In Victoria, the Sale of Land Amendment Act 2019 (the Act) has come into effect since 1 March 2020. The Amendment Act has made a number of significant changes to the Act, which bring some substantial financial penalties and consequences if they are not complied with.
Below is an overview of the key changes, which vendors and purchasers should be aware of to avoid pitfalls.
Increased requirements on vendor disclosure
In addition to the current requirements of section 32 of the Act, the government has tightened laws to ensure vendors and agents must also now disclose “material facts” about a property to a prospective buyer when selling land. A material fact is a fact that would be important to a potential purchaser in deciding whether or not to buy the property and at what price. It is an offence to knowingly conceal any material fact.
For example, if you know your property has an unfavourable past history (used to be a site of a homicide or murder), or it contains flammable cladding, or it was used as a meth lab, then you will need to disclose this, otherwise you could face tough penalties.
Greater protections for purchasers in land banking schemes
Land banking schemes involve a person purchasing a small section of land in a large block of land with the anticipation that the large block of land will be developed in the future. The Amendments have now tightened the schemes which are in favour of prospective purchasers.
There have been several examples of land banking schemes collapsing with purchasers losing their investment. However, it is now compulsory for vendors to hold the purchaser’s deposit on trust, and the deposit is refunded if the land is not developed within 5 years.
Prohibiting certain terms contracts
Terms contracts are those contracts that offer settlement periods of up to 30 years to accommodate those who cannot get a regular bank loan. It is now an offence to knowingly sell or induce someone to enter into some prohibited terms contract.
More specifically, terms contracts of residential land at a sale price of less than a prescribed amount are banned. Any purchasers under these prohibited terms contracts can void them by written notice.
Restrictions to rent-to-buy arrangements
Rent-to-buy schemes, a similar type of alternative finance for those unable to get a loan, is an arrangement where a renter is given the option to purchase the property. These leases are often at a premium to regular leases.
Under the Amendments, most rent-to-buy contracts are prohibited for residential purchasers. It protects especially young purchasers from entering into rent-to-buy contracts, but then never being able to afford the property.
The above summary is only an extract of key changes introduced by the Amendment Act. If you have any questions or our conveyancing fees, do not hesitate to email us at [email protected] or call us on +61 3 9590 618. Our expert team can answer any queries and we work hard to ensure your sales or purchasing experience is as stress-free and straightforward as possible.