Buying Off the Plan — Your Complete Guide

Buying off the plan can be a tempting solution for many prospective homeowners and investors in NSW. However, it also comes with a unique set of special legal considerations alongside the usual matters typical of purchasing property.

If you’re considering an off-plan purchase, take five minutes to read our guide — we look at the important matters you’ll want to know.

What Does Off the Plan Mean?

Simply put — you’re buying a property that’s yet to be built or in the process of being built. 

In that, you’re entering a contract where the building may still be at the design stage or is in the construction phase. And, your decision to proceed will be based upon building plans, designs and specifications — not real-life — to give you an idea of what the finished result will look like and what you’re buying.

What Are the Benefits of Buying Property Off the Plan?

Buying off plan property in Sydney has gained popularity in recent years due to several factors, including:

  • Only a Deposit Required with Primary Contract of Sale — Once you start the conveyancing process, the initial agreement only requires a deposit (the same as normal purchase), with the remainder due upon completion. With off-plan properties on average taking 12 months or more to complete, this gives you a longer period to save the funds.
  • Discounted Prices — Early purchasers of off-plan properties, especially before building works begin, may find the developer offers a reduction on the final price payable.
  • NSW Government Assistance — If you’re a first-time home buyer, you can often claim government grants for off-plan properties — First Home Owners Grant (FHOG).
  • Stamp Duty Concessions — In NSW, there are potential stamp duty concessions for buying off-plan. These include — deferring any payments of stamp duty for up to 15 months from the signing of the contract, or upon completion and transfer of the property — whichever occurs first. 
  • Tax Benefits for Investors — When you’re buying a property off-plan as an investment, there are different tax benefits you may be able to claim. 
  • Potential Capital Growth — When you enter the agreement to buy off-plan, you normally pay the current market price applicable to the property. With the trend in property prices rising each year, by the time your property is complete, it can often be worth significantly more than what you initially agreed to pay for it.
  • Opportunity for Customisation — Buying a property before the construction phase is finished allows you to provide more input on how your new home is completed. You may even be able to make internal structural alterations if you catch the developer in time.

Are There Risks to Buying Off the Plan Property?

Yes, there are. The key risks of buying an off-the-plan property include:

  • Project Delays Building works could fall behind schedule, which means your property isn’t finished in the allotted time of the contract. If you’re renting while you’re waiting for your new home to be completed, this can significantly add to your costs.
  • Final Property and Construction Quality — As you don’t get a chance to see the end result until construction is finished, there may be a chance the final build will not be to your expectations.
  • Builder Bankruptcy — There is a risk the developer may go bankrupt before finishing the project. Therefore, your purchase falls through, you have to find a new home, and you could even lose your deposit.
  • Market Fluctuations — Just as the price of a property may increase while being constructed, there is also a chance your final property value could be lower. This impacts your loan-to-value ratio (LVR), the interest rates you pay and your mortgage repayments.
  • Unexpected Changes — Construction projects rarely go 100% according to plan. You may find there are changes during the construction process you aren’t happy with.

These and many other downsides of buying off-plan can be mitigated with a detailed contract that protects your interests and ensures you have legal recourse if things don’t not go as you anticipated. 

What’s Included in the Off-Plan Property Contract?

There is no “standard” contract when purchasing off-the-plan. Contracts will often be much lengthier than traditional already-built properties as they will need to include more details of an as-yet-unseen property.

Contracts for off-plan properties also tend to be drafted mostly in favour of the property developer. Hence, as a purchaser, it’s vital you employ a legal professional such as a conveyancer or property solicitor to ensure you’re aware of important terms and special conditions, including:

Whether you’re considering buying an off the plan townhouse in Sydney or buying apartments off the plan, we always recommend you get the contract reviewed as soon as you find a property you’re interested in.

Cooling Off Period

With so many extra considerations to be included in the contract, the cooling off period from the date of the signing of contracts is extended to 10 business days compared to the standard 5 days of an already constructed home. During this period the purchaser can withdraw from the contract and only forfeit 0.25% of the deposit paid.

