Since 1 May 2020 a buyer of an off the plan strata lot in Western Australia has had statutory rights to avoid the contract in defined circumstances. Before that a buyer was largely locked in until the subdivision was registered. Your rights are limited with strict timeframes, so you should seek advice.
What does buying off the plan mean?
Buying off the plan means signing a contract for a lot that doesn’t exist yet. The seller holds land it intends to subdivide or a building it intends to build, then sells the lots before the work is finished. Your deposit is held in a trust account rather than paid to the seller.
The contract identifies your lot on a set of plans. If the subdivision is never registered, the contract can be cancelled and you’ll get your deposit back.
What changed in 2020
The strata legislation was amended with effect from 1 May 2020 to give off the plan buyers a set of disclosure rights and a set of rights to avoid the contract. Equivalent provisions apply to community titles schemes.
The seller must disclose defined information before you sign and tell you if it changes. If something changes, whether you can get out depends on what changed.
Which changes let you out?
A reduction of 5 per cent or more in your lot’s area, or a change of 5 per cent or more either way in your unit entitlement, is a notifiable variation and the seller must tell you about it. So is a proposal to terminate the scheme. For either of those you may be able to avoid the contract without proving you have been affected. For any other change you must prove the change materially prejudices you.
A unit entitlement is the number on the strata plan that sets your share of the common property and your share of the levies.
How long can you be locked in?
The contract sets a period for registration of the subdivision plan and it can be three or four years after the contract date. Until that period expires, you generally can’t terminate for delay alone.
If the scheme isn’t registered within the period the contract sets, you may be able to avoid the contract and recover your deposit. If the contract sets no period, six months applies.
These rights can’t be contracted out of. A clause purporting to remove them does not work.
Can the seller walk away?
Most off the plan contracts let the seller terminate if it can’t obtain construction approvals or can’t sell enough lots to make the development viable. If the contract ends in this manner, you should get back everything you have paid.
Western Australia has no statutory restriction on a developer terminating under a sunset clause, which is a clause setting the date by which the development must be finished. Some other states restrict it.
Is there a cooling off period?
Western Australia has no cooling off period on a real estate contract and buying off the plan is no different. Once both parties have signed, the contract is legally binding. The only ways out are the ones the contract or the legislation gives you. See There is no cooling off period in WA.
What the contract usually controls
Most off the plan contracts protect the seller on three things a buyer might expect to be able to argue about:
- a finished lot slightly larger or smaller than the plans showed, sometimes with an adjustment to the price;
- a substitution of fixtures and finishes if what was specified is no longer available; and
- defects in the construction, which usually can’t be used to delay settlement.
If a particular inclusion is important to you it must be written into the contract before signing. The seller isn’t obliged to change its standard contract for you.
Finance and the valuation
Your lender values the property when it is finished rather than when you sign. If the market value of your lot has changed between contract date and completion, the valuation may be lower than the purchase price and your loan can be approved for less than you planned. You must cover the difference at settlement or you may be in default.
A finance approval is only valid for a set period. Most expire about two to three months after they are issued, so on a long off the plan settlement you should ensure you can meet any approval requirements during this period. See Buying or selling subject to finance in WA.
Transfer duty
There is a transfer duty concession for buying off the plan depending on when your contract was signed and when construction started. You can refer to RevenueWA’s website for more information.
Frequently asked questions
Can I get out of an off the plan contract?
Sometimes. There is no cooling off period, so it depends on what the contract says and on the avoidance rights in the strata legislation. Get advice as soon as practicable, because there are short and strict time limits.
What happens to my deposit?
Generally it is held in a trust account rather than paid to the seller. If the subdivision is never registered you should get it back.
Do I have to accept a smaller apartment than the plans showed?
It depends how much smaller. A reduction of 5 per cent or more in your lot’s area is a notifiable variation. That may let you avoid the contract without proving you are worse off.
Talk to us before you sign
We review off the plan contracts for buyers and act on residential and commercial property settlements across Perth and Western Australia.
Call the settlements team on (08) 9220 4430 or download an itemised quote for your own purchase.
Related: There is no cooling off period in WA.
This article is general information and not legal advice. Every property transaction relies on its own facts.
