Buyers who wish to buy brand new units and townhouses will most likely buy off-the-plan.The concept of buying off-the-plan involves a buyer entering into a contract to purchase a property that has yet to be built.This article highlights some of the issues that buyers should consider when buying off-the-plan.

The first problem that buyers face is that they cannot see what they are buying.They have to make their assessment based on plans and drawings and possibly a model of the building.Some buyers may be comfortable with this but others may not be comfortable in which case buying off the plan may not be something for them.

Leading on from this, there have been cases in the past where a buyer has entered into a contract expecting certain views from the unit only to find that when the unit is built the unit has restricted views.

Off-the-plan residential developments can take a number of years to develop, particularly the larger developments. Construction finance will often be conditional upon the developer securing a designated amount of pre-sales after which the developer then needs to carry out and complete construction and then have a survey plan registered at the Titles Office to create separate titles for the units or townhouses. The off-the-plan contract will have a sunset date by which the building must be constructed, the titles created and the sale settled. The sunset date in off the plan contracts will vary but under the relevant legislation developers can have a sunset date of up to 5 ½ years. Therefore, buyers must be prepared to commit themselves to the purchase over a long period during which the buyers’ personal circumstances may change.

The property market fluctuates over time. A buyer entering into a long term contract will hope that property values will increase over the term of their contract so that when they settle the contract the property will be worth more than (or at least remain the same as) when they entered into the contract. However, this is not always the case and we have known situations where prices have declined over the term of the contract and the property is worth less at settlement than when the buyer entered into the contract. This in turn can lead to problems if buyers are relying on bank finance to settle.

Obtaining finance for off-the-plan contracts is another issue that buyers needs to carefully consider. While banks can give an indication that finance is available before or when the contract is entered into, the banks will often reassess the situation when the unit or townhouse is built both in terms of carrying out a valuation of the property and assessing the buyer’s personal circumstances at that time and thereby the buyer’s ability to repay the loan. There is always a risk that the bank will not provide finance at settlement which will leave the buyer facing a breach of contract claim if unable to settle.

It is important that buyers ensure that the contract clearly defines the finishes, fixtures and furnishings that are included as these have the potential for misunderstanding and dispute.

These are just some of the issues that buyers must consider before entering into an off-the-plan contract.

How We Can Help

Off-the-plan contracts are not standard contracts like the REIQ contracts and the terms vary from contract to contract.

The contracts come with a large bundle of disclosure documents and it is imperative that buyers have the documents scrutinised by a lawyer before entering into the contract.

Our experienced property lawyers are experienced advising on off-the-plan contracts.

Contact Us

Get the best representation. Contact Ryan Murdoch O’Regan Lawyers on 1800 999 529, email mail@rmold.newwebsite.live, or submit an enquiry below.

We are available to meet with you at any of our local offices (Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba) or by telephone or video-conference.

This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.