Recent incentives provided by the Federal Budget have generated more interest in off the plan properties. However, buyers should keep in mind certain contract conditions before signing on.
Subject Clauses
Off the plan contracts are usually subject to either or both of the following conditions being satisfied:
- the registration of the proposed plan of subdivision with the Registrar of Titles; and or
- the issue of an occupancy certificate
Settlement cannot occur unless these conditions are fulfilled.
Sunset Clause
Purchasers should be aware of sunset clauses in off the plan contracts, as they essentially set a strict time limit for developmental works and conditions to be satisfied. This may not be ideal for purchasers looking to purchase and move into a property soon as these clauses often state a 24-48 months time frame. Failure to complete works in time can cause the contract to be rescinded.
Material Changes to Land Clauses
It is common for off the plan contracts to include a clause that enables vendors to alter the proposed plan of subdivision.
This can include changing the boundaries of the land, which could affect the size of the land, therefore affect the value of your purchased property. In other words, what you signed up for and what you receive could be different.
For off the plan apartments, the vendor can rearrange lot numbers, allocation of lots, and sizes of lots etc. This example can be seen where you have purchased a unit that comes with a car park right next to the lift, as it makes it easier for you to access in your wheelchair. The vendor decides to rearrange the car park lots and upon registration of the titles, you find your car park has been moved further away from the lifts.
Termination of Contract Clauses
An off the plan contract may include conditions that enables the vendor and developer to cancel the contract in the event certain conditions cannot be met. A few examples of such clauses include:
- The council issues a permit notice requiring the vendor to comply with specific requirements that might be too costly to them
- The vendor does not sell more than 25% of the lots within the off the plan estate
This can have a devastating effect on a purchaser who has been waiting for months or years for the contract to complete.
Unfavorable Contract Conditions
It is not uncommon for off the plan contract to include conditions to the benefit of the Vendor.
There may be terms that restrict purchasers from selling, transferring, assigning, or disposing the property or interest in the property prior to completion of construction without obtaining approval from the vendor.
It is crucial for a purchaser to understand the terms of resale before signing a contract to purchase an off the plan property.
Stamp Duty
Purchasers should also be aware of stamp duty payable to ensure sufficient funds are available to complete the purchase when due. Further information on off the plan stamp duty treatment can be found here.
At W Legal Group, we have a team of experts who are experienced in advising on off the plan contracts. Contact us on +61 3 9590 618 or email us at hello@wlegalgroup.com.au for further support.
