On 9 November 2023, major reforms to the Australian Consumer Law (ACL) regarding Unfair Contract Terms (UCT) officially came into force. These changes significantly expand the definition and application of UCT provisions and, for the first time, introduce substantial penalties for breaches.
These updates have serious implications for the property industry, especially for off-the-plan sales contracts, house-and-land packages, and put and call option agreements, all of which are often drafted as standard form contracts.
At Ensure Legal, we have observed that many developers, property agents, landlords and builders have not yet fully reviewed their documents in light of the new UCT regime. This article provides a comprehensive legal breakdown and risk management guidance.
What is an Unfair Contract Term (UCT)?
A UCT is a provision in a standard form contract that creates a significant imbalance in the rights and obligations of the parties, is not reasonably necessary to protect the interests of the advantaged party, and would cause detriment to the other party if enforced.
Under the ACL, UCTs typically arise in contracts where:
- One party has all or most of the bargaining power,
- The other party has little or no ability to negotiate,
- The contract is offered on a “take it or leave it” basis.
What Changed in November 2023? From Invalid to Illegal
Before 9 November 2023, an unfair contract term was simply void and unenforceable—but not illegal.
Now, the updated law makes it unlawful to include or rely on a UCT in a contract. More importantly, it introduces severe penalties:
✅ Maximum penalties for companies (whichever is greater):
- AUD $50 million, or
- 3× the value of the benefit obtained from the breach, or
- 30% of the company’s adjusted turnover during the breach period
✅ Maximum penalties for individuals (e.g. directors, executives):
- AUD $2.5 million per breach
Importantly, if a contract contains multiple UCTs, each clause may attract a separate penalty, significantly increasing exposure.
How Real Estate Contracts May Be Affected
📌 What contracts are likely to be “standard form contracts”?
If one party prepares the contract and the other party has little to no opportunity to negotiate, the document is likely to be treated as a standard form contract. In property and construction, this includes:
- Off-the-plan sales contracts
- House and land package agreements
- Put and call option deeds
- Commercial or retail lease templates
- Standard building and construction contracts
⚠️ Examples of clauses that may be deemed unfair:
- Clauses allowing one party to unilaterally change settlement dates or specifications
- Termination rights exercisable by only one party without compensation
- Risk-shifting provisions without corresponding benefits
- Restrictions or exclusions on the other party’s right to seek legal remedies
Legal Recommendations from Ensure Legal
With the new UCT penalties now in effect, continuing to use outdated contracts poses significant legal and financial risks.
✅ We recommend that all real estate and business clients:
- Conduct a thorough review of existing contracts, including sales contracts, leases, building agreements, and option deeds;
- Assess whether the contracts meet the definition of “standard form” under the new law;
- Identify and amend potentially unfair clauses such as unilateral rights, limitation of liability, or excessive indemnities;
- Train your sales and legal teams on the new UCT standards and negotiation strategies.
Ensure Legal can assist with contract reviews, legal redrafting, and compliance advice to keep your business protected.
Final Thoughts
The UCT reforms signal a clear shift toward stronger protections for small businesses and consumers in Australia. Businesses can no longer rely on “legally drafted” terms if those terms are substantively unfair.
If your operations involve property development, real estate sales, construction, or commercial leasing, you should urgently assess whether your documents are compliant.
For support in reviewing contracts or adapting your legal documents to comply with the new UCT regime, contact the experienced legal team at ENSURE LEGAL. We offer tailored services in contract risk management, UCT compliance, and clause redrafting to help you reduce penalties, avoid disputes, and protect your brand reputation.
