Buying “Off the Plan” means that plan is subdivision is not registered and therefore there is no title to it.
Usually a substantial amount of time will pass between the signing of the Contract and settlement on the property, possibly up to 5 years. During this time many things can change including the value of the property.
Some risks associates with these purchases can be:
- Not seeing the actual property before signing the contract; you will be relying on a sketch, floor plan and advertising material for information about what you are buying;
- There may be unexpected changes to the plans or specifications during the process or the size of the land itself;
- An uncertain completion and settlement date;
- The possibility that market prices could vary and come settlement time, the property may be worth less than the contract price; or
- Your circumstances could change – eg. You may have finance approval when you enter in to the contract, but two years later you may have lost your job.
An Off-the-Plan Contract will have what is known as a Sunset Clause – this clause will give the parties a specific date by which the subdivision of the land is required to be registered. If the subdivision is not registered by the date in the Sunset Clause, the Purