Wednesday, July 21, 2010

Unfair "off-the-plan" contracts

"People who buy properties off the plan will have greater protection from developers who wish to make last-minute changes to homes such as switching the light fittings or reducing precious floor space.

Property lawyers say new legislation about unfair contract terms could leave some developers exposed to contract terminations if they neglect to review their purchase agreements.

Common clauses in off-the-plan contracts allow developers to alter the size of the dwelling by up to 5 per cent or change inclusions and fittings without the purchaser's consent."


"This means that a number of usual clauses in off-the-plan contracts, which allow flexibility in developing the site, may infringe the restriction on unfair terms. For example, “no objection” clauses, where the buyer cannot object to changes to the building, the lot or the scheme, or unilateral rights to terminate in favour of the developer, may be unfair to buyers and therefore void. Developers need to be careful that including such clauses does not create a “significant imbalance” in the parties’ rights and obligations, that the clauses are reasonably necessary to protect the developer’s interests, and that they do not cause detriment to the buyer if a term was relied upon. Where these types of clauses are to be included, developers will need to include provisions to support the necessity to include such clauses (such as a financier’s requirements or changing council requirements)."

See Legal Alert

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