Connect with Us

Agile. Innovative.
Empowered Choices

Insights

10 things Purchasers need to know about Off-the-plan Contracts of Sale

1. What is an off-the-plan Contract?

Where you sign an 'off-the-plan Contract', you are purchasing a property that does not yet exist. You may be entering into a contract to acquire vacant land or, to purchase an apartment, townhouse or other dwelling or retail shop that has not yet been constructed.

You purchase the property based on what is known as the 'plan of subdivision' and based on the architectural drawings (if any) and the specifications in relation to fixtures, fittings and finishes (if any).

2. Plan of Subdivision

A plan of subdivision is a proposed plan that is ordinarily included in an off-the-plan contract. It shows how the current registered plan is proposed to be subdivided and details the number of lots in that proposed subdivision.

The off-the-plan contract will specify that you are purchasing a particular lot in that proposed plan of subdivision.

3. Architectural Drawings

Where you are purchasing a residential dwelling or commercial lot off-the-plan, there will ordinarily be architectural drawings included in the contract.

The architectural drawings are intended to provide the purchaser with the scope of what the construction of the dwelling or commercial lot will look like. However, purchasers should be aware that architectural drawings are usually subject to change, depending on the terms of the contract.

4. Design Specification

Most purchasers also want to know what the extent of the fit-out of the dwelling or commercial lot will include.

The design specification is ordinarily prepared by the developer's architect and will include a list of fixtures, fittings and finishes that will be included in the property upon completion. For example, are there any pendant lights included that were shown in the display suite, are the appliances in the kitchen included, is there an air conditioning unit and so on.

Again, these can often be subject to change, depending on the terms of the contract and it is important that you understand what you are buying. Usually, the specifications will not detail specific brands or models to allow the developer some flexibility.

5. GST

If you are purchasing a residential property, it is more than likely that any GST payable will be included in the price and is not required to be paid in addition to the price. This is not the case with commercial lots which ordinarily attract GST unless an exemption applies.

It is important that you understand the terms of the contract and whether GST will be payable and, whether the GST is included or is in addition to the price.

6. Natural Surface Level

A developer is required to disclose any works to the land that will affect the natural surface level of the land. Ordinarily, this would be shown by elevation drawings being included in the contract.

If such works are not disclosed, a purchaser may have the right to rescind the contract. You should always seek legal advice prior to terminating a Contract to ensure your interests are protected.

7. Deposits

Have you considered paying your deposit by way of Bank Guarantee rather than a cash deposit?

If you do, you will retain the benefit of the interest earned on the deposit whilst the property you have purchased is being constructed by the developer.

8. Owners Corporation

When a plan of subdivision is registered, an owners' corporation (formerly known as a body corporate) will usually be brought into existence.

Did you know that by entering into an off-the-plan contract, you may be prohibited from voting at owners corporation meeting whilst the developer still owns lots in the development?

The proposed owners' corporation fees payable that are disclosed in the contract, may not be ultimately what is resolved at the first meeting of the owners corporation following registration of the plan of subdivision.

Likewise, owners' corporation rules may be introduced that were not initially disclosed in the contract.

It is important that you understand your rights and obligations in entering into an off-the-plan contract.

9. Sunset Clause

Every off-the-plan contract includes what is known as a 'sunset clause'. Such a clause includes a date by which, if the plan of subdivision is not registered, either the vendor or the purchaser can end the contract.

However, new laws have recently been introduced as a 'consumer protection', so that developers must obtain a purchaser's consent before they are able to rescind a contract pursuant to the sunset clause.

10. Measurements

All too commonly, developers and agents provide marketing material that say your apartment is going to be one size but, in the fine print of the contract, you will be purchasing an apartment that could very well be much smaller than you had anticipated.

You should not rely on marketing material. You should ensure that you understand the terms of the contract and the property that you are buying.

Burke & Associates Property Team

At Burke & Associates Lawyers, we have a depth of experience in dealing with purchasers who buy property off-the-plan but, we also deal extensively with property developers. This means that we are well placed in advising purchasers because we understand developments, from both sides.

Please contact our Property Team for further information or to have a free 15 minute consultation with one of our lawyers to see how we can assist you.

Contacts

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

Request Burke & Associates Lawyers' News