Buying property "off the plan"

Buying “off-the-plan” generally involves signing a contract with a developer before:

• final subdivision approval
• building has commenced or completed

On this page:

• What can be bough off-the-plan
• Advantages of buying off-the-plan 
• Risks of buying off-the-plan
• ‘Off-the-plan’ property contracts 
• Off-the-plan contract details

What can be bought off-the-plan

Off-the-plan sales may include the sale of:

• vacant land
• house and land packages
• strata properties such as units, townhouses or apartments

Final settlement of an off-the-plan sale can only happen after Landgate has issued the Certificate of Title.

Advantages of buying off-the-plan

The main attraction of buying off-the-plan is locking in the current property price. Usually buyers pay a deposit, usually no more than 10%, and pay rest at a future settlement date.

Risks of buying off-the-plan

Buying off-the-plan has some potential risks for buyers, including:

• uncertain completion dates
• differences in the expected and actual quality of the finished product
• loss of deposit
• market value depreciation
• issues with obtaining finance. For example changes in lending policies, financial circumstances, or interest rates. can impact the buyers ability to get finance when needed.
• Contracts are binding and may not be cancelled easily.

‘Off-the-plan’ property contracts 

Off-the-plan sales contracts involve a developer agreeing to deliver land, a house and land package, or a strata property at an agreed price. These are often subject to necessary approvals.

Developers often have standard contracts pre-prepared by lawyers to protect their interests. Sometimes, they may choose to use the standard Joint Form of General Conditions for the Sale of Land.

Before signing a contract:

• check it clearly states responsibilities, deadlines, and consequences of unmet conditions
• seek legal advice about the meaning of any unclear terms. Check if any terms can be added or changed before signing

Off-the-plan strata title properties 

Before the buyer signs the contract, the developer must provide:

• disclosure statements
• details about the proposed strata plan
• strata by-laws.

Deposits and any pre-registration payments must be:

• made to a solicitor, real estate agent, or settlement agent,
• held in their trust account until the strata plan is registered with Landgate.

A developer can access deposit money after registration of a plan unless the contract prevents this.

Contracts may allow the developer to complete common property before or after settlement. This might include a driveway or pool. The contract must set out what happens if common property is not completed on time.

Buyers have the right to cancel a contract if the deadline to register the strata/survey strata plan is not met.

In some contracts, a developer may include a term allowing them to choose the property manager, removing the buyer's right to select their own. The State Administrative Tribunal can shorten or terminate management contracts in certain cases.

All of this is covered by the Strata Titles Act 1985 (WA). If the developer fails to follow the Strata Titles Act, the buyer can void the contract before settlement.

Off-the-plan contract details 

Off-the-plan contracts typically include:

Price 

Some off–the-plan contracts have a fixed price clause, while others may have terms that allow for increases in building costs.

Deposits 

Deposits are an amount paid by the buyer to the selling agent to hold the property. 

Buyers can safeguard their money by asking:

• the developer to place the deposit in trust until settlement
• for this to be included in the contract.
• in writing, for the deposit to go into an interest-earning account, with the interest paid to you if the:
  • deposit is over $20,000 or
  • settlement is more than 60 days away
• the money to be put in an interest-bearing account as a contract condition  when a solicitor holds your deposit.

Timetable for completion

Developers use sunset clauses to set a contract's end date. Buyers consider;

• if necessary approvals are still required
• if funding has been secured
• current progress of the development

Buyers may still have rights under Australian Consumer Law for unreasonable delays.

Specifications and features 

The contract should state the required features of the property such as a lift for multi-story access.

Changes by the developer 

Some contracts allow the developer to change specifications in a contract without getting the buyer’s approval.

Agreeing to a ‘variation clause’ may prevent you from claiming compensation from the developer if changes are made that don’t suit you.

Withdrawal from the contract 

Withdrawal clauses allows the developer or buyer to withdraw from the contract if particular conditions are not met.

Settlement

Once a property is completed it is likely to proceed fairly quickly to settlement.

Freehold land - a developer will be in a position to settle as soon as a Certificate of Title has been issued by Landgate.

Strata developments - settlement can take place after the last of the following events occurs:

• the registration of the Strata/Survey Strata Plan; 
• the issue of a separate Certificate of Title for the strata lot; or 
• the certificate of occupation is issued by the local authority. 

Disclaimer

Disclaimer clauses are sometimes included to prevent a buyer from claiming in court that they were misled by the developer. For example, images from the marketing material do not accurately portray the finished product.

The Australian Consumer Law makes it an offence to mislead or deceive consumers. It also allows consumers to take action against traders (including developers) if they suffer loss as a result of a trader’s conduct. The right to claim damages cannot be excluded by a contract term.

Defects liability

A ‘defects liability’ clause states it is the developer’s responsibility to repair any major or minor defects. This is generally not included in a freehold land contract.

You may also have additional rights under the consumer guarantees in the Australian Consumer Law.

Rental guarantees