What should you consider when buying off the plan?
Updated: Feb 10
What is “Off the Plan”?
When you enter into a contract to buy a property off the plan you are entering into an agreement to purchase property that has not yet been constructed (or completed). In the case of vacant land, the Lot you are purchasing is not yet registered with the Land Registry Service.
Considerations when buying off the plan:
The biggest thing to consider when buying off the plan is that plans can change! As the dwelling is not yet constructed, you cannot walk in and see exactly what you are buying. There are always clauses in off the plan contracts that allow the Vendor to make amendments to the plan, including changes to the lot area and dimensions.
There is generally also a clause in off the plan contracts which allows substitution of finishes and inclusions. It is important that your solicitor or conveyancer explain these clauses to you and if required, seek amendments to provide you as much protection as possible.
Identify what you are purchasing
Does your unit include things such as a car space or storage space? You need to be able to identify these on the plan and ensure they are part of your lot. Your solicitor or conveyancer can also advise you if there is any provision in the contract for the location or size of these to be changed by the vendor.
Be mindful of how long it is expected for the development to be completed. The sunset date (or extended sunset date) can be much longer than the expected timeframe for completion. You must be prepared for the deposit you have paid to be tied up for that long. You must also be mindful that the market could change significantly in that time.
Most financial institutions do not provide formal finance approval for off the plan purchases, so it is imperative that you are confident that you will be able to obtain finance to complete the contract when the dwelling is complete and registered. Keep in contact with your bank or broker as to the progress of the development so that you will have everything in place in time for settlement.
Protection when buying off the plan
Legislation that came into force at the end of 2019, increased measures to protect purchasers when buying off the plan.
The measures include:
· Vendors must now provide a disclosure statement that details key information including draft plans, schedule of finishes, draft strata by laws and sunset dates.
· Vendors must notify purchasers of any change to a plan which may be materially detrimental to the property.
· Vendors must provide the purchasers with the registered plan at least 21 days prior to settlement.
· The cooling off period for off the plan contracts has been extended from 5 business days to 10 business days (though in practice this cooling off period is often waived).
· Vendors cannot elect to end a contract due to the expiry of the sunset date without the consent of the purchaser or the NSW Supreme Court.
Do your research!
The most important thing to do when buying off the plan is to do your research! Research the market and market projections. Research the developer and builder. Have they done any recent developments in the area? What is their reputation within the industry?
Finally, seek the expert advice of your solicitor or conveyancer. Off the plan contracts can be very complex and require specialist advice. Your solicitor or conveyancer are experienced in these matters and are here to guide you through the process.