‘Sunset clawback’ court case on Short Lane Apartments in Surry Hills ends in confidential cash payment
SEP 12, 2017
A landmark court case under new “sunset clawback” laws designed to prevent new apartment developers unfairly tearing up sales contracts so they can make more money on delayed property sales has ended in a financial settlement.
The NSW Supreme Court case finished on Tuesday, only a day and a half into its scheduled five days, with the 11 buyers of off-the-plan units at a Surry Hills block understood to have been offered a confidential cash sum in addition to the refund of their deposits.
Lawyer Brett Gilbert, who’d been representing many of the unit-buyers, said had new laws that forced developers to take action against buyers, rather than vice versa, not been brought in at the end of 2015 they might never have seen such a result.
An artist’s impression of Short Lane, Bourke Street in Surry Hills. Photo: Domain.com.au
“I have no doubt that, without the change in the laws, this would have been a real battle and probably one without a solution,” said Mr Gilbert of Gilbert Legal on Tuesday. “The new laws may not be perfect, but they certainly help.
“I think they’ll make developers very careful in the future before they attempt to rescind contracts without a valid reason. There’s still a degree of uncertainty about the laws and there will be until a case goes all the way to judgment, but this is a fair result.”
Legislation was introduced into Parliament to protect buyers against developers deliberately delaying completion then rescinding contracts to take advantage of rising property prices. Under new laws the onus is now on the developer to prove they are justified in taking the action and, if buyers refuse to rescind, the developer must take them to court to argue before a judge that it’s necessary.
NSW government minister Victor Dominello, who formulated the new legislation after a Domain campaign during his term as minister for innovation and better regulation, said he was delighted by the result. Photo: Anthony Johnson
This case involved purchasers into a new 22-unit block, Short Lane Apartments, at 352 Bourke Street, who put down their deposits in late 2013. Constant delays triggered the sunset clause date in October 2016, and the developer-builder, Kanaan Kanaan of Komplete Constructions, advised them he was rescinding contracts.
Eleven refused, and were taken to court. Before the confidential settlement was reached, one of the buyers, Deborah Blay, said talks hinged on a financial offer to all parties. “We decided to fight this in the hope that, in the future, other purchasers won’t be as disadvantaged as we have been,” she said on Monday.
Developer Mr Kanaan said later after the settlement that he never wanted to take the purchasers to court, and had made them a very good offer beforehand. He would have allowed them to keep their apartments if they agreed to pay him half the costs he’d incurred as a result of the unavoidable delays.
An artist’s impression of one of the apartments at Short Lane, Bourke Street in Surry Hills. Photo: Domain.com.au
“That would have roughly been only half the amount their apartments had gone up in value since the contracts were exchanged,” he said. “Eight people accepted that offer but we felt that the rest were being greedy about it. But I am glad we got something out of it at the end of the day, and they did too.”
· Related: First test of ‘sunset clawback’ laws
· Related: Government acts for off-the-plan buyers
On hearing of the settlement, NSW government minister Victor Dominello, who formulated the new legislation after a Domain campaign during his term as minister for innovation and better regulation, said he was delighted by the result.
“This is bad news for bad developers, and good news for the consumer,” he said. “It’s a vindication of the new laws brought in that do so much to improve the inequality in the bargaining power between the purchasers of new apartments and developers who aren’t doing the right thing.
“A lot of the stakeholders at the time said changing the law was too hard, but it wasn’t. And this has proved it.”
Negotiations for a settlement began after acting Justice Arthur Emmett wondered aloud in the courtroom whether the new laws gave him the power to order a result with a sum of money to be paid by the developer. This is still uncertain.
The court heard on Monday that, instead of the projected 15 months to complete the project, it had taken more than 52 months. The delays involved changes to plans, together with consents having to be obtained, and a case at the Land and Environment Court.
The buyers said all the changes were to the benefit of the developer, allowing him more retail space and a rooftop garden for the exclusive use of the four top-floor apartments he’d retained. Lawyers for the developer said the delays were beyond his control.