The Law Handbook 2024

544 Section 6: Houses, communities and the road of the unit or lot being purchased), the location of easements, and when building works will commence. The contract will also stipulate what is to happen if the works cannot be completed or the plan has not been registered by the nominated sunset date. In 2019, the Victorian Government passed new laws that removed the ability of developers to use sunset clauses to intentionally delay residential building projects and exploit buyers. Developers can now only use sunset clauses with the buyer’s written consent or with permission from the Supreme Court of Victoria (this applies to residential off-the-plan properties only). A buyer can end a contract of sale upon the expiration of the sunset date without the vendor’s consent or permission from the Supreme Court. Currently in Melbourne, there are lots of pending apartment developments. The biggest risk of purchasing off-the-plan in such a market is that, come settlement, a buyer’s bank may value the property at less than what the buyer paid for it, and the bank will ultimately not lend as much as it may have first indicated. This is a particular concern when the direction of the property market is uncertain. The best way a buyer can protect themselves from this situation is by saving as much money as possible between signing the contract and settlement (and have a back-up plan, such as a parent going guarantor on the loan). There are other factors to think about before buying off-the-plan, considering a developer may take one to six years to build the property (depending on the sunset date in the contract): • Will you still want to live here in say, six years’ time? What could change in your life during that period? Would you be better-off buying an already built apartment that is available now? • Will there be changes in your life in the next six years that could result in a bank not agreeing to lend you as much money? (e.g. Are you planning on starting a business or a family or shifting to a lower-paid job?) • Would you still want this property if some of the fixtures/finishes were not the same as in the marketing materials, or if the dimensions of the property were reduced by four per cent, or if some of the views or facilities were not as promised? Due to the complexity of off-the-plan property contracts, buyers should seek legal advice before signing the contract of sale as buyers can be bound by the contract in ways that might surprise them. Guarantees and deposit bonds For off-the-plan properties, buyers may be able to pay the deposit by way of a bank guarantee or a deposit bond that is issued in the vendor’s favour. Check the contract to see if this is permitted (note that the vendor needs to consent to the deposit being paid this way). The original bank guarantee or deposit bond is usually held by the vendor’s solicitor until settlement. After settlement, the document should be returned to the buyer to send to their final institution to be destroyed. Solicitors acting for vendors should also be wary of bank guarantees or deposit bonds expiring before they have a chance to call on them (e.g. if a buyer defaults under the contract and the vendor wants to call on the deposit bond or bank guarantee to access the deposit money). Generally, bank guarantees or deposit bonds must have an expiry date of at least 45 days after the due date settlement. Conveyancing What is conveyancing? Conveyancing is the process of transferring ownership of a property from the vendor to the buyer. Conveyancing involves preparing legal documents, checking for problems or restrictions relating to the property, and exchanging money between the buyer and the vendor. Who does the conveyancing? Do-it-yourself conveyancing It is difficult for a party to a real estate transaction to do their own conveyancing, as conveyancing in Victoria is now done via an electronic platform to which solicitors and licensed conveyancers must subscribe. Further, many contracts require the buyer to be represented by a lawyer or licensed conveyancer in the transaction. Conveyancers versus solicitors Licensed conveyancers compete with solicitors for conveyancing work. The Conveyancers Act 2006 (Vic) (‘ Conveyancers Act ’) commenced on 1 July 2008. This legislation regulates (non-solicitor) conveyancers in Victoria and deals in detail with licensing, qualifications, professional indemnity insurance, the operation of a property fund, and