Buying Off the Plan refers to purchasing a property, whether land, an apartment, or a townhouse, before it has been subdivided and/or built. Instead of inspecting a completed property, the buyer relies on building plans and specifications disclosed by the Developer in the Section 32 Vendor Disclosure Statement.
Advantages and Disadvantages of Buying Off the Plan
| Advantages | Disadvantages |
|---|---|
| Stamp Duty Savings A reduction on Stamp Duty payable via an off-the-plan Duty Concession compared to purchasing a property on the market. More information about the concession can be found at: https://www.sro.vic.gov.au/landtransfer-duty/offtheplan |
Limited Inspection Opportunities You are not given the same exposure and opportunity to inspect the property during development. Many quality or defect issues can arise and may be difficult to have rectified by the Builder later. |
| Design Flexibility & Price Certainty Allows for greater input into the property’s design and secures a fixed contract price, regardless of market value changes during construction. |
Construction Delays Most off-the-plan purchases will exceed the estimated completion date, sometimes taking years to complete. Such delays can be inconvenient, and if the sunset date has not been reached, the purchaser has limited options to exit the Contract. |
| Extended Settlement Timeframes Settlement timeframes are usually more extensive than most other property purchases. This period provides a greater time to save money and get your finances in order. |
Developer Amendments Off-the-plan contracts allow Developers to make amendments to the plan if required to obtain compliance or occupation. Changes may include the addition of easements, relocation of services, or floor layout adjustments. |
| Sunset Clause Protection Most off-the-plan Contracts will contain a ‘sunset clause’ – a clause that allows the Purchaser to rescind the Contract of Sale if the Plan of Subdivision or Certificate of Occupancy is not obtained by the sunset date in the Contract. If the Purchaser exercises their rights under the sunset condition, the Contract will come to an end and the Purchaser will be refunded the full Deposit. |
Market Risk at Settlement If Settlement occurs during an unstable market, the property may not be valued as highly as expected, meaning you may not be able to borrow as much from the bank and may need to cover the shortfall. |
Advantages
Stamp Duty Savings
A reduction on Stamp Duty payable via an off-the-plan Duty Concession compared to purchasing a property on the market. More information about the concession can be found at: https://www.sro.vic.gov.au/landtransfer-duty/offtheplan
Design Flexibility & Price Certainty
Allows for greater input into the property’s design and secures a fixed contract price, regardless of market value changes during construction.
Extended Settlement Timeframes
Settlement timeframes are usually more extensive than most other property purchases. This period provides a greater time to save money and get your finances in order.
Sunset Clause Protection
Most off-the-plan Contracts will contain a ‘sunset clause’ – a clause that allows the Purchaser to rescind the Contract of Sale if the Plan of Subdivision or Certificate of Occupancy is not obtained by the sunset date in the Contract. If the Purchaser exercises their rights under the sunset condition, the Contract will come to an end and the Purchaser will be refunded the full Deposit.
Disadvantages
Limited Inspection Opportunities
You are not given the same exposure and opportunity to inspect the property during development. Many quality or defect issues can arise and may be difficult to have rectified by the Builder later.
Construction Delays
Most off-the-plan purchases will exceed the estimated completion date, sometimes taking years to complete. Such delays can be inconvenient, and if the sunset date has not been reached, the purchaser has limited options to exit the Contract.
Developer Amendments
Off-the-plan contracts allow Developers to make amendments to the plan if required to obtain compliance or occupation. Changes may include the addition of easements, relocation of services, or floor layout adjustments.
Market Risk at Settlement
If Settlement occurs during an unstable market, the property may not be valued as highly as expected, meaning you may not be able to borrow as much from the bank and may need to cover the shortfall.
Helpful Tips When Purchasing Off the Plan
- Engage an experienced property lawyer before signing. This ensures you receive professional legal advice and understand your rights and obligations under the Contract of Sale.
- Speak with your banker or broker to discuss your financial position, considering potential changes in circumstances and the property’s future valuation.
- Maintain regular contact with the developer and request to be notified of any changes so that appropriate advice can be sought.
How Haven Legal Can Help
At Haven Legal, our property lawyers have extensive experience advising purchasers buying property off the plan. We also work closely with property developers, giving us a unique insight into both sides of the transaction. This dual perspective enables us to provide informed, strategic advice tailored to the needs of purchasers. For further information and insights into off-the-plan properties, watch our video:
