Off the Plan Transaction

‘Off the plan’ transactions involve arrangements to buy or sell property that has not yet been registered as a single lot with the relevant land titles registry. The transaction may involve the purchase of a vacant lot that forms part of a subdivision or a ‘house and land package’ for the construction of a new house or unit to be built on that land.

Unlike buying an existing dwelling, your decision to buy off the plan is based on your perception of the finished product. This is typically gleaned from visiting display homes; reviewing plans, specifications and schedules of finishes; and assessing marketing and promotional campaigns. As such, off the plan contracts require special consideration. Contracts are typically voluminous to deal with a range of contingencies and the unique features of an off the plan development project.

If you are considering purchasing off the plan, we recommend you bring the contract to us in the early stages. We will go through it thoroughly, explain the conditions, and provide guidance so you can make an informed decision.

Off the plan contracts

Off the plan contracts are typically more complex than contracts for existing residential property. They are usually prepared by the vendor’s/developer’s lawyers with provisions tailored to their requirements and the development in question.

Building projects require flexibility to allow for contingencies throughout construction and the registration process. Generally, off the plan contracts do not have a definite completion date but will include a ‘sunset clause’. This is the ultimate time within which the contract must be completed, expressed as, for example, 24 months from the contract date. If the sunset date passes without completion having been affected, the parties may have certain termination rights.

Once construction is completed and complies with all development requirements the plan can be registered and title to the new property issued. This triggers the actual settlement date, which is generally a few weeks later.

To deal with the uncertainty in timelines, purchasers buying off the plan need a contingency plan. They will need to carefully monitor their financial circumstances – with most loan approvals only lasting a few months, they will need to ensure that their lender is kept informed of progress and finance will still be available when it is time to complete the transaction.

It is also typical for off the plan contracts to include allowances for variations to the land dimensions. This takes into account any directions given by the consent authorities who have the ‘final say’ regarding approval of the development. Any reductions in land should be capped in the contract.

Other variations may relate to the provision of ‘equivalent’ fixtures and fittings.

The disclosure statement summarises key information such as the sunset date, whether (at the time) the development has been approved, and other conditional events. The statement identifies the relevant clauses in the contract that explain these matters further.

A draft plan, prepared by a registered surveyor, must also be provided setting out details such as the proposed lot number, the area and its location, the site of any proposed easements affecting the lot, and details of any restrictions or covenants affecting the land.

A draft floor plan and location plan must be included for strata schemes and a draft location diagram, detail plan and community, precinct, or neighbourhood property plan, as relevant.

Other disclosure documents (as relevant) include:

• proposed schedule of finishes
• details of proposed section 88B instruments
• draft by-laws for lots contained in a strata scheme
• draft management statements and any proposed development contracts for lots contained in a community, precinct, or neighbourhood scheme
• draft strata management statements or building management statements

Buying a strata unit

Many off the plan property transactions comprise units in a residential or mixed-use strata complex. Property in a strata scheme is divided into lots and common property. The lot is defined by the cubic airspace and interior surfaces of the walls, ceilings, and floor – usually the inside of the unit or apartment and the balcony.

Typically, the owners’ corporation establishes an administrative fund to pay regular outgoings and maintenance and a sinking fund for long-term or capital works. Your contribution to these funds is determined by the unit entitlement of your lot, as is the value of your vote at meetings.

As with any property transaction, there are pros, cons, pitfalls, and processes to navigate with an off the plan sale or purchase. Our experienced conveyancers have dealt with numerous off the plan property transactions and can provide expert advice and guidance.

If you need advice or assistance from an experienced conveyancer, contact [email protected] or call 02 9629 6685.