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Can the Developer Cancel a Residential Development and Only Return the Deposit?

The ongoing challenges posed by the COVID-19 pandemic have significantly impacted the construction landscape in NSW, leading to a surge in building costs. This has compelled some developers to reconsider the feasibility of their projects, prompting inquiries about the cancellation of developments and the return of deposits.

In off-the-plan contracts, developers may have an automatic right to rescind if a ‘sunset date’ is not met. It’s important to note that such clauses typically enable the purchaser to reclaim the deposit but not necessarily interest or damages – this means purchaser may lose any increase in the unit’s value.

However, section 66ZS of the Conveyancing Act 1999 (NSW) makes these clauses unenforceable, except in two situations: when the purchaser agrees to rescind the contract, or with an order from the Supreme Court of NSW.

If you have received a letter from a developer indicating a project’s cancellation and the desire to rescind the contract while only offering repayment of the deposit, seeking immediate legal advice is crucial. This will ensure you fully understand your entitlements and avoid inadvertently waiving any legal rights.

For further information or advice contact our civil litigation and building dispute expert, David Collins

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