Buying property off the plan
Properties can be advertised and sold before a building is built or land subdivided. This is called 'buying off the plan'. If you want to buy off the plan, we will give you the tools to help decide.
Be aware of your rights when buying off the plan
You must review the contract and get legal advice to understand exactly what you are buying. You should also get advice on the rights available to you if things don’t go as expected.
You should:
- get appropriate legal or other advice before signing any documents or paying any money
- exercise caution
- know what you are signing:
- look out for clauses that allow the developer to rescind the contract after you have exchanged
- find out if there are separate contracts for land purchase and building construction and how those 2 contracts interact.
- understand if there will be extra costs or penalties if there are delays to building start dates
- understand what you become liable for if you withdraw from the contract.
Deposits and settlement
Generally, the buyer pays a deposit to secure the property. The balance is payable upon settlement. The date for completing the contract is not until the building is finished and the plan is registered.
Questions to ask your conveyancer or legal representative about an off the plan contract
- Can I make changes to the finishes (e.g. in the kitchen and bathroom)?
- Can I select appliances, such as stoves and dishwashers, and items such as floor and wall tiles?
- Can I visit the site during construction?
- If the building is finished earlier or later than expected, can I still arrange finance?
- What are my rights if construction is delayed or the design is altered?
- Can I on-sell the property to someone else during the construction period?
- Can the developer make changes to the design of my property and is my consent required?
- Can the developer extend sunset dates or the date for completion? In what circumstances?
- How far advanced is the project? What milestones still need to be met before the building is finished and the plan can be registered?
What to consider before you buy off the plan
With high demand for housing in popular areas of NSW, it can be easy for developers to market off the plan properties years before building work is complete.
You should consider the following before buying:
Prices are locked in when you commit to buy
Make sure you understand that prices are locked in at the date you exchange contracts.
The resale value of the property
Market prices can fluctuate, and growth rates today may vary in the following years. The resale value of your property, once it is complete, may be less than you may predict.
Funding the purchase
If paying the balance on settlement relies on another sale, you’ll need to ensure you are ready. If you will need to borrow money to complete the purchase, you need to be confident that you can secure finance when that time comes. It may be several months or even years after you agree to buy.
Interim accommodation
You may need temporary accommodation if you settle the sale of the property you currently live in too early.
For example, if you are moving into a retirement village, you might avoid having to move twice by timing the sale or settlement of the sale of your current home close to the time when you can occupy the new one.
Changes to building plans
Changes to the building plans often occur during construction. The finished complex or unit may not be the same as in the original plan. Consider any terms in the contract that may allow these changes.
The vendor must notify you of changes to ‘material particulars’. These are changes that may affect the use and enjoyment of the property. For example, the location of the apartment within the building, or a restriction on title that affects how the property will be used.
If you learn of any change, you should discuss these with your lawyer or conveyancer right away. Legislation may allow you to pull out of the contract or claim compensation, but you only have 14 days from being notified of a change to take action.
Quality of finish
When signing the contract, you may not know exactly how your property will look when it is built. Sometimes, the fixtures and fittings are different from what the buyer imagined or what was in a demonstration display. Have your lawyer or licensed conveyancer check the proposed schedule of finishes.
Management contracts in place
In a strata or community land scheme, the developer may have signed binding management contracts between the owners corporation and caretakers or building managers or for other services, including embedded networks. Prospective buyers are entitled to know the details and see copies of any such contracts. Your lawyer or licensed conveyancer can arrange the necessary searches.
Exclusive use or special privilege by-laws
The developer is not permitted to register by-laws which give exclusive use of desirable parts of the common property to owners of certain lots. This type of by-law can only be made after one-third of the lots have been sold.
Unit entitlement
The unit entitlement of the various lots in a strata scheme determine voting power at meetings. These entitlements and levy contributions, may not be specified or even known when properties are advertised for sale. Voting rights and strata levies have ongoing impact on owners, so keep these issues in mind.
Maintenance schedule and fees
Make sure you ask to see the initial maintenance schedule and the fees. Learn more about strata levies.
Payment of deposit
The deposit must be retained by the stakeholder (i.e. the real estate agent, solicitor or developer) in a trust or controlled money account during the contract period. These monies cannot be released to the vendor before settlement. This ensures purchaser protection if the developer becomes insolvent.
Concessions for buying off the plan
Revenue NSW may provide certain concessions to people buying property off the plan. These include stamp duty exemption and grants. You will need to check what is available and if you are eligible at Revenue NSW or call 1300 130 624.
Home Building Compensation Scheme
Builders carrying out residential building work (including the construction of strata units) valued over $20,000 including GST must get cover under the Home Building Compensation (HBC) scheme (formerly known as home warranty insurance).
The HBC scheme may help compensate you for some losses if:
- there is defective or incomplete work in the building, and
- the builder or developer has become insolvent, dies, disappears, or
- the builder's licence is suspended for failing to comply with certain court or Tribunal orders.
The HBC scheme covers new houses and multi-unit residential buildings up to 3 storeys high. There is no cover for multi-unit buildings that are more than 3 storeys high. Exemptions also apply to certain types of retirement villages.
Attaching proof of HBC cover to the contract of sale
If building work on the property has started, a copy of the builder’s proof of HBC cover must be attached to the contract of sale.
Insurance is required to protect the buyer against:
- the risk of non-completion of the work
- breach of statutory warranties relating to the work.
You can:
- find out more about the HBC Scheme at www.sira.nsw.gov.au.
