Sale of Land Amendment Bill 2019 | Bill

Ms VAGHELA (Western Metropolitan) (16:40:50): I too rise to speak on the Sale of Land Amendment Bill 2019. This bill is tough on dodgy developers and will offer protection for buyers. The Sale of Land Act, which was enacted in 1962, was developed for the purpose of protecting purchasers under terms contracts and contracts for the sale of land off the plan. After that the act was amended to protect the interests of property purchasers more generally. It regulates certain aspects of real estate. It regulates the treatment of deposit moneys, provides for mandatory pre-contractual vendor disclosures and regulates public auctions, among other things. It is recognised as a critical piece of consumer protection legislation which underpins Victorian property law. During 2016 and 2017 the act’s operation was examined as part of the Andrews Labor government’s broader review of consumer property laws. The bill continues to support the act’s role in providing critical consumer protection by introducing a number of key reforms to address important consumer drawbacks in the Victorian property market. These drawbacks were identified during the review of the act. There are a few key reforms which form part of the Sale of Land Amendment Bill 2019. One of the key reforms this bill brings relates to the use of sunset clauses. Off-the-plan contracts commonly include provisions giving the developer or the vendor the right to end the contract if a plan of subdivision for the development has not been registered by a specific date. During the review and also in the last 18 months many of my fellow MPs have received an increasing amount of correspondence from Victorians who have bought properties off the plan and whose contracts appear likely to be terminated by developers under these sunset clauses. These Victorians who have bought the properties are hardworking people who have worked all their lives to save money for a deposit and to build a home, but the dodgy developers do not care. In some cases buyers’ contracts have been terminated only for the developer to subsequently register the plan of subdivision and offer the property for sale at a higher price. It is just about profits, not worrying about people or their homes or livelihoods. In other cases the dodgy developers have also threatened to use sunset clauses to terminate signed contracts unless the buyers pay additional sums. This is outright bullying. We might ask why these buyers do not take legal action against the vendors or developers. Taking such action against these big developers or vendors is beyond the means of most Victorians. Although the number of developers who may seek to take advantage of the ending of the rights is generally low, the risk of this occurring increases when the price of the property increases faster than expected. Termination under a sunset clause in an attempt to capture this value—the profit—is therefore entirely opportunistic. Despite having paid a significant deposit amount and having waited a long period of time to have the property, upon ending the contract the purchasers are denied the benefits of any increases in the value of the property. Once they get repaid the money from the vendors or the developers they get only their deposit back and that is without interest. Then they have to go and look for a property. Once they start looking of course the property prices have significantly increased and it becomes difficult for them to buy a property. This opportunistic behaviour on the developers’ part costs Victorians money and causes a lot of unnecessary stress. This behaviour actually leads to a loss of confidence in the integrity of the off-the-plan industry. These amendments are significant. Normally the state does not interfere in private contractual arrangements. Generally a purchaser wishing to challenge the vendor who is benefiting from this on the basis of the contractual terms the purchaser agreed to would be required to take legal action. However, the extent of consumer detriment caused by developer misuse of sunset clauses and its impact on Victorians’ confidence in the off-the-plan market warrants a legislative solution. Therefore, in order to address the misuse of sunset clauses by vendors, the bill provides that a vendor may not end a residential off-the-plan contract with a sunset clause without the agreement of the purchaser or, alternatively, the express permission of the Supreme Court or it will constitute a breach of contract which will enable the affected purchaser to claim damages or appropriate remedies from the vendor. The provisions of the bill are taken to have come into operation on 23 August 2018—the day after the day on which the Sale of Land Amendment Bill 2018 was second read. Dodgy developers with existing off-the-plan contracts from before this bill passes may just want to end them because that is a way they can attempt to ensure that they are not subject to the sunset clause reform which will happen as a result of this bill, but the Andrews Labor government has made clear in this legislation that a vendor’s ending of a contract under a sunset clause after the date on which this bill was initially second read in the Parliament will be ineffective unless it occurs with the purchaser’s consent. Purchasers also have a contractual right to terminate a plan if it has not been registered by a certain date and in the absence of a contractual right. The second important