibilities when selling property through an off-the-plan contract.

Specifically, under the Conveyancing Act 1919 (NSW) and the Conveyancing (Sale of Land) Regulation 2022 (NSW), changes considered to be material particulars include:

• Alterations to the draft plan of the property.
• Modifications to the proposed schedule of finishes.
• Updates to strata by-laws.
• Revisions to easements or covenants affecting the lot.
• Amendments to a strata management statement or a building management statement.
• Changes to a management statement for a community, precinct, or neighbourhood scheme.
• Variations in a development contract or a strata development contract.

Developers must understand these categories to ensure compliance with their notification duties.

Changes That Are Not Material Particulars

While the rules for notifying changes are comprehensive, not every alteration to an off-the-plan contract is considered a change to a ‘material particular’. Consequently, a developer in NSW is not required to formally notify the purchaser of certain exclusions.

According to the Conveyancing (Sale of Land) Regulation 2022 (NSW), changes generally not deemed to be material particulars include:

• Alterations to the proposed lot number or a change in the street name.
• A change to, or the inclusion of, a provision for allocating the costs of shared expenses within a building management statement or a strata management statement.
• For lots in a proposed strata scheme, a change to, or the inclusion of, the specific location or area of a parking or storage space, provided it is made in accordance with the terms of the existing off-the-plan contract.

Developers should carefully assess any change against these definitions to decide if formal notification is necessary.

Using the Approved Notice of Changes Form

When a developer is required to notify a purchaser of a change to a material particular, this must be done using the officially approved Notice of Changes form. This standardised format ensures that information is clear and concise, helping the purchaser understand the nature and implications of the change.

Moreover, utilising the approved form is a key procedural step in fulfilling the developer’s disclosure obligations once the contract has been signed.

Timing Requirements for Notification

There are specific timing requirements that a developer must meet when notifying a purchaser about changes to a material particular. As stipulated by section 66ZN of the Conveyancing Act 1919 (NSW), the Notice of Changes must be provided at least 21 days before the contract’s completion date.

This timeframe allows the purchaser sufficient opportunity to consider and respond to the implications of the notified changes prior to finalising the property purchase.

Purchaser Rights & Other Key Developer Requirements

Purchaser Right to Rescind the Contract

When a developer in NSW notifies a purchaser of a change to a “material particular” in an off-the-plan contract—or if the final registered plan reveals such a change that wasn’t previously notified—the purchaser may gain the right to rescind the contract. This right is not automatic. The purchaser must establish two key points:

• They would not have entered into the contract had they been aware of the change.
• They are materially prejudiced by the change.

Material prejudice means the change adversely affects the use or enjoyment of the lot. If both conditions are met, the purchaser can withdraw from the contract and have their deposit returned. This protection ensures the developer adheres to what was initially promised.

Purchaser Right to Claim Compensation

Rather than rescind the contract, a purchaser may choose to proceed with the purchase and claim compensation from the developer. To do so, they must show:

• They have been materially prejudiced by the change.
• They would not have entered into the contract had they known about it.

The maximum compensation is 2% of the purchase price. If the developer and purchaser cannot agree on the amount, they may refer the dispute to arbitration. An arbitrator’s decision is final, and once compensation is pursued in this way, the purchaser generally loses the right to rescind the contract for that specific change.

Time Limits for Purchaser Action

Purchasers must act promptly to exercise their rights. They have 14 days from either:

• Being served with the Notice of Changes by the developer, or
• Receiving the registered plan that reveals an unnotified inaccuracy in a material particular.

Failure to act within this 14-day window may result in the loss of the right to rescind or claim compensation for that specific change.

Providing the Registered Plan Before Settlement

Developers must serve purchasers with the final registered plan and any associated documents at least 21 days before the proposed settlement date. Furthermore, purchasers cannot be compelled to settle within this 21-day period. These requirements:

• Ensure transparency by giving purchasers time to review the final property details.
• Preserve purchasers’ rights to rescind or claim compensation—within 14 days of service—if the registered plan discloses a previously unnotified inaccuracy in a material particular.

Holding Deposits Securely in Trust

For contracts exchanged from 1 December 2019, any deposit or instalment paid by the purchaser must be held by the stakeholder—typically the real estate agent—in one of the following throughout the contract period:

• A trust account
• A controlled money account

Critically, these funds cannot be released to the developer before settlement. This requirement safeguards the purchaser’s money, particularly if the developer becomes insolvent, ensuring the deposit remains protected until the transaction is completed. It does not prevent purchasers from providing a bank guarantee or deposit bond instead of a cash deposit.

Conclusion

Property developers in NSW face stringent disclosure obligations for off-the-plan contracts, primarily governed by the Conveyancing Act 1919 (NSW) and the Conveyancing (Sale of Land) Regulation 2022 (NSW), which mandate a detailed Disclosure Statement and accompanying draft documents. These legal requirements are designed to ensure transparency for anyone buying off the plan, covering ongoing notifications of material changes to the contract, outlining purchaser rights to rescind or claim compensation, and stipulating how a developer must handle deposits and provide final registered plans.

Understanding these complex requirements is crucial for ensuring smooth project progression and avoiding disputes. Our expert lawyers in property and planning can guide you through the hurdles of complying with these requirements. Contact our property law specialists at LawBridge today for tailored guidance.

Frequently Asked Questions