Off the Plan

Off the Plan

When we refer to ‘off the plan’, we are talking about purchasing a property where the lot has not been created yet at the time the contract is signed. There are two primary types of ‘off the plan’ purchases:

• Vacant land purchase: This typically involves buying a lot in a large-scale residential development. After the purchase, the buyer makes arrangements to construct a home on the land.
• Incomplete dwelling purchase: This could range from a dwelling that is almost ready for occupancy to a vacant lot where the entire dwelling is yet to be built. It could be a stand-alone house, townhouse, or an apartment.

Regardless of the type, ‘off the plan’ purchases usually follow a similar process with shared potential risks. One of the most common scenarios is when a large-scale developer sells residential apartments even before construction begins. The time-gap between the contract signing and the settlement, when the property is finished, can extend up to 5 years.

‘Off the plan’ purchases have both advantages and risks. Here’s a quick rundown:

Advantages:

• Lower upfront investment: Unlike buying an existing dwelling where a 10% cash deposit is usually required, ‘off the plan’ developers may accept a deposit bond or bank guarantee, reducing the upfront cost.
• Purchaser incentives: Developers often offer incentives like rental guarantees, free appliances, and rebates to secure pre-sales and obtain financing for their projects.
• Potential for profit: The long gap between sale and settlement can work in the buyer’s favour if the property market improves, potentially increasing the property’s value.
• Deferred transfer duty: Non-foreign buyers intending to use the property as their main residence can defer the payment of transfer duty for 12 months after the contract signing, or until the property is completed or handed over.

Risks:

• Being locked in: Once you sign the contract, you are committed until the sunset date, which is often 2 to 5 years from the sale date. There may also be restrictions on ‘on-selling’ the property during this period.
• Potential for loss: The property market could also decline, leaving you with a property worth less than the contracted purchase price.
• Contractual terms: Contracts for large-scale ‘off the plan’ sales often contain special conditions favouring the vendor, which may be non-negotiable and potentially unfair to the purchaser.
• Finished product dissatisfaction: The completed property might not live up to the marketing materials, and parts of the property might still resemble a construction site at the time of settlement.
• Building changes: The contract may allow the vendor to make alterations to the building plans, potentially leading to significant changes that may disappoint the purchaser.
• Owners corporation fees and rules: When buying an apartment, consider the costs of common areas maintenance and the rules that will take effect after the building’s completion.
• Additional legal costs: ‘Off the plan’ transactions require more work within tight time constraints, and there is often a significant delay between the sale day and the settlement date, leading to higher costs than traditional conveyancing transactions.

At BConveyancing.co, we are here to guide you through the ‘off the plan’ purchase process and help you make the most informed decisions. We provide all clients with a comprehensive written advice in relation to all Off the Plan contracts. Contact us today for more information.