Sales off-the-plan: Another decision of the Victorian Court of Appeal about the Sale of Land Act, 1962

  • Author : Bill Stark - 24-05-2013

Further to my blog of 11 September 2012, the Victorian Court of Appeal has now handed down its decision relating to an appeal by the developer, Harofam Pty Ltd.

In Harofam Pty Ltd v Scherman [2013] VSCA 104, the Court of Appeal (Nettle AP, Neave JA and Garde AJA) unanimously dismissed the developer's appeal from the decision I wrote about earlier.

As a result of the Court of Appeal's decision, as I noted earlier, it is clear that the courts will be reluctant to allow a vendor/developer the opportunity to extend the date for registration of a plan of subdivision beyond the 'fixed, definite and certain' date that is specified in the original off-the-plan contract of sale.

In an article published today by Allens (see: http://www.allens.com.au/pubs/realestate/fore24may13.htm), the authors argue:

any mechanism in the contract [for a sale of land off the plan] that allows the date [for registration of the plan of subdivision] to be extended is likely to be invalid.


 

The conlcusion reached by Allens (with which I respectfully agree) is that:

When negotiating off-the-plan contracts of sale, parties often seek to reserve some flexibility for themselves by including a right to extend critical dates. Following this case, it appears that a clause giving a party the ability to extend the date by which a plan of subdivision is registered under an off-the-plan contract of sale will likely be invalid. Parties should keep this in mind when negotiating off-the-plan contracts. The date by which the plan of subdivision must be registered should be fixed at the date the contract of sale is entered into. That date should include an allowance for potential delays in obtaining any approvals and carrying out any works necessary to enable the plan of subdivision to be registered.

It seems that off-the-plan sales of land in Victoria will continue to generate litigation for the foreseeable future. This is especially so due to the current state of the market and as the City of Melbourne will be flooded with thousands of new apartments over the next 2 to 4 years as many current and proposed developments reach finalisation.

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Bill Stark

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