NSW Minister for Innovation and Regulation Victor Dominello has said that he plans to overhaul numerous aspects of legislation covering off the plan developments in the state.
In an interview with Fairfax media outlets, Dominello said he wants more transparency around commissions paid to off the plan promoters, whether developers should be allowed to alter floor space during construction and removing the ability of developers to enact sunset clauses to cancel contracts and resell developments at a higher price.
“We want to have a look at property spruikers who promote these get-rich-quick schemes through so-called seminars… The problem is the speakers don’t tell you they are being paid by the developers, effectively to promote their properties. We need some transparency around this,” Dominello told Fairfax.
“In a hot market like this the sunset clause can be invoked, the price escalates and the developer makes a heap of money so it’s in their interest to wait for the sun to set,” he said.
Susnset clauses in off the plan agreements allow the developer or buyer to cancel the contract if work is significantly delayed; however there are fears currently that developers are deliberately delaying work to cash in on capital growth.
Rich Harvey, managing director of Sydney based buyer’s agency Property Buyer said he would be extremely pleased if sunset clauses were scrapped.
“I always advocate caution in buying off the plan in a rising market because as projects near completion you see contracts being cancelled so developers can resell them at much higher prices while the buyers miss out on the extra equity,” Harvey said.
Harvey said the discussion about changing off the plan legislation was a good reminder for people to take a closer look at any off the plan agreement they might be considering.
“Off the plan purchases can work if you get the right development but you need to be careful and you should definitely do your homework.
“When it comes to floor space, there’s no way I’d sign an agreement that has a floor space variation of more than 5%, in my opinion people should be getting what they agreed to and paid for.
“You also need to look at who the developer is and what their reputation is… commission has become a dirty word when it really shouldn’t be, but that’s because so many agents have become incentivised to push developments that don’t work.”
