If you’ve been shopping around for a new apartment or
townhouse, you’ll have probably experienced the flashy marketing
materials, attractive showrooms and the rush of other buyers
snapping up the units. However, behind all that, the legal
documents containing the offer are usually several hundred pages
long, and filled with dense legal conditions that even the most
careful buyers would struggle to fully understand.
In this article, we will cover the key terms that are in most
off-the-plan contracts, and help you make an informed decision
when buying in this way.
Purchasing property off-the-plan is very different to
purchasing an established property or vacant piece of
In this article, we will take you through some of the
conditions that are in typical off-the-plan contracts in
Victoria, and help you weigh up the risks involved in buying
Most off-the-plan contracts in Victoria contain these
features, which will each be described in further detail
Most real estate contracts in Victoria (whether for
established properties or off-the-plan) contain a ‘whole of
agreement’ clause that essentially states that:
So make sure you understand what’s in the contract!
When buying an established property, what you see is
essentially what you get. For off-the-plan contracts,
this is far from certain.
Off-the-plan contracts generally contain several technical
documents that together describe what you expect to be
It is very rare that the advertising materials and artist’s
impressions of the property that first drew you to the
property will be included in the contract itself.
This is significant because only an experienced builder or
architect can fully advise you about the technical documents
accurately reflect the advertising materials and what you
expect to be getting. Lawyers and conveyancers do not
have the expertise to advise you about this.
It is very common for plans to change over the course of a
project for a variety of reasons, and off-the-plan contracts
generally give vendors extensive rights to do so. Some
changes that are routinely made include:
Generally, off-the-plan contracts give the developer the
right to make any changes to the building plans and
specifications as long as it does not substantially and
detrimentally affect the purchaser.
This means that specifications can be changed as long as the
resulting quality is substantially similar, floor plans can be
changed as long as the change in floor area is no more than
5%, and many changes may be made to other lots in the
development as long as they do not directly affect the
This is part of the reason that most purchasers do not engage
an expert to review the plans and specifications in a contract
before signing: those plans may very well change during
construction. In the end, it is a matter of trusting the
reputation of the developer.
All off-the-plan contracts have a ‘sunset date’ (often
defined in the contract as the ‘registration period’), by
which the new unit must have been built and registered at the
titles office. If that does not happen in time, both
parties have the right to exit the contract, and the deposit
must be returned in full. Typically, the sunset period
is around 3-6 years for larger developments, and 1-3 years for
smaller ones. This is often the only right the purchaser
has of ending the contract.
Most off-the-plan contracts also give the developer the right
to end the contract for one or more of the following reasons:
Where a contract is ended in one of these ways, the purchaser
is entitled to a refund of the deposit. Typically but
not always, they will also be paid a small amount of interest
on that deposit, but there is usually no other compensation
for the purchaser (for example, for any wasted legal costs or
FIRB application costs).
Most off-the-plan residences share common property and common
services with other units in the development, and this means
that an owners corporation (formerly known as body corporate)
will be formed just before settlement in order to manage the
shared space and facilities.
For larger apartment developments, your unit could be part of
several different owners corporations (for example, one for
all units in the development covering building insurance and
other things applying to everyone, one for units that have car
spaces only and one for the units allocated to a particular
set of facilities like a gym or swimming pool, etc).
Each owners corporation will levy fees that must be paid
every year, much like council rates and water rates.
Some off-the-plan contracts will give an estimated budget for
its owners corporations, which will give you an idea of these
ongoing costs. Many do not, so you just have to be aware
that they will be an additional outgoing once you own the
For larger developments, units that are completed first are
often settled before construction is completed for the entire
development. For owners of these earlier units, this
could mean that living on the property right away could be
noisy or unpleasant until the development is fully completed.
The deposit paid by purchasers under an off-the-plan contract
cannot be any more than 10% of purchase price. It is
typically held in the vendor’s solicitor’s trust account, or
alternatively provided by way of bank guarantee to the
Where the funds are held by the vendor’s solicitor, it is
usually invested in an interest-bearing bank account
(generally with a fairly low interest rate of 1-2%).
Many vendors are willing to negotiate this point with the
purchaser, so you should ask for it. Even on a modest
$500,000 property that takes 4 years to build at 1.5%
interest, that’s still at least $3,000.
The last six months leading up to settlement typically
happens like this:
Settlement is then typically scheduled 14 days after the
notification. If that is inconvenient for a purchaser,
vendors will sometimes allow one extension of a few weeks, but
no more. Other vendors will charge penalty interest once
you fail to settle.
When exactly the property settles is therefore not in the
purchaser’s control, and in some ways also not in the vendor’s
control either. It is very important for the purchaser
to keep in contact with their lawyer, and if they are using
financing to complete the purchase, their loan manager or
broker, to make sure that once the title is registered, they
have already signed all the necessary paperwork and are able
to settle 14 days afterwards.
Generally, you are entitled to a final inspection before
settlement. This is where you find out whether the
vendor has built to the original specifications, or taken the
liberty of making the sorts of changes described earlier in
this article. If they have, then that is generally not
enough reason to not settle.
If you find defects with the property in the final
inspection, it is again not a reason to not settle. Your
solicitor or conveyancer can ask the vendor to fix the
defects, but this will not necessarily be done before
Many off-the-plan contracts will provide that defects found
after settlement can still be notified to the vendor in the 3
months following settlement, and they will contact the builder
for you to fix those issues. For issues found after
these 3 months, and for contracts that do not have this 3
month period, you will have to pursue the builder or the
builder’s insurer directly to get the issue rectified.
Growing up in a family of property developers, real estate is
in Lucy’s blood. It’s that experience and her time at her
previous commercial and property law practice that allows Lucy
to cut to the chase, identify the real issues, give you
practical advice alongside the legal, and help you with
anything from the smallest purchase to your next major
Lucy can also draw from her years of experience at the
Australian Tax Office and Victorian State Revenue Office to
help you structure your property transactions in the most
Call us on +61
3 9041 7733 if you would like to find out more.
You can see our related services for property purchases on
Kai Legal publications provide general information, and are
not legal advice. These are not complete summaries of the law,
and only touch on select points and scenarios that may be
relevant to our readers.
This fact sheet is current as of 26 September 2017.
© Kai Legal 2017
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