FINANCIERS note, the rules that apply to multi-storey residential developments have changed.
The Western Australian Government has changed the Home Building Contract (Home Indemnity Insurance – Exemptions) Regulations.
Those who have been involved in the multi-storey residential development market since early 2002 have been aware of the requirement of the builder to give the prescribed notice to a purchaser advising that the builder does not carry home indemnity insurance. The consequences of not issuing this notice before the purchaser entered into the sale contract were that the purchaser could rescind the contract.
The changes are a considerable improvement on the previous situation but still need to be watched to ensure the enforceability of pre-sales.
The position under the new regulations can be summarised as follows:
•The regulations apply to a building comprising at least two independent dwelling units, any part of which is at least three storeys high or has more than one basement storey;
•A builder does not have to carry indemnity insurance if the builder gives the prescribed notice (the Builder’s Notice) to the developer. Where the builder is also the developer and is selling units in the development, the builder has to give notice to each purchaser. This has to be done before the sale contract is entered into;
•After the developer receives a Builder’s Notice from a builder, the developer must not enter into any sale contract unless the developer gives a copy of the Builder’s Notice to the purchaser before the purchaser enters into the contract. Failure to do this attracts a penalty of $5,000. More importantly, the purchaser may rescind the sale contract; and
•Where the developer receives the Builder’s Notice after the developer has entered into a sale contract, the developer must give a copy of the Builder’s Notice to the purchaser within 10 days of the developer receiving the Builder’s Notice.
Failure to do this attracts a penalty of $5,000. In addition, the purchaser may again rescind the sale contract.
Geoff Stevens, partner, 9288 6926
Phillips Fox
