Allens

Real Estate

Focus: Change to planning certificates in NSW – Vendors beware!

10 March 2009

In brief: There has been a change to the legislative regime governing planning certificates in New South Wales. Partner Victoria Holthouse (view CV) and Lawyer Andrew Selim report on the new regulation and how it could pose a risk to vendors who have issued contracts for sale, by increasing the possibility of rescission by a purchaser.

How does it affect you?

  • The recent changes to s149(2) planning certificates in New South Wales pose the greatest risk to a vendor who has entered into a contract for the sale of land on or after 27 February 2009.
  • A purchaser could argue that a vendor has not complied with mandatory statutory disclosure and implied warranty requirements if an up-to-date s149(2) certificate, which complies with the new regulation, is not attached to a sale contract entered into on or after 27 February 2009. On that basis, a purchaser may seek to rescind the contract.
  • If you are vendor and you are about to enter into a sale contract, you should ensure that statutory information, especially in s149(2) certificates, is current and complete by obtaining and attaching a 'fresh' s149(2) certificate, issued after 27 February 2009, to your sale contract.
  • You should check that any s149(2) certificates issued by a local council on or after 27 February 2009 are complete and contain not only information required by the new regulation but also all other relevant information which vendors are required to disclose in planning certificates.

Background

When land is bought or sold in New South Wales, the Conveyancing Act 1919 (NSW) and the Conveyancing (Sale of Land) Regulation 2005 (NSW) require a vendor to attach copies of certain documents to the contract.1 One of those documents is a 'planning certificate' issued under section 149(2) of the Environmental Planning and Assessment Act 1979 (NSW) (the EP&A Act) which contains information about land zoning, relevant planning controls and other property affectations such as land contamination and road widening.2 

If a vendor fails to attach a s149(2) certificate, a purchaser may rescind a contract for sale at any time within 14 days after making the contract, unless it has been completed.3

In addition to the requirement to attach a s149(2) certificate, a vendor warrants that, among other things, as at the date of the contract (and except as disclosed) the s149(2) certificate attached to the contract specifies the true status of the land.4 A vendor's breach of that implied warranty gives the purchaser a right to rescind up to the date of completion, if that breach constitutes a failure by the vendor to disclose the existence of a matter, the purchaser was unaware of it when the contract was entered into, and the purcahser would not have entered into the contract if they knew about it.5

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Recent changes to s149(2) planning certificates

On 27 February 2009, the Environmental Planning and Assessment Amendment (Complying Development) Regulation 2009 (NSW) (the Regulation) came into force. The Regulation inserts a new clause 3 into schedule 4 of the Environmental Planning and Assessment Regulation 2000 (NSW) (the EP&A Regulation).

That change now means that in s149(2) certificates, local councils must provide (in addition to details about zoning, planning controls and other property affectations) information about whether the land being sold is land on which no complying development6 may be carried out under the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (NSW) (the SEPP). If no complying development may be carried out under the SEPP, the reason must also be provided.

Prior to 27 February 2009, local councils were not required to include this information in s149(2) certificates.

The Regulation also inserts a new section, s279(2), in the EP&A Act that allows a local council to issue a s149(2) certificate which only contains information required by the new clause 3 (ie, whether or not the land is one on which a complying development may be carried out and if not, why).

These types of 'limited' planning certificates do not set out all the matters required to be disclosed under schedule 4 of the EP&A Regulation and so should not, on their own, be used as the planning certificate to be attached to a contract. The limited planning certificate can be used to 'top up' an existing s149(2) certificate which may not include the new required information.

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What risks do you face if you, as a vendor:

entered into a contract before 27 February 2009?

In the absence of a clear statement to the contrary, legislation in Australia is assumed not to have a retrospective effect.7 So, because the Regulation does not explicitly state that it applies retrospectively, the recent changes do not apply to sale of land contracts entered into before 27 February 2009. This means that vendors who exchanged contracts before 27 February 2009 are not at risk of rescission by a purchaser for non-disclosure of the information required by the Regulation.

entered into a contract on or after 27 February 2009?

If:

  • the s149(2) certificate attached to your contract was issued prior to 27 February 2009;
  • your contract has not completed; and
  • your planning certificate has neither been replaced by a fresh s149(2) certificate nor supplemented by a 'limited' planning certificate,

the possibility of a purchaser arguing that you have failed to comply with your statutory disclosure and implied vendor warranty obligations is greatly increased. If the purchaser's argument is successful, they will be entitled to rescind the contract at any time up to the date of completion.

At the time of writing, the Law Society of NSW Property Law Committee is in discussion with the NSW Department of Lands and the NSW Department of Planning about how to address the issues currently facing many vendors in New South Wales, who, for example, exchanged contracts immediately following, or not long after, 27 February 2009.

are about to enter into a contract?

The risk of rescission by a purchaser for non-disclosure can be avoided if you:

  • replace the s149(2) certificate currently attached to your contract (if it was issued prior to 27 February 2009) with a fresh s149(2) certificate before exchange. Alternatively, you may obtain and attach a 'limited' planning certificate to supplement your s149(2) certificate. Given that a 'limited' certificate may not be used as a stand-alone document for the purposes of statutory disclosure, vendors should adopt the preferable position of obtaining a fresh and complete s149(2) certificate; and
  • check to see whether any s149(2) certificate issued to you by a local council on or after 27 February 2009 not only contains information about whether a complying development may be carried out on your land but also whether it contains all the requisite information that needs to be disclosed under the EP&A Regulation.

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Conclusion

These new changes to planning certificates are obviously meant to create greater transparency for purchasers buying land in NSW. It may, however, create greater risks and possible costs for vendors who enter into contracts for the sale of land after 27 February 2009, at least during the transitional phase as s149(2) certificates are updated.

The major problem at this stage is the category of contracts entered into on, or after, 27 February 2009.

We will continue to monitor the introduction of the new amending leglsiation and its impact on contracts for sale of land, as well as the NSW Department of Planning's response. If you have any questions in relation to this issue or any other real estate matter please contact us.

Footnotes
  1. Section 52A(2)(a) of the Conveyancing Act.
  2. For a list of what is included in a s149(2) certificate, see schedule 4 of the EP&A Regulation. Best practice also dictates that vendors should attach information about other optional matters under s149(5) of the EP&A Act.
  3. Clauses 19(1)(a) and 20(1)(a) of the Conveyancing (Sale of Land) Regulation.
  4. Section 52A(2)(b) of the Conveyancing Act; Clause 8 and Schedule 3 of the Conveyancing (Sale of Land) Regulation.
  5. Clauses 19(1)(b), 19(3) and 20 of the Conveyancing (Sale of Land) Regulation.
  6. A complying development is a development which complies with clause 1.18 of the SEPP. For example, such a development must (among other things) be permissible in the land use zone in which it is carried out and must meet relevant provisions of the Building Code of Australia.
  7. Maxwell v Murphy (1957) 96 CLR 261 per Dixon CJ at 267.

For further information, please contact:

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