Developers beware – strict compliance with Strata legislation for ‘Off the Plan’ contracts

12 February 2009 Topics: Property and planning law

In a recent decision of the Supreme Court of Queensland it was held that the settlement mechanism in an off the plan contract between two parties did not comply with the particular section of the Body Corporate and Community Management Act 1997 (“Act”) which governs how developers can call for settlement to occur.

The case is known as Bossichix*.

This case highlights that the Court will take a strict approach to interpreting how certain sections of the Act will apply to off the plan contracts.  It is essential that parties who are contemplating buying or selling “off the plan” are aware of the implications of this decision.

The relevant section

The relevant section is section 212 of the Act.  It provides that settlement of an off the plan contract must not take place earlier than 14 days after the seller advises the buyer that the scheme has been established.  It also provides that there must be a proposed community management statement for the scheme.  If settlement has not occurred and section 212 of the Act has not been complied with, a buyer may have the right to terminate the contract.

Facts of the case

The off the plan contract between these parties contained a clause which read as follows:

‘The settlement date is the later of:

  • 14 days after the Seller notifies the Buyer that the Building Format Plan is registered; and
  • Three days after the Seller notifies the Buyer that a Certificate of Classification is issued for the building.’

This type of clause was used in off the plan contracts under legislation which predated the Act.

The Court’s decision

The Court held that the wording used in the clause detailing how settlement could be called failed to comply with section 212 as it did not strictly follow the wording in the relevant section.

The Court was motivated by the notion of consumer protection in requiring strict compliance with the wording used in the relevant section.

The Court acknowledged that there may have been little practical difference between the sequence of events which the seller was relying upon to call for settlement to occur and those mentioned in section 212.  However, the Court took the view that section 212 is “essentially a consumer protection provision”, and the seller’s failure to comply with the section meant that the seller had not and could not appropriately fix the time for settlement.

Substantial compliance and the fact that the events leading up to settlement did not disadvantage the buyer were insufficient to assist the seller.

We understand that the decision is currently the subject of an appeal by the seller which may or may not be successful.  At this juncture, it is wise to proceed on the basis that the appeal will not be successful and that strict compliance with section 212 is a necessity.

Conclusion

It is clear that the Courts will look for strict compliance with particular sections of the Act where consumer protection is being provided. Substantial compliance may not be sufficient.

*Bossichix Pty Ltd v Martanek Holdings Pty Ltd [2008] QSC 278.

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