How to get out of an Off-The-Plans Contract – if you are quick enough


We had a call a couple of weeks ago from a young fellow who had purchased a unit off the plans in a new and quite ambitiously priced development.

He was having second thoughts, and his existing lawyer was not helping.  The contract included a sort of “solicitor’s approval” clause and, rather than cancelling the contract outright, the lawyer was going down the track of trying to figure out how to raise objections under the solicitors approval.

It seems that his lawyer was not aware of section 225 of the Resource Management Act 1991, which states that:

Subject to subsection (1), any agreement to sell any allotment in a proposed subdivision made before the appropriate survey plan is approved under section 223 shall be deemed to be made subject to the following conditions:

(a) that the purchaser may, by notice in writing to the vendor, cancel the agreement at any time before the end of 14 days after the date of the making of the agreement:

(b) that the purchaser may, at any time after the expiration of 2 years after the date of granting of the resource consent or 1 year after the date of the agreement, whichever is the later, by notice in writing to the vendor, rescind the contract if the vendor has not made reasonable progress towards submitting a survey plan to the territorial authority for its approval or has not deposited the survey plan within a reasonable time after the date of its approval.

Subsection (a) is the important one for our purposes, although (b) can sometimes come into play, usually if a development stalls for a year or more because it has not achieved the required level of pre-sales.  Subsection (a) allows you a “cooling-off” period of fourteen days after the date of the agreement.  Within that period, you may cancel by notice in writing served on the vendor or the vendor’s solicitor, no questions asked.

Check the notice requirements in your contract..it may restrict to whom notice can be given and how it may be served.  The notice must be deemed served before the fourteen days are up.  If you are pushing the deadline, let your lawyer do the cancellation…it’s not worth making a mistake.

The “subject to section 1” bit refers to a requirement that the section 223 certificate to the subdivision has not yet been granted by the relevant local territorial authority (means in essence that the council has approved and signed off the subdivision).  Generally, when people are just starting to sell units off the plans, they are still trying to get to a minimum number of sales before they do too much more, and are nowhere near obtaining a s.223 cert.  However, if you are a late-comer and picking up one of the remaining units, the developer may have passed their threshold quite some time back and be a long way down the subdivision track…maybe even too far for s.225 to still apply.  Do not delay in using your right to cancel!

Some contracts will try to provide in the fine print that you agree to waive your rights under section 225.  Generally speaking that kind of clause won’t work or stop you cancelling.  I am not saying you can always disregard such a clause, and you will need prompt legal advice on the specific wording.

An addendum:  You might be forgiven for thinking that this post refers to events in the “Why Solicitors approval clauses are essentially useless” article, but not so….completely different people, trouble each time.  It was no surprise to find that it was the developer’s lawyer that had included it in the contract.  Dangerous stuff.

Advertisements

About Ivan McIntosh

I am a partner of Carter Atmore Law...residing in City Road just off the busy thoroughfare of Symonds Street, Auckland, New Zealand....where we are specialist business & property development lawyers, working for both local and international clients. Proud husband to Joanna, and dad to two sons. Passionate rugby supporter. Email: imcintosh@calaw.co.nz Ph: 64 9 921 5026
This entry was posted in Business Law, Property Law, Subdivisions, Unit Titles and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s