You snooze, you lose – RMA and the developer

Agreements for sales off the plans will include sunset clauses – or “twilight” clauses as a client called them the other day. I like that new name it seems more accurate somehow.

They will also be subject to s225 of the Resource Management Act. It is an interesting section, aimed at protecting the purchaser. First it gets them out of the agreement if that is what they choose within the first 2 weeks. Second it gets them out if the developer is too slow in getting a title.

Once again the court has been asked to decide whether people can contract out of this section of the Resource Management Act. Once again the court has said no. This time it was in a High Court decision made in November last year between Cyndicate Property Group and some purchasers.

In that case, which involved a Hamilton residential subdivision, the court was also asked to examine whether the developer had made enough progress in the given time. You see whether a purchaser can cancel a contract using s225 of the Resource Management Act is dependent on whether the vendor has made “reasonable progress towards submitting a survey plan” within a defined period.

In this instance the vendor obtained a subdivision consent but they did not begin to undertake the subdivision works immediately. Instead, over an 8 month period they redesigned the development. They subsequently obtained a change in the conditions and then began the subdivision works.

The delay of 8 months was sufficient to mean the time period set out in s225 was breached. Purchasers purported to cancel the agreement using that section. The court needed to determine whether reasonable progress had been made. If it had, the purchasers could not cancel. If it hadn’t the purchaser could cancel.

It’s frustrating but, because it was a summary judgment forum, although the judge was clear parties cannot contract out of section 225, the judge was not happy to deal with the decision as to whether sufficient progress had been made in the subdivision. So, in the absence of a settlement, the matter will go to a full court hearing. No doubt the issue the court will need to determine is whether redesigning the development amounts to reasonable progress towards submitting a survey plan.

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