What does it mean to buy “off the plan”?

Explore our previous article to find out.

This article aims to summarise some of the of the risks of buying off the plan.

Long complex contract in seller’s favour

Off-the-plan contracts are typically long.  For built-strata developments the contracts can be as long as 200 or 300 pages.

Further, these contracts are usually complex and extremely detailed. The complexity arises not only from the plans and specifications, but also from provisions relating to:

• development approval and creation of new titles;
• encumbrances affecting the property;
• the proposed strata company.

Further, off-the-plan contracts are usually drafted in favour of the seller. Particular examples are discussed below.

Termination by seller

Most off-the-plan sale contracts have provisions enabling the seller to terminate the contract if they are unable to sell enough blocks/units to make the development as a whole viable or they are unable to obtain approvals from planning and development authorities.

If the contract is terminated in those circumstances, the buyer should receive a full refund of any monies paid under the contract.

Buyer locked-in for long period

As a general rule, the Buyer cannot terminate an off-the-plan contract until the agreed period for registration of the subdivision plan has expired.  The length of this agreed period will vary depending on the development, but can be as long as three or four years.

There is no cooling-off period for real estate contracts in Western Australia.  Once the contract is signed by both parties it is generally legally binding.

Property size may change

Can a buyer object if the property ends up slightly smaller or larger than the property described on the original plans?

Most off-the-plan contracts contain conditions preventing buyers from terminating on the basis of minor adjustments.  In some cases the purchase price may be altered to reflect the new area.

Finishes and fixtures may change

Understandably the seller may have to change the promised fixtures if, for example, those specified are no longer available. Most off-the-plan contracts prevent buyers from ending the contract because of such changes.

Rectification of defects after settlement

Any new building will have defects, hopefully minor ones.  Most off-the-plan contracts say that the Buyer cannot delay settlement on account of defects in the construction or finish of the property.  Further, it may be several months after settlement before the seller (ie the builder) gets around to rectifying the defects.

When it’s finished will you like it?

As much as the plans will give you an indication of the amenities of your property, you must accept that you won’t really know what it looks like and feels like until it’s finished.

Sunlight, views, noise, parking congestion will all be part of this and, to some extent, are unforeseeable.