July 9, 2009

On the 22 June s 212 of the Body Corporate and Community Management Act 1997 (“BCCMA”), dealing with cancellation by buyers of off-the-plan contracts was amended to shut off court approved buyers’ rights to terminate contracts because of some technical contract deficiencies.

With unprecedented speed, government introduced and passed a retrospective law to remove a consumer protection provision relied on by the successful (terminating) buyer in the Qld Court of Appeal in Bossichix Pty Ltd v Martinek Holdings Pty Ltd, decided on 5 June.

In this case B contracted, off-the-plan, to buy an apartment from M in Mackay development “Rivage” for $995,000.
Clause 14 of the contract provided that:

“the settlement date is the later of:

  • 14 days after the Seller notifies the Buyer that the Building Format Plan is registered; and
  • three days after the Seller notifies the Buyer that a Certificate of Classification is issued for the building”

On 13 November 2007 and before any notice was given by M relating to settlement, B terminated the contract under the now replaced section 212(3).

M rejected the termination and gave notice on 31 March 2008 to B that the building format plan had registered and fixing settlement for 14 April 2008. B did not complete and their solicitors wrote a confirmation letter to M that the contract was terminated.

M issued proceedings. B’s defence was that clause 14 did not comply with s 212 which permitted buyers to terminate off-the-plan unit contracts, if:

  • the contract did not specify that “settlement must not take place earlier than 14 days after the seller gives advice to the buyer that the scheme has been established or changed”; or
  • if a proposed community management statement was not in existence as at the date of the contract.

B argued that:

  • Only a contract that contained the very words of section 212(1) would sufficiently comply. (The Court found it unnecessary to deal with this point); and
  • Clause 14 referred to a notice of the registration of the Building Format Plan, whereas section 212 refers to something different, namely a notice of the establishment of the scheme.

The Court accepted the second argument stating that “clause 14 does not have the same effect as the provisions required by section 212(1)” because, in its view, the registration of the plan and the establishment of the scheme are separate and distinct notwithstanding that in 99% of cases they occur at the same time.

In a very significant victory for the off-the-plan buyer, B’s termination of the contract was therefore upheld and the deposit was required to be refunded.

The government immediately acted on calls from developers and their lobbyists to amend the Act effective from the date of the Court’s decision.

The new BCCM section 212 that became law on 22 June 2009 (but has some limited retrospective effect – see below) “rectifies” the situation in favour of developers.

Section 212 now provides that an off the plan contract for any community title lot is taken to include a “deemed term” to the effect that, despite any other term in the contract, “settlement must not take place earlier than 14 days after the seller advises the buyer that the scheme has been established or changed.”

This has a similar effect to the repealed provision but denies buyers termination opportunities.

In a further helping hand to developers, if any notice is given to a buyer that is inconsistent with the “deemed term” then the notice “is void” to the extent of the inconstancy.

New section 212A now provides that a buyer may cancel an off-the-plan unit contract if the proposed community management statement was not in existence as at the date of contract. This is identical to the second limb of the repealed s 212.

Other cancellation rights for material prejudice under s 214 still apply.

Section 212 is retrospective to a contract entered before 22 June 2009 unless it was lawfully terminated by the buyer on the grounds of non-compliance with the old s 212 before 5 June 2009 (the date of the Bossichix decision) or if legal proceeding relating to the lawfulness of the cancellation by that date are being taken.

The breathtaking speed at which government acted in this matter has surely cemented its “pro-development” credentials and the position of the property and development industry in relation to government policy.

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