Buying a property off the plan means that it is yet to be subdivided by the developer into the lot which is being bought. The land may still need some development works carried out to it by the seller, and a legal title has yet to be created for the particular piece of land you are buying.
What does buying off the plan mean?
The contracts for buying off the plan are more complex than when buying an existing property. One reason is because as work still needs to be carried out, the contract needs to allow scope for some minor variations between the proposed plan, provided that any changes do not materially prejudice you.
There are two main parts to the contract:
- Disclosure Statement – this contains a disclosure plan, which shows the proposed property you are buying, body corporate information and fees. You must sign the disclosure statement to acknowledge the plan before signing the contract.
- Contract – this covers the legal aspects of your purchase including:
- The time frame the seller has to carry out the subdivision and finish any work required to the land (this is called the sunset date);
- What minor changes the seller is allowed to make to the land from what is disclosed on the disclosure plan;
- The purchase price, and any adjustments to the purchase price;
- The deposit, and when it must be paid;
- When settlement must occur.
For more information, please ensure you contact us so we may review the contract before you sign it to ensure that the contract is in fact subject to finance approval as sometimes it may not be completed correctly, or it may not be a standard off the plan contract.
We have gone into a bit more detail as to what expect in the contract below.
What is the sunset date?
Under an off the plan contract, the seller has a timeframe by which they are supposed to settle your purchase ("the Sunset Date"). If the seller does not settle your purchase by the Sunset Date, then usually you may terminate the Contract and the deposit will be refunded to you. These dates can be as long as 18 months for land, and 5 years for units, however developers usually want to complete settlements as quickly as possible and in a shorter period of time.
In our experience, it would be very unusual for a seller to delay settlement once a title for the Lot has registered, however, it is conceivable. If you require that settlement occurs by a certain date, you can ask for this to be requested by the seller.
What changes can a seller make to the development?
Due to the development not being finalised yet, the seller is able to make changes to the development. The seller must provide you with a notice of changes as required if any substantial ones are made. Some of the changes may be:
- Changes to the Building
- Changes to your Lot
- Changes to the Community Management Statement for a body corporate.
There is legislative protection for Buyers against changes contained in the Disclosure Statement, which overrules any term of the Contract.
If a change is made (to the Lot, an Exclusive Use Area or Common Property), and you are able to demonstrate you are 'materially prejudiced' by that change, then you may be able to terminate the contract, in which case the Deposit and any interest earned will be refunded to you.
The change clauses and legislative protections are complex so it is best to contact us to answer any queries you may have.
When must settlement occur?
Settlement must occur once every piece of land has its own legal title and (if it not vacant land) a Form 11 Certificate of Classification has been issued, otherwise there is no property yet in existence to settle.
The timeframe for settlement to occur once the land registers and the Form 11 is issued usually varies between 14 – 21 days from notification being given by the seller's lawyer to the buyer's lawyer.
You must ensure that you and your financier is able to settle on time, otherwise you are in breach of contract.
Who should you speak with to assist with your off the plan purchase?
If you are getting cold feet or sweating over entering into a contract, contact us. We will be able to walk you through the process and make sure that you've got all the conditions and timeframes you need to protect you by ensuring that you make all enquiries in relation to your purchase.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.