Legal Tips for Buying Off-the-Plan Residential Properties

What Exactly Is “Off-the-Plan”?

Before we dive into the tips, let’s clarify what buying “off-the-plan” means. Essentially, you’re purchasing a property before it’s been built. This often allows you to lock in a price early and customise certain aspects of the home—but it also means you’re committing to something that may look a little different when it’s completed.

While it’s an exciting opportunity, buying off-the-plan comes with unique risks and considerations.

Understand the Sunset Clause

The sunset clause is a clause in off-the-plan contracts that gives either the buyer or the developer the right to terminate the contract if the project isn’t completed by a certain date. Sounds reasonable, right? Well, it can be, but it’s also one of the most contentious clauses in these contracts.

Some developers have been known to delay projects intentionally in order to try to invoke the buyer to terminate, or to try to terminate themselves. Some buyers may not realise that a developer is not actually allowed to terminate under this clause in NSW unless the buyer consents, so its important that buyers get the right advice before agreeing to anything!  Always check the sunset date and negotiate a fair timeline, and if the developer wants to extend the sunset period, ensure you understand why and whether it’s in your best interest.

Variations and Inclusions – Read the Fine Print!

Off-the-plan contracts often give developers the right to make variations to the design, size, or materials of the property. While some flexibility is to be expected (because no one can predict every possible construction issue), you want to ensure that you’re not signing up for a property that could end up looking vastly different from what you initially agreed to.

Check the inclusions list in detail—what exactly comes with the property? Is that sleek European kitchen in the display suite guaranteed in your apartment, or will you be stuck with something a little more basic?

Buyers have protections under law in relation to changes that are material – conveyancers and lawyers should always flag these to buyers to ensure they’re aware of all of their options! 

Understand the Strata and Common Property

When buying off-the-plan in Sydney, many properties will be part of a strata scheme, meaning you’ll own your apartment or townhouse but share ownership of common areas like gardens, gyms, or pools. Make sure you understand the strata fees, which are ongoing costs to maintain these shared spaces.

It’s also essential to review the proposed by-laws—these are the rules that will govern your use of the property and common areas. Restrictions on renovations, pet ownership, and even what you can hang on your balcony could be in place, so make sure you’re comfortable with them before you buy.

Financing Off-the-Plan – It’s a Different Game

Securing finance for an off-the-plan property is not as straightforward as with a standard purchase. Banks may only lend based on the value of the property at the time of completion, which could be years away. If the property market changes, the value of your off-the-plan property could be lower than expected, which might affect your ability to secure a loan.

This is why pre-approval is important, but so is checking with your lender throughout the building process. Make sure you have financial flexibility to deal with any fluctuations in property value when it’s time to settle.

Delays and Construction Timelines

One of the most common risks with off-the-plan purchases is delays in construction. While it’s easy to get excited about moving into your new place, always prepare for the possibility that the completion date could shift. Whether it’s bad weather, supply shortages, or labour issues, delays are common in the construction world.

Ensure that the contract specifies a realistic completion date, and understand your rights if the project is delayed.

Cooling Off Period – Know Your Exit Options

In NSW, you’re entitled to a cooling-off period when buying residential property. For off-the-plan purchases, this is a ten-business-day period during which you can back out of the contract, although you may forfeit 0.25% of the purchase price.

This is your opportunity to reconsider if any red flags arise after signing, so make sure you have legal advice lined up and review the contract thoroughly during this time.

Key Takeaways – What Buyers Need to Know

Here are the top things to remember when buying off-the-plan:

1. Check the Sunset Clause
   Understand the sunset clause and make sure it’s fair. 
2. Be Clear on Inclusions and Variations
   Scrutinise the contract for any variations that could affect the final design or quality of the property, and confirm exactly what’s included in your purchase.
3. Be Ready for Delays
   Construction delays are common. Make sure you have a contingency plan if your move-in date gets pushed back.
4. Get Expert Legal Advice
   Off-the-plan contracts are complex, so having the right legal support is essential. At Jaide Law, we specialise in ensuring that buyers understand every aspect of their contract before signing.

Purchasing off-the-plan is an exciting step, but it’s crucial to protect your interests and minimise risks along the way. Our team at Jaide Law is here to help you navigate these waters, ensuring you make a sound investment in your future home.

Disclaimer – The above information is general in nature and doesn’t consider your personal circumstances. Before making any decisions, we recommend seeking professional advice tailored to your situation.