In Lockwood v PSP Investments Pty Ltd [2013] VSC 10 the Victorian Supreme Court recently confirmed the Victorian and Civil Administrative Tribunal’s (VCAT) ruling in Besser v Alma Homes Pty Ltd [2012] VSC 460 that an amendment does not need to be ‘adverse’ or ‘affect rights deleteriously’ to be material.
In Lockwood the Purchaser bought 4 apartments and 4 car parks at a development in Windsor (8 separate contracts of sale). Following the day of sale, amendments were made to the plan of subdivision which had the effect of:
1. Making the car parks common property (the 4 car park contracts of sale therefore failed);
2. Removing lot 800 on the roof (proposed penthouse) and making this area common property; and
3. Increasing the lot liabilities and entitlements as a result of the car parks and roof being common property.
The Vendor did not notify the Purchaser of the amendments in writing (as required under section 9AC(1) of the Sale of Land Act 1962 (Act)) and the Purchaser only discovered the amendments after the plan of subdivision was registered. The Vendor subsequently notified the Purchaser of the amendments in writing and offered 99 year leases of the 4 car parks.
The Purchaser sought to rescind the 4 apartment contracts of sale (the 4 car park contracts of sale had already failed) on the basis that there had been a material change to the plan of subdivision.
The Vendor argued that the 8 contracts of sale were stand alone and an amendment had to be detrimental before it could be material.
The Victorian Supreme Court held that an amendment does not need to be adverse or affect rights deleteriously to be material and that the contracts of sale had been validly rescinded. The Vendor’s offer to grant 99 year leases over the car parks was seen as an admission that the 8 contracts of sale were ‘linked’ and went against the Vendor’s argument that each contract of sale should be looked at separately.
The main things to take from this case are:
1. Under section 9AC(1) of the Act the Vendor must notify the Purchaser in writing within 14 days of the ‘proposed amendment’ following the request for amendment and before registration of the plan of subdivision.
2. Registration of the plan of subdivision will not prevent a Purchaser from rescinding a contract of sale under section 9AC(2) of the Act within 14 days of notification of a material amendment to the plan of subdivision.
3. An amendment to a plan of subdivision does not need to be adverse or affect rights deleteriously to be material. In Besser the material amendment to the plan of subdivision was a reduction in the Purchaser’s lot liability and entitlement which the Vendor argued was an advantage, but VCAT held was material and allowed the Purchaser to rescind the contract of sale.
It seems that the Courts will support rescission where there have been amendments to the plan of subdivision.
Amendments to plans, whilst at times unavoidable, should therefore be kept to a minimum, especially in relation to changing lot entitlements and common property, and should be communicated to Purchasers in writing as soon as possible following a proposed amendment and prior to registration of the plan of subdivision.
To read more about the case, please click here.