- use the HBC Check to see if you're covered.
Exemptions for attaching proof of HBC cover to the contract of sale
Sometimes builders only take out cover shortly before building commences. If the building work has not yet started, the developer is not required to provide the certificate of cover. In this situation:
- the HBC cover must be in place before any construction starts.
- the developer must give the buyer proof of cover within 14 days. The buyer can cancel the contract if cover is not provided within this time.
- all these conditions must be included in the contract.
Cancellations
The legal right to cancel the contract under the Home Building Act 1989 is limited to situations without cover under the HBC Scheme at the arranged time. In this circumstance, the prospective buyer can only cancel before the contract has been completed (settlement).
Be warned: where a contract of sale is completed and settled, the legal right to cancel the contract no longer applies. This is the case even if the builder has broken the law and not provided the necessary insurance.
Strata Building Bond and Inspections Scheme
The Strata Building Bond and Inspections Scheme (SBBIS) requires developers to lodge a building bond with the Secretary before an application is made for an occupation certificate for new apartment building work. Developers pay a percentage of the contract price, which secures funds to pay for the rectification of defective building work, if required. The SBBIS applies to residential apartment buildings of 3 storeys and below. SBBIS does not apply if HBCF does.
Making an expression of interest or an offer
You can buy a property off the plan at an auction or for a fixed price.
Developers can also contract several real estate agencies to sell their properties.
Agents may be marketing and selling properties at the same time as the developer’s own marketing and sales activities are happening. Each agent may offer the property on different terms and conditions.
An expression of interest payment will not secure the property for you. It signals your ‘interest’ only. When you make an expression of interest payment, the agent must give you a receipt and confirm in writing that:
- there is no obligation to sell the property to you
- you have no obligation to buy the property
- they will refund your deposit if you don't end up entering in a contract to buy the property.
Agents can take several deposits for the same property from other prospective buyers.
Remember, there is no binding contract until signed contracts have been formally ‘exchanged’, even if the developer has accepted an offer.
You cannot make changes to the contract after it has been exchanged, so be sure you are comfortable with what you have agreed to.
Agents must tell you if other offers are later made on the property, or if it is sold to someone else
Protections when buying property off the plan
Key safeguards include:
Increased disclosure
Vendors who sell property off the plan need to give purchasers more information than when selling an already constructed home.
Vendors need to:
- attach a disclosure statement to the contract that outlines key information, like sunset dates and other conditional events
- provide draft documents like a plan, proposed schedule of finishes, and draft by-laws.
Notification of changes and statutory remedies
Changes often occur during a development, and the final property can be different to what the purchaser was first promised. Vendors must notify purchasers of changes that make what was first disclosed inaccurate in a ‘material particular’.
Material particulars are changes that will adversely affect the use or enjoyment of the lot being purchased.
In some cases, where purchasers are materially prejudiced by a change to a material particular, they can pull out of the contract and get the deposit back.
They may, as an alternative, choose to settle the purchase but claim compensation for the change. This is capped at 2% of the purchase price.
Purchasers also need to be given a copy of the registered plan at least 21 days before settlement.
Prohibited marketing tactics
Agents and developers must not mislead or deceive any parties during a negotiation or transaction.
When selling properties off the plan, sales agents are not allowed to:
- advertise a property for a lesser price than other similar properties, if the advertised property is no longer available
- indicate a price range for a property, where the lower end of the range is less than the agent's estimated selling price for the property
- hold on to your expression of interest payment
- use high pressure tactics to get you to buy another property at a higher price if the property you made a payment for ends up being sold to someone else.
Cooling off period
Off the plan buyers have a 10 business day cooling off period. This is longer than when buying an already constructed home (usually 5 business days).
Purchasers can decide to pull out of the contract during the cooling off period. They will forfeit 0.25 per cent of the purchase price for doing so.
The cooling off period can be waived or shortened. But this is only if the purchaser’s lawyer or conveyancer:
- provides a certificate required by legislation, and
- explains the contract and the consequences of varying the cooling off period.
Deposits
The stakeholder (i.e the real estate agent, solicitor or developer) must hold the deposit monies and any instalments paid under an off the plan contract in a trust or controlled money account during the contract period. This money cannot be released to the vendor before settlement. This protects the deposit and instalment monies in the event of the developer’s insolvency.
Purchasers can use a bank guarantee or deposit bond in place of a cash deposit only if the developer agrees before the contract is signed.
Sunset clauses
Developers will need a buyer’s consent before they end a contract using a sunset clause. Otherwise the developer will need to apply to the NSW Supreme Court to justify termination.
See the Office of the Registrar General’s website for more information about these requirements and key protections.
Building defects
Class 2 building defects
The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (RAB Act) grants powers to the NSW Building Commission to investigate serious defects in multi-storey residential apartment buildings (class 2). It allows developers to be issued with various orders if serious defects are discovered. The compliance powers can be used for up to 10 years after the building is completed.
Resolving class 2 building defects
How you resolve a residential building defect issue depends on the size and age of the building and the type of defect.
Before occupation
For advice on what to do when an occupation certificate is delayed by Building Commission NSW orders, refer to Building dispute intervention.
See also information about the Strata Building Bond and Inspections Scheme (SBBIS) Stage 4: Rectify defective building work.
After occupation
Where you can’t resolve a serious building defect with the builder or developer, notify Building Commission NSW.
They will assess the complaint to determine if the issue can be resolved through statutory warranties or other assurance schemes, or if it needs further investigation.