reform which is part of this bill is to prevent certain ‘terms contracts’ and ‘rent-to-buy’ arrangements. This bill also introduces a prohibition on selling residential land under rent-to-buy arrangements with certain exceptions. The predatory conduct in the alternative housing finance sector has led to vulnerable consumers entering into unaffordable and high-risk terms contracts or rent-to-buy arrangements for the purchase of residential property. Terms contracts and rent-to-buy arrangements are often sold by finance brokers as the financial solution to people who are unable to access credit from the mainstream credit market. These are people who are very desperate to enter the property market: they want to buy their own residential properties. What used to happen is that the market for these sorts of deals—the terms contracts and the rent-to-buy arrangements—was in lower value housing in regional or remote areas, but that is shifting. We are seeing these sorts of deals also in lower value housing in the outer metropolitan area now. It is also happening in my electorate of Western Metropolitan Region. Rent-to-buy arrangements present a significant risk to buyers. For example, if during the rental period the tenants are not able to pay rent for a month, then the landlord can potentially terminate the contract. This will lead to the termination of the lease as well as the termination of the rent-to-buy arrangement. Upon the termination of the lease the person will lose both the option to purchase and also any fees that they would have paid under the sale option. During the review of the Sale of Land Act they did not see many benefits of rent-to-buy arrangements. In fact there was substantial feedback that there are not many benefits of such arrangements. The only winners in these transactions tend to be the finance brokers who do these deals. However, the government recognises that future models of rent-to-buy arrangements may be legitimate and that this should not be prevented. The third reform that is part of the bill is discouraging unregulated land banking schemes. The bill also closes a regulatory gap that has enabled developers associated with unregulated and problematic land banking schemes to sell to unsophisticated investors without regard to their interests. Before any formal subdivision or development has occurred small-scale domestic investors are offered the opportunity to either buy a lot off the plan or pay money to purchase an option to buy a lot at some point of time in the future. The value of the option is tied to the likelihood of the land being approved for development by the relevant council; that is where the purchaser will make a profit, once the council has given a permit. While moneys paid by purchasers are protected under the act, the purchase of an option to buy land is not covered under the act. As a result what happens is that there are chances that the land may be unsuitable for development or rezoning and the money that gets paid for this option does not get put into a trust account and therefore there is a risk of the loss of the money. Previous land banking schemes have involved the sale of options which have collapsed and purchasers have lost their money. These property spruikers who sell such options exploit unwary investors through their dubious banking schemes. The fourth point of this bill is the strengthening of presale disclosure. The bill also includes amendments to address some issues. While we do not see them frequently, they are of concern to the community when they arise. One such issue is the disclosure of certain material facts when people are selling a property—for example, it could be the property’s history as the site of a homicide or the past use of the property to manufacture illicit drugs. It is currently an offence under section 12 of the Sale of Land Act 1962 for any person with the intention of inducing another person to buy land to fraudulently conceal misleading facts. This bill is going to replace the word ‘fraudulently’ with ‘knowingly’. The bill also provides for legislative guidelines to be prepared by the director of Consumer Affairs Victoria which will clarify what a material fact will be. These reforms will encourage estate agents to do their due diligence before they list a property for sale and will also complement existing laws whereby agents will be liable for recklessly making a statement which is misleading. The last point of reform in this bill concerns public auctions on Anzac Day. The Andrews Labor government has listened to the concerns raised by some people that public auctions should not be conducted on Anzac Day before 1.00 p.m. In recognition of the community concern about public auctions being conducted, the bill will amend the ANZAC Day Act 1958 to prohibit public auctions being conducted before 1.00 p.m. on Anzac Day. This does not happen frequently; however, sometimes Anzac Day does fall on a Saturday—when most of the auctions are being conducted—and sometimes on Sunday as well. In 2015 Anzac Day fell on a Saturday, and 18 auctions were conducted on that day before 1.00 p.m. In conclusion, I would like to take this opportunity to thank the stakeholders who participated in the review of this act. The bill introduces critical reforms which are designed to mitigate the consumer detriment identified during the review while allowing legitimate and beneficial property transactions. Therefore I commend the bill to the house.