Buying off the plan: what a conveyancer checks before you sign

Buying off the plan means committing to a property before it is finished, sometimes before construction has even started, based on architectural plans, floor layouts and a display suite rather than the finished building itself. It can suit some buyers, particularly where an extended settlement period matches their financial timeline, but the gap between signing and settlement introduces risks a straightforward purchase of an already-built property does not carry.

Several risks come up repeatedly in reporting on off-the-plan purchases. Construction delays can tie up a buyer's deposit for a long time, in some reported cases years beyond the originally expected completion date. The finished property can differ from the plans or the display suite it was sold against, within whatever variation the contract permits. A developer can become insolvent partway through a project. And at settlement, a bank's valuation of the completed property can come in lower than the contract price agreed years earlier, leaving a funding gap the buyer has to cover from other sources.

A sunset clause is one of the more important contract terms specific to off-the-plan purchases, and it is worth understanding on its own. It sets a deadline by which the developer must register the plan of subdivision and issue individual titles; in Victoria, the default statutory period is 18 months from the date of sale unless the contract specifies something different. If that deadline passes without titles being issued, the sunset clause commonly gives either party the right to rescind the contract, with the buyer's deposit refunded.

That mechanism has, in a small number of reported cases, been misused — in a rising property market, some developers were reported to have deliberately delayed a project to trigger the sunset clause, rescind the contract, and resell the same unit at a higher price to a new buyer. This prompted legislative reform in New South Wales and Victoria specifically aimed at preventing it. In Victoria, a developer must now generally give the purchaser at least 28 days' written notice and obtain their written consent, or otherwise apply to the Supreme Court for an order, before rescinding a contract under a sunset clause — meaning a developer can no longer simply walk away from a delayed contract without oversight.

Given these risks, a conveyancer reviewing an off-the-plan contract commonly checks a specific set of terms before a buyer signs: the sunset clause and what rights it gives each party, the variation clause governing how much the finished property is allowed to differ from the plans, the deposit arrangements or deposit bond, the defect rectification period after completion, the developer's disclosure statement, and — for a strata property — the body corporate budget the buyer will be contributing to once it is established. This kind of specialist review is commonly reported to cost somewhat more than a standard established-property purchase, reflecting the additional contract terms involved.

The long lead time between signing and settlement is also, on its own, a reason off-the-plan purchases warrant closer attention than a standard transaction — more can change in the buyer's finances, the market, or personal circumstances over a multi-year build than over the typical six-to-eight-week settlement described in our article on the standard settlement process. This article is general information about common off-the-plan risks and contract terms, not advice on a specific development or contract, and terms vary meaningfully between developers and states. Our directory lists Australian conveyancers and property solicitors by area if you are considering an off-the-plan purchase and want a contract reviewed before signing.

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