Land Sales Act amendments

The Land Sales and Other Legislation Amendment Bill 2014 (Qld) (Bill) was introduced to the Queensland Parliament on 3 June 2014.  The Bill has not yet been passed.  The Bill (once passed and on commencement) will amend the Land Sales Act 1984 (Qld) (LS Act), the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) and the Property Law Act 1974 (Qld). 

The Bill in its current form may be changed prior to its enactment.  This Alert is based on the Bill as it currently stands.

In this Alert, Partner Don Battams and Solicitor Nicholas Hew highlight the significant changes for property developers.

Key points:

• All of the disclosure obligations relating to lots in community titles scheme developments will be moved into the BCCM Act.
• The LS Act will no longer apply to sales arising from a subdivision or reconfiguration of land into not more than five lots. 
• A deposit of up to 20 percent of the purchase price may now be paid without the risk of a deposit of that size being construed as a penalty and without the contract becoming an instalment contract. 

Significant changes

The LS Act was introduced in the 1980s to regulate the “off the plan” sale of unregistered land in Queensland and to impose minimum disclosure obligations on developers who sell property “off the plan”.  The LS Act applies to off the plan sales of units as well as flat land subdivisions.

The most significant change to result from the proposed legislation is that all of the disclosure obligations relating to lots in community titles scheme developments will be moved into the BCCM Act.

Sale of proposed lots in a community titles scheme (apartments or units):

• The parties to a contract may now specify a time frame of up to five and a half years by which the seller must provide a registrable transfer to the buyer.  Currently, the maximum period is three and a half years.  Where no timeframe or sunset date is specified in the contract, the default position of three and a half years will apply. 
• A deposit of up to 20 percent of the purchase price may now be paid without the risk of a deposit of that size being construed as a penalty and without the contract becoming an instalment contract.  As the law currently stands a contract that requires a deposit of more than 10 percent of the purchase price will be an instalment contract.  It is also likely that the deposit will be considered a penalty and the seller will be unable to retain it if the buyer defaults. 
• Where the seller grants an option to purchase and provides the buyer with the required disclosure material, the seller is not required to again provide the buyer with disclosure material, should a contract subsequently be entered between them.  However, if a nominee buyer is used on the exercise of the option, the disclosure requirements must again be complied with.
• The disclosure statement must state the timeframe referred to above.
• The disclosure statement must be accompanied by a disclosure plan to identify the proposed lot.  The disclosure plan must satisfy certain requirements (e.g. for a building format lot, it must show the proposed lot number, the total area of the lot, the areas of the lot outside the primary structure such as a balcony, courtyard or carport, the floor level, other lots and common property on that floor level and the orientation of the lot by reference to the north point).  The disclosure plan must be prepared by a surveyor.
• The timeframe for the seller to provide a further disclosure statement to the buyer for any variation has been changed to at least 21 days before settlement occurs.  This removes the prospect of a seller having to serve multiple further disclosure statements during the course of a project.  Once provided to the buyer, the buyer will then have 21 days to terminate if the buyer is materially prejudiced by the variation. 
• The further statement must be signed by the seller and certified as accurate by a surveyor (if it rectifies the identification of the lot).
• Expression of interest payments must be paid directly to the trust account of a law practice at its office in Queensland or a real estate agent.

Sale of proposed lots in land subdivisions (non-community title):

• The LS Act will no longer apply to sales arising from a subdivision or reconfiguration of land into not more than five lots.  Currently, an exemption application may be made to the Office of Fair Trading in relation to a small subdivision.
• The 18 month time frame or sunset date for providing a registrable instrument of transfer to buyers remains for sales utilising a disclosure plan and disclosure statement.  This is the timeframe within which settlement must occur.
• A deposit of up to 20 percent of the purchase price may now be paid without the risk of a deposit of that size being construed as a penalty and without the contract becoming an instalment contract.  Currently, a buyer has a right to terminate the contract if the deposit is more than 10 percent of the purchase price.  That right has been removed.
• Where the seller grants an option to purchase and provides the buyer with the prescribed disclosure material, the seller is not required to again provide the buyer with disclosure material, should a contract subsequently be entered between them.  However, if a nominee buyer is used on the exercise of the option, the prescribed disclosure requirements must again be complied with.
• The disclosure plan and disclosure statement requirements have been modified.  In particular, a buyer’s termination right where there has been a significant variation has been removed.  The termination right will now be aligned with the “material prejudice” approach that applies to the sale of proposed lots in a community titles scheme under the BCCM Act.
• The timeframe for the seller to provide a further statement to the buyer due to any inaccuracy with the earlier disclosure plan is at least 21 days before settlement occurs.  Once provided to the buyer, the buyer will then have 21 days to terminate if the buyer is materially prejudiced by the inaccuracy.
• The further statement must be prepared by a surveyor and signed by the seller.
• Expression of interest payments must be paid directly to the trust account of a law practice at its office in Queensland or a real estate agent.

Conclusion

Property developers will welcome, in relation to the sale of proposed lots, all disclosure obligations being dealt with in the BCCM Act and, in the case of proposed lots in land subdivisions, the ability to sell proposed lots arising from a subdivision involving not more than five lots without having to obtain an exemption from the Office of Fair Trading.   

Until the changes commence, property developers must continue to comply with the existing legislative requirements. 

If you would like to know more about these changes to Queensland’s regulatory framework for property development, please contact HopgoodGanim’s Commercial Property team.