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I have purchased an off-the-plan property. Am I am able to get out of the contract?

This is a question that our property lawyers are often asked so let’s explain what is involved.

Once an off-the-plan contract is signed, unless there are conditional terms, purchasers are obligated to complete the contract and proceed with settlement. If you are not able to complete settlement on the due date, you will be in breach of the contract of sale and you risk the contract being terminated, your deposit being forfeited and the vendor suing you for loss suffered.

So what do you do if you want to get out of your off-the-plan purchase?

Sunset Clause

Every off-the-plan contract of sale should contain a ‘sunset clause’, being the final date by which the vendor must ensure that the plan of subdivision is registered, or the occupancy permit issued. This may for example, 24 months from the date that both parties have signed the contract of sale.

If the plan of subdivision is not registered by the sunset date or the occupancy permit issued, a purchaser may have grounds to bring the contract to an end.

Tip: You should diarise the sunset date in your contract to consider your options with your property lawyer when this date is nearing.

Material Difference

The Sale of Land Act 1962 allows the purchaser of an off-the-plan property to end the contract of sale in circumstances where:

  1. 1. There has been an amendment to the proposed plan of subdivision that is in your contract; and
  2. 2. That amendment to the plan of subdivision materially affects the lot that you have purchased; and
  3. 3. You give written notice to end the contract within 14 days of when the vendor provides the amended plan of subdivision to you.

What is considered Material?

  • The general rule of thumb is where there is an amendment of 5% or more to the size of your lot, but this should not be relied upon without seeking legal advice on your particular circumstances
  • A recent case of Burger & Ors v Longboat Holdings Group2 Pty Ltd demonstrated that even if the change is smaller than 5%, if the change affects the Purchaser’s use and enjoyment of the property, it may be material
  • However, a material change need not be a change in size and may, for example, be a change to lot liability and lot entitlement, change in location to car park etc.

Tip:  We recommend seeking legal advice immediately upon receipt of the amended plan of subdivision, should you believe there has been a material change to your lot, or you are looking to end the contract.  You should not give notice ending your contract without legal advice, as you may unintentionally repudiate the contract where the vendor would not be obligated to refund your deposit.

Hardship

If your personal circumstances have changed, for example, you are suffering medical or financial hardship and aren’t in a position to proceed with the purchase of the property, this is not in itself a reason to end the contract. However, you may be able to negotiate and seek the vendor’s consent to mutually cancel the contract and have your deposit refunded.

Nomination

You may also find another party (related or 3rd party) to complete the purchase, by way of a nomination. Some contracts will require the vendor’s consent to nomination. You should also be aware that if you nominate to an unrelated party and the nominee fails to settle, as the purchaser named in the contract, you will still have an obligation to settle. There are ways to mitigate this risk and you should speak with your property lawyer about this.

At Burke & Associates Lawyers, our property lawyers have a depth of experience in dealing with purchasers who buy property off-the-plan and, we also work extensively with property developers. This means that we have the expertise to  advise purchasers and developers because we understand developments, from both sides.

If you require any assistance with your Off-the-plan purchase or sale please don’t hesitate to contact our Property Division or phone today for a complementary 15-minute consultation with Kristy Muhlhan, Sandra Le or Wendy Toura on +61 3 9822 8588.

Insight written by Wendy Toura & Kristy Muhlhan

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...

Sandra Le

Associate

Sandra Le

Associate
LL.B BCom
Sandra is professional and takes exceptional care with every matter she undertakes and is a natural problem solver.

Wendy Toura

Conveyancing Team Leader and Law Clerk

Wendy Toura

Conveyancing Team Leader and Law Clerk
Licensed Conveyancer, BCom
Wendy’s role is primarily in conveyancing.

Emma Dickens

Paralegal

Emma Dickens

Paralegal
Bachelor of Legal and Dispute studies
Emma joined us in 2018 and holds a Bachelor of Legal and Dispute studies. Emma is currently studying for her Advanced Diploma of Conveyancing.

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