Are you a residential property owner who has entered into a put and call option with a property developer? Have you found yourself in a situation where the developer has not exercised their call option and you have sought to compel the developer to purchase your property by exercising your put option but that the developer has tried to exercise their cooling off right to rescind the Contract? Thanks to recent changes to the Conveyancing (Sale of Land) Regulation, prospective purchasers are now no longer able to exercise a cooling off right when subject to a put option, providing much greater security and comfort to vendors.
This legislative change arose as a result of the 2021 case, BP7 Pty Ltd v Gavancorp Pty Ltd [2021] NSWSC 265 where a developer entered into put and call option deeds for the purchase of 14 apartments in two strata schemes. The developer did not exercise their call options to buy the 14 apartments at which point the vendor exercised its put options. The developer then sought to rescind all 14 contracts under the five day statutory cooling off period usually allowed to purchasers of residential property. Section 66T(d) of the Conveyancing Act normally precludes cooling off periods in relation to a contract for the sale of a residential property “if the contract is made in consequence of the exercise of an option to purchase property” but the Court found that this section did not apply to ‘put’ options (as the wording of the section only contemplated a right to purchase property in the nature of a call option) and that the developer could validly exercise their cooling off rights and rescind the contracts.
In response to the decision in this case, the New South Wales Parliament enacted a new regulation to the Conveyancing Act (regulation 17(3)) on 1 September 2022 which provides that, “The Act, section 66S does not apply to a contract made in consequence of the exercise of an option to compel the purchase of land.” This regulation clarified section 66S of the Act and provides clarity that purchasers of residential property who are subject to a put option cannot exercise a cooling-off right under the Contract.
So whereas previously, vendors had to require purchasers of property under put and call options to provide both a section 66ZF certificate waiving the cooling off period for the option deed and also a section 66W certificate waiving the cooling off period for the Contract which would be entered into when the put option was exercised, vendors can now rely on the new regulation to exclude a cooling off period once a contract is entered into subject to a put option.
Here at Green & Associates Solicitors, we are highly experienced at drafting put and call options and can assist you in structuring your next property transaction as well as advising you of your rights and obligations under put and call agreements.
