Legislative update – (even more) new ways to make development harder

04 September 2018

On 21 August 2018, the Victorian Government introduced the Sale of Land Amendment Bill 2018 in an effort to provide greater protection to Purchasers, while creating greater restrictions and obligations on Vendors of off-the-plan and terms contracts and options to purchase.

Changes to the Vendor’s right to rescind under sunset clauses

If passed, the Bill would restrict vendors to two methods of rescinding a residential off-the-plan contract under a sunset clause. Any provision in a residential off-the-plan contract of sale that is inconsistent with these methods will have no effect.

  1. By notice and with consent of the Purchaser. This method would require the Vendor to serve a notice on the Purchaser indicating that the Vendor wishes to rescind the contract in 28 days’ time. The notice must set out:
    • The reason why the vendor is proposing to rescind the contract;
    • The reason for the delay in registering the plan of subdivision or the issuing of the occupancy permit; and
    • That the purchaser is not obliged to consent to the proposed rescission.

Once 28 days has lapsed, the Vendor may only rescind the contract if it has received the Purchaser’s written consent (and a failure to respond by the Purchaser could not be deemed as written consent).

  1. By court order. Where the Vendor has not obtained the Purchaser’s consent to rescind the contract, the Vendor may apply to the Supreme Court for an order allowing the contract to be rescinded on the basis it would be “just and equitable in all the circumstances”. However, Vendors face the risk of compensating Purchasers for rescinded sales if the Court considers reasonable compensation would also be “just and equitable”.

Vendors will also be required to pay Purchasers’ legal costs unless they can satisfy the Court that the Purchaser unreasonably withheld their consent in the first place. This may be difficult to prove given Courts tend to favour consumers in interpretation of the Sale of Land Act and given a Purchaser could argue that they were reasonably entitled to refuse consent and ask the Court to make a decision as to whether the proposed rescission is “just and equitable”.

Critically, Vendors will be required to give notice to affected Purchasers and obtain their written consent before rescinding a contract under a sunset clause from 23 August 2018. As the Bill proposes to operate retrospectively, these requirements will apply to both new and existing off-the-plan contracts. However, Vendors will not have the right to apply for a court order until the Bill is passed and receives Royal Assent.

Changes to the content of sunset clauses

The Bill also proposes to regulate what must be included in the content of sunset clauses. For contracts entered into after the date the amendments are brought into effect, sunset clauses must include descriptions of:

  • The Vendor’s obligation to give notice of a proposed rescission of the contract;
  • The Purchaser’s right to provide written consent;
  • The Vendor’s right to apply to the Supreme Court for an order permitting the Vendor to rescind the contract; and
  • The power of the Supreme Court to make an order permitting rescission if satisfied the order would be just and equitable in all the circumstances.
Changes to terms contracts

The amendments could also see the Sale of Land Act prohibiting terms contracts that do not meet a minimum sale price. This is to be achieved by establishing a prescribed amount in the regulations (which has not yet been determined).

The Bill then proposes a number of offences:

  • Selling residential land under a terms contract where the sale price is less than the prescribed amount;
  • Knowingly arranging or brokering the sale of residential land under a terms contract where the sale price is less than the prescribed amount;
  • Knowingly inducing a person to enter into a terms contract for the sale of residential land where the sale price is less than the prescribed amount; and
  • Advertising the sale of residential land under a terms contract where the sale price is less than the prescribed amount.

Under the Bill, Purchasers can avoid terms contracts that are prohibited under the Sale of Land Act before completion of the contract by giving a signed written notice to the Vendor.

Currently, Vendors can prevent terms contracts being avoided by Purchasers by establishing that they acted honestly and reasonably and ought fairly be excused so long as the Purchaser was in as good a position as if the Act had been complied with. Should the Bill pass, this will no longer apply to residential land (excluding residential land that is primarily used for agricultural purposes) if the sale price is less than the prescribed amount.

Changes to disclosure of material facts

The Sale of Land Act currently creates various offences around disclosing, or failing to disclose, material facts in the sale of land, such as knowingly or recklessly making or publishing false representations with the intention of inducing a person to purchase land.

Currently, it is an offence to make a statement, promise or forecast that a person knows to be misleading or deceptive or fraudulently conceals material facts. The Bill proposes to replace “fraudulently” with “knowingly”, meaning Vendors will commit an offence if they know material facts are not being disclosed, even if they did not intend to do so fraudulently.

To help meet these obligations, the Bill proposes allowing the Director of Consumer Affairs Victoria to create guidelines to help Vendors and estate agents understand what a material fact is for the purposes of the Act.

Changes to options to purchase

The Bill proposes to tighten regulation on options to purchase by prohibiting Vendors selling an option to purchase land under a land banking scheme.

The exception is where the option is under a registered managed investment scheme or under another financial product issued by the holder of an Australian financial services licences. This is because these options are already regulated to some extent under the Corporations Act.

The amendments would see Vendors being required to have any money paid by the Purchaser held on trust by the Vendor’s lawyer, conveyancer or estate agent up until the option expires or a plan of subdivision is registered, whichever is earlier. Purchasers would have the right to rescind the agreement if the Vendor fails to meet these requirements.

Further, the Bill proposes a default option expiration despite anything to the contrary in agreement for an option. If the event triggering the Purchaser’s right to the option does not occur within 5 years of entering the agreement, the option will automatically expire.


Vendors should closely monitor the progress of the Bill. Should the amendments come into effect, Vendors may find themselves facing significant penalties if they do not comply with the new requirements. For residential off-the-plan contracts, Vendors should be aware of the risks of terminating under the sunset clause and consider how they may need to update these clauses in the future to avoid finding themselves retrospectively in breach of their contracts of sale.

In the meantime, Vendors should:

  • Be careful of rescinding contracts under a sunset clause from 23 August 2018 as the amendments will operate retrospectively for Vendors who do not give notice to and obtain consent from Purchasers;
  • In the absence of any guidelines, seek advice on what constitutes a material fact to ensure adequate disclosure is being given to Purchasers; and
  • Raise with their legal practitioners, conveyancers or estate agents how they can facilitate holding funds on trust for options to purchase.

Our team can assist with any queries you may have about the proposed amendments and how best to protect your interests. Please contact us for further information.

This article was written by Michael Mammen, Partner, David Marriott, Partner and Genevieve Bolton, Law Graduate.

Michael Mammen

P: +61 3 8644 3643

E: mmammen@hwle.com.au 

David Marriott

P: +61 3 8644 3646

E: dmarriott@hwle.com.au

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