Considering buying off-the-plan? Purchasers beware.

H & H Lawyers successfully defends a vendor developer against claims brought by the purchaser of an off-the-plan property in the Supreme Court of NSW.

While the benefits of buying an off-the-plan property are often highlighted to a purchaser, the decision in Xu v Lindsay Bennelong Developments Pty Limited & Ors [2020] NSWSC 1692 confirmed the importance of having any terms that are “non-negotiable” for the purchaser to be clearly expressed in writing in the contract for sale of land.

Facts

In this case, the plaintiff was a purchaser of an off-the-plan property. During the handover inspection of the completed property, the purchaser discovered that there was only one car space attached to her property despite the representation being made prior to entering the contract for sale of land that there would be two car spaces. Subsequently, the purchaser brought a claim against the former vendors of the subject property and the substituted vendor, to whom the contract for sale was novated to, after exchange of contracts.

Other relevant facts include:

1.   prior to purchasing the property, the agent made representations to the purchaser that there would be two car spaces attached to the property;

2.   prior to purchasing the property, the purchaser’s solicitor inquired and the former developer confirmed in writing that the property had two car spaces;

3.   the front page of the contract of sale of land did not specify how many car spaces were attached to or formed part of the property;

4.   the draft floor plan and draft strata plan of the property which were attached to the contract of sale marked that there are two car spaces allocated to the property;

5.   there was no other mention of there being two car spaces attached to the property in the special conditions to the contract or anywhere else in the contract; and

6.   it was a special condition to the contract for sale that the purchaser acknowledges and agrees that the vender may make alterations, from time to time, and vary the building floor plan or the draft strata plan, as it sees necessary or desirable.

The plaintiff claimed that the defendants breached the fundamental term and purposes, or alternatively, an implied term of the contract, by only transferring one car space with the property instead of two car spaces. The plaintiff also claimed that, in doing so, the defendants engaged in misleading and deceptive conduct or false representation under sections 18 and 30(1)(e) of the Australian Consumer Law (“ACL”) and sought specific performance for the defendants to transfer one more car park under sections 237 and 243 of the ACL.

The then Chief Judge in Equity, Ward CJ dismissed the plaintiff’s arguments and held that:

 1.   the contract was for the sale of a unit with a single tandem car space. However transferring two car spaces was neither a fundamental term nor an essential implied term of the contract; and

 2.   the representations that the plan would include a space for two cars were clearly made. Nonetheless, such representation does not amount to misleading or deceptive conduct in circumstances where the developer had reasonable grounds to make such representation at the time and the plaintiff suffered no loss by relying on the promise.

Key takeaways

While this case is not to be generally applied to all circumstances in relation to off-the-plan purchases, a purchaser of an off-the-plan property should be mindful of standard special conditions attached to contracts for sale of off-the-plan properties which are designed to allow a vendor developer to make changes (to a degree) to a draft floor plan or draft strata plan.

As in this case, even if the court finds that the draft plan which formed part of the contract was varied, such variation may not constitute a breach of a fundamental or essential term of contract. Thus, a purchaser of an off-the-plan property must scrutinise the terms and conditions before entering into the contract for sale. Further, if the purchaser seeks to rely on any representations made by an agent or vendor prior to entering into the contract, such representation should be expressly and unequivocally included in writing in the contract to make sure the vendor makes good on the promise. The purchaser should also be mindful that the contract would generally provide a limited time to seek rescission.

A vendor should also consider the litigation risks associated with the sale of off-the-plan properties. Even if the vendor is successful such as in this case, being involved in court proceedings is costly and time-consuming, and may impact its reputation as a developer as well as open the gate for other purchasers to bring a similar claim against the developer.