Axegla off-the-plan contract

What is “Off-the-plan” Contract?

You buy or about to buy a residential property that is yet have property title registered and/or the construction is yet commenced or completed. You must be very excited with buying a brand new home! However, buying off-the-plan always carries more risks than buying established properties.

It is important that you consider and understand the risks associated with the process of purchasing an off the plan property. In this article, Axegal draws your attention to three most notable factors (and thus risks) you need to consider carefully before you sign an off the plan contract.

1. Sunset Date

Off the plan contracts always have a sunset date (‘Sunset Date’).

The seller is required to fulfill its contractual obligations, including (among many other processes) registering of the residential lot and obtaining the occupation certificate. If the seller fails to do so by the Sunset Date, the purchaser and the seller are entitled to rescind the contract.

Unexpected events like covid-19 restrictions, work strikes or even bad weather may delay completion of those processes.

That is why off the plan contracts always include a clause to extend the Sunset Date in case those unexpected events happen, and shift all the risk of the extended Sunset Date to the purchasers.

The recission of contract does not come automatically after the sunset date passes. The seller may only rescind by notifying and obtaining written consent from the other party, at least 28 days before the proposed rescission, or an order from the Supreme Court.

2. Material change to the draft Strata Plan

On settlement, there may be changes to the draft plans.

Unless the change is material, the purchaser cannot make any objection to the change or claim for compensation. An example of a material change is when the area of the property is reduced by or more than 5% compared to the area of the property shown in the draft plan. If this is the case, the purchaser is entitled to rescind the contract, or choose to proceed with the contract and claim for compensation.

Most of contracts are drafted to allow sellers to make changes without notifying purchasers if the change is not a ‘material particular’.

3. Variations to the Schedule of Finishes

The proposed schedule of finishes, which is a list of product specification and materials that may be installed in your future home, must be attached to the contract. Changes to schedule of finishes often occur during construction, and the final inclusions maybe different from what the seller originally promised you.

Almost all the off the plan contracts will have special conditions which allow the seller to vary the schedule of finishes. It is essential to have your solicitors review these conditions and make sure that the contract has them covered. And remember, make sure that if the seller changes the finishes, the new ones must be of equal or better quality than the ones on the list!

Other risks may include construction defects or unfair adjustments on settlement. Off the plan contracts are substantially more complex than standard contracts for established properties. If you are thinking of paying a holding deposit or signing a contract for an off the plan property, contact Axegal before you do so, and we will help you get through the entire process smoothly.

We take pride in our own work and are always grateful for the trust of our clients.


Disclaimer: This publication is intended to provide commentary and general information. It should not be relied upon as legal advice. You should seek formal legal advice in particular transactions or on matters of interest arising from this publication.

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