Section 9AC of the Sale of Land Act – What does ‘materially affect’ mean?
When a property is sold ‘off the plan’, subject to the registration of a Plan of Subdivision, a lot can change between the signing of the Contract and the registration.
Throughout the registration period, a Plan of Subdivision may undergo many amendments from the proposed Plan which was included in the Contract of Sale. These amendments may be for practical purposes or aesthetic purposes, or even to meet the requirements of the Council or Registrar of Titles in order to actually get the Plan registered.
However, certain amendments to a Plan of Subdivision after an off-the-plan Contract is signed may give a purchaser the right to rescind the Contract.
Section 9AC of the Sale of Land Act 1962 provides:
(1) If after an off-the-plan contract has been entered into and before the registration of the relevant plan of subdivision an amendment to the plan is required by the Registrar or requested by the vendor, the vendor shall within 14 days after the receipt of the requirement of the Registrar or the making of the request by the vendor (as the case requires) advise the purchaser in writing of the proposed amendment.
(2) The purchaser may rescind an off-the-plan contract within 14 days after being advised by the vendor under subsection (1) of an amendment to the plan of subdivision which will materially affect the lot to which the contract relates.
As set out above, the vendor has to provide a copy of the new version of the plan when these amendments occur – but sometimes the purchaser of a lot may not be happy with the changes being made.
This is when the question arises, is the amendment one that would be considered to ‘materially affect’ the lot in question?
A special condition that has commonly been included in Contracts might read something along the lines of ‘A change in area of less than 5% will not be considered material’.
This wording, or a variation of it, was previously accepted as protecting the developer if an amended Plan meant a purchaser’s future property ended up smaller or larger than the one they signed for, as long as the change was under 5%.
The recent decision by the Supreme Court in Burger & Ors v Longboat Holdings Group 2 Pty Ltd [2021] VSC 469, found that the inclusion of such a special condition did not mean that a developer was automatically protected from rescission when such a change was made.
Despite the amendment in that case only resulting in a reduction of approximately 4.39% to the purchaser’s lot overall, the master bedroom bore the largest individual reduction, a reduction which Associate Justice Matthews stated was ‘not insignificant’ and therefore held was ‘clearly material’.
Other examples where a change was considered to materially affect a purchaser’s lot include but are not limited to:
- A reduction in lot liability and entitlement which resulted in the owner losing certain rights they previously had as a holder of 25% of the votes
- Changes which resulted in the natural light coming through a light court being significantly affected
- A portion of common property being turned into a Council Reserve, thereby removing the owners’ exclusivity
- A reduction in the number of visitor car spaces
- A terrace area previously accessible to all lot owners being reserved specifically for certain owners in a second Owners Corporation
- Turning car space lots included in the Contracts of Sale into common property car spaces
There are also some instances where changes have not been considered to materially affect the lot being purchased, including:
- The change of a car stacker space from top position to bottom
- Rearranging car space and storage lots so that they were no longer situated directly next to each other
- Reduction in the size of a car space by 11%
It is important to note that in each of the above matters, every amendment and the resulting effect was considered in light of the specific circumstances, including the conditions of the Contract of Sale and the property being bought, and what may or may not be considered material is not always apparent.
Whether you are a developer or vendor who is selling properties subject to the registration of a Plan of Subdivision, or you are a purchaser who is buying a new property off-the-plan, it is important that you are aware of your rights if the Plan of Subdivision needs to be amended and that you seek legal advice on your position.
If you have any questions or if you need assistance with your property matter, please reach out to our helpful property team.
