5 April 2017

This bulletin replaces issue 136 Changes to the Sale of Land Act – what you need to know.

On 3 April 2017, the Sale of Land Amendment Act 2016 (the Act) came into effect in Western Australia.  The legislation introduces greater protections for consumers when signing sales contracts for land that is not yet owned by the developer. 

Landgate have now clarified and updated information previously communicated which includes a variation to the Approved form of the statutory warning that must be used.  

Developers often sell lots before they have completed the purchase of the parent lot that will be subdivided to create those lots.  This is because they need the commitment of purchasers in order to cover their upfront financial requirements, including the cost to purchase the parent lot to be subdivided.  This can expose the purchaser to risk, for example, if the finance for the development falls through or if an unscrupulous developer absconds with the deposit monies.  The Act provides the necessary protections for both the consumer and the developer in these instances.

Changes to the Act, which will affect you and your clients in cases where the seller does not yet own the land, include the following:

• Making it mandatory for sellers to warn buyers, in writing, that the developer does not own the land.  If there is no warning, the sales contract becomes illegal and void.
• Imposing time limits on when the developer can become the registered owner of the land. This will normally be a six month period or a specific date detailed in the sales contract. Contracts will become illegal and void if these time limits are not adhered to.
• Requiring the developer to make all reasonable endeavours to satisfy the vendor’s condition in the contract before the expiry of the period by which it must be satisfied. These reasonable endeavours include taking steps to obtain the necessary regulatory approvals and lodging the necessary plans for the subdivision or proposed subdivision.
• Giving rights to the parties to terminate the contract if the conditions are not met or relevant notices are not given.
• Requiring sales deposits to be held in an Australian trust account operated by an Australian legal practitioner, a real estate agent or a settlement agent.

It is important you make yourself aware of the implications of the changes to the Act so you can ensure you adhere to your obligations under the Code of Conduct in regard to acting with due care, diligence and skill and acting in the best interests of your client.

For more information on the Act, visit the Landgate website.

Please note the CPD core activity ‘Managing risk in relation to legislative changes’ covers the amendment to the Sale of Land Act in relation to off-the-plan sales.