07/12/2004 - 21:00

Off-the-plan loophole closed

07/12/2004 - 21:00

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Off-the-plan loophole closed

A LEGISLATIVE loophole allowing buyers of off-the-plan apartments to later rescind their contracts has been amended, providing greater certainty for developers and financiers.

Previously, buyers could terminate a contract of sale if they received notice that a multi-storey residential building was not covered by home indemnity insurance.

This situation created a number of difficulties for developers, who often sell off the plan and secure finance on that basis and appoint a builder at a later date.

A new notice has been incorporated into the Home Building Contracts (Home Indemnity Insurance Exem-ptions) Regulations 2002 that developers can give buyers.

Hawaiian Management Group development manager Horatio Alvarez said the change was designed to allow developers to issue an indemnity form before appointing a builder.

“Previously, developers entered into contracts with purchasers, and then appointed a builder who would issue an exemption notice, which meant purchasers could pull out if they wanted to,” Mr Alvarez told WA Business News.

“Sometimes up to 30 per cent of purchasers pulled out of contracts.

“Developers now have flexibility, which reduces their risk and also the risk from a financier’s point of view.”

Property Council deputy executive director Geoff Cooper said the new regulations allowed develop-ers to advise buyers before any contract was signed whether or not a building was covered by home indemnity insurance.

“Provided that the purchaser receives that notice prior to signing a contract of sale, they no longer have the right to rescind the contract,” he said.

The amendment has taken effect immediately, and applies to buildings that comprise of at least two independent dwellings, which are at least three storeys or have more than one basement story.

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