While it can be shortened or even waived — the purchaser’s conveyancer or legal representative must provide a certificate required by law that details valid reasons for doing so. 

Buying Off the Plan in Sydney — How Long Does It Take?

The construction time of a property or development can vary — from a few months to several years. The contract will provide the developer with a degree of flexibility in the time frame to complete the project. Normally a contract will specify a completion date — referred to as a Sunset Date — by which the developer must use their best endeavours to complete. 

If the project isn’t finished within the allotted period (including any extensions referred to in the contract), either party will have the right to cancel the agreement. In these circumstances, the deposit will be refunded to the purchaser. 

However, these provisions should be carefully reviewed to give you adequate protection in the case of a termination of the contract.

Recent changes to NSW legislation now mean a developer must obtain customer consent before terminating any contract using the Sunset clause, or petition the courts in NSW for justification of the contract.

Schedule of Finishes for Off-Plan Properties

Depending on how far the developer is into the build, purchasers will be able to have more input into the final design and finishes of the property. Much of this will be detailed in the contract of sale and will commonly include the colour scheme of the property and a selection of the inclusions and appliances.

Some developers will often allow for upgrades of the specified finishes but this may be at an additional cost depending on your contract.

Variations to Off the Plan Property Developments

The contract of an off-plan development will allow for some variation and flexibility for the developer when constructing a property. 

Variations could be due to outside authorities, or it may be necessary for the developer to grant drainage rights or some restriction over the property to comply with council requirements.

Others typically detailed in the contract will be the right of the developer to change materials — including appliances and other inclusions. This could be because the material or appliance is no longer available, but a provision is made for substitution of equivalent quality.

There will normally be a provision for the buyer to pull out of the contract if the variation is deemed to be significantly detrimental to the purchaser or affects the area size by more than 10%. However, this buyer’s right is often very limited in time, so your conveyancer must make sure the contract offers adequate protection for you, the buyer.

Strata and Buying Off-Plan

When buying off the plan apartments, the contract must contain a draft strata plan. This will detail the location and size of the apartment, but if there are any car parking or storage spaces noted, these may not be allocated at the time of purchase.

If as a purchaser, you have a preference for the location of your car parking space or other areas such as storage space, your conveyancer can add these to the negotiations and ensure they’re noted in the contract.

Developer Provisions

Most off-the-plan strata contracts will include some provisions. This entitles the developer to retain control over common property in the strata for a reasonable time after the completion of purchase.

The developer may wish to use these common areas for conducting selling activities or it may be necessary to conduct further works on the development after settlement to comply with statutory regulations. 

Your strata conveyancer will be able to advise you on the terms of the contract regarding common property.

Off the Plan Settlement Process

It’s a common misconception that settlement for an off-the-plan property takes place as soon as the construction of said property is completed. There are normally several other events that need to happen first before it can finally go ahead.

The settlement date will usually be calculated on whichever of the many triggers occurs at the latest date: 

  • For new houses in NSW, an occupation certificate that deems the property is safe to live in must be registered. And, if the development involves a new subdivision of land, the new plans must also be registered with the Land Registry Services (LRS).
  • When buying apartments off-the-plan, in addition to the occupation certificate, a strata plan must be registered.

In NSW, the purchaser’s solicitor or conveyancer will be responsible for giving written notice of these events and their dates. The contract of sale will state how much notice must be given, but it will generally be 14 or 21 days from the agreed settlement date.

Considering Buying Off the Plan in Sydney or NSW?

Buying off plan property in Sydney or NSW can be a smart investment strategy, but it requires due diligence and an understanding of the legal and financial implications. 

Our network of experienced property conveyancers and solicitors are here to help you — reviewing and negotiating the terms and conditions to protect your interests for the best possible outcome.

Get in touch with Smarter Conveyancing today to see how our team of property experts can guide you through the entire buying off the plan process.