Developers could face financial penalties for failing to deliver homes and unfairly profiting off buyers under reforms being considered by the NSW Government.
Feedback is being sought on stronger protections for consumers in off the plan contracts for homes and land in NSW, to guide the delivery of new housing and prevent lengthy delays that leave people out of pocket.
An off the plan contract is an agreement for the sale and purchase of a property that is yet to be developed or constructed. These contracts can apply to the sale of a proposed lot in a strata or community land scheme or to the sale of land in a conventional subdivision.
The reforms are being designed to help increase housing supply by providing greater certainty and clearer deadlines for home buyers and to free up land for development faster by removing outdated restrictions on development sites.
The reforms are intended to help more people achieve the Australian dream of home ownership and build greater confidence in the housing market by improving protections for buyers and preventing developers from delaying homes they have been contracted to deliver.
About five per cent of 180,000 residential purchases in NSW last financial year were off the plan contracts which allow a buyer to commit to purchasing a property before the complex is built or land is subdivided.
Potential reforms being released for comment aim to tighten contract rules to give buyers a clearer understanding of when they can expect to move into their new home, reducing uncertainty and the risk of being left behind in the market when a contract is cancelled.
This could include scrapping the ability for developers to draw the contract out with indefinite sunset clauses which give buyers no clear path forward, or ability to exit the arrangement.
Other proposed changes the NSW Government is considering include:
- Making sunset clauses mandatory in contracts so that buyers can withdraw if sunset events do not occur by a set time
- Requiring developers to disclose the status of the development against construction milestones so buyers have a better understanding of timeframes and potential risks
- Limiting a developer’s ability to extend sunset dates only for certain reasons beyond the developer’s control such as weather or supply issues, and imposing time limits on extensions
- Requiring developers to take reasonable steps to meet dates by potentially introducing penalties for inaction.
The Government is also looking at unlocking potential development sites by making it easier to remove private, outdated agreements from land titles (known as obsolete restrictive covenants) which can limit how land is used or developed.
Covenants can continue to bind future landowners indefinitely, even if they become outdated – for example, an obsolete covenant may prevent more than one property from being built on the land or ban the use of certain building materials.
To support the reforms, the Office of the Registrar General has released a discussion paper called ‘Contracts and Covenants: Reforms to support development of land’ outlining the options.
The community is invited to respond to survey questions or upload a submission on the reform proposals and share their experiences on the NSW Government’s Have Your Say platform.
The consultation will lay the groundwork for legislation to be developed in 2025.
The Contracts and Covenants consultation is open until 7 March 2025.
To have your say, visit: https://www.haveyoursay.nsw.gov.au/offtheplan-contracts-covenants
Minister for Customer Service and Digital Government Jihad Dib said:
“Buying a home is one of the most stressful experiences for an individual, these proposals are designed to provide greater certainty and consistency. This review is about making sure home buyers have the right protections and information they need to make informed decisions.”
“Off the plan contracts play a crucial role in supporting essential housing supply initiatives in NSW. They allow buyers to purchase property early in the development process, while giving developers the confidence and financial security to build.”
“We know that most developers do the right thing, but we don’t want situations where businesses try to run down the clock on a contract to sell to a higher bidder or mislead consumers by unfairly changing the goalposts for when they can move into their dream home.”
“These reforms are designed to provide greater transparency as well as encourage the delivery of new homes. These proposals are about encouraging developers to be upfront about timelines and challenges to assist homeowners.”
“We encourage people to have their say on these proposals which aim to boost consumer confidence in the off the plan contract process and help NSW achieve our housing targets.”
Registrar General Danusia Cameron said:
“Off the plan buyers need more information and support than buyers of established homes because they are not able to inspect a property before committing to buy it.”
“It is important that the laws governing off the plan contracts also arm buyers with appropriate safeguards, meet the needs of the community and address emerging issues in the sector to ensure there is continued confidence in the process.”
