15 questions being asked by the Victorian government into off the plan sales industry

Issues affecting the off the plan property market are being reviewed by the Victorian Government. To obtain insights into the current state of the property market, the Hon. Melissa Horne MP, Minister for Consumer Affairs has commissioned a Property Market Review. This review is looking for ways to improve property market laws by gaining insights from members of the public, businesses and other stakeholders on how the current laws can be improved. A Property Market Consultation Paper has been developed by the Review Panel to assist the consultation process and identifies what the Panel believe to be some of the most pressing issues. The review will look at what are the problems faced by consumers in respect to off-the-plan and house and land package purchases. It noted the contracts are complex and can be over a hundred pages long. It further noted the contract is with the developer who in turn has a contract with the builder and it may be difficult to hold the developer to account for building defects. It also noted the completion date for the build can be delayed resulting in additional and unexpected costs for the purchaser. There are also issues for purchasers about the potential future financial liabilities for off-the-plan sales. Purchasers are often unaware about the estimated future costs associated with the property following the plan of subdivision, including rates, charges and owners corporation fees. A vendor will be unable to provide accurate figures before a plan of subdivision has been registered. For house and land packages, similar issues arise including delays and circumstances changing between the signing of the contract and completion of the build. Government regulation of off-the-plan sales has recognised these issues and specific provisions in the Sale of Land Act seek to protect purchasers, but the terms of reference for the review seek to explore whether further reform is required to ensure the current framework for house and land packages and off-the-plan sales provide sufficient consumer protection. The papers lists 15 key questions for stakeholders to consider: 1) What reflections do you have on the challenges related to off-the-plan sales? Is there additional context or evidence that supports the nature or extent of the challenges highlighted? 2) What mechanisms are needed to alleviate the risks that arise during a development? 3) Should there be a requirement for designated key information to be provided in an easily accessible format? 4) Should purchasers be required to obtain legal advice prior to entering into an off-the-plan contract? 5) Should vendors be required to provide additional detailed information in the warning notice about potential changes to the lot, materials and appliances? 6) Is requiring purchasers to acknowledge they have read and understood the warning notice concerning the risks of entering into an off-the-plan sales contract a suitable and/or alternative to requiring independent legal advice being sought? What is the cost of such legal advice? 7) Are prospective purchasers sufficiently informed about reasonable cost estimates (e.g. owners corporation fees)? 8) Should vendors be required to specify details of brand/model of appliances, finishes or equivalents that may be used in the sales contract? 9) Should vendors be required to provide written notice to purchasers prior to settlement when substitutions have been made during the build and where appropriate for these to be included as a contract variation? 10) Should government prohibit specific representations as to future events being made where those matters are subject to future decisions by government or others? 11) Should vendors be required to notify purchasers of delays to completion of building projects in off the plan contracts? What should trigger the requirement and what is an appropriate timeframe? 12) Should delay or other reasons be a specified ground for recission of the contract by the purchaser? In what circumstances might this be appropriate? Should additional grounds for purchasers to rescind the contract based on delay be specified in the Sale of Land Act? 13) Should government provide guidance examples of what could constitute material changes? 14) Are there additional solutions to managing potential development delays for vendors and purchasers? 15) Are there other key issues or possible improvements other than further disclosure that the panel should consider? What would their impact be? How can government best give effect to them? Submissions can be made at https://engage.vic.gov.au/property-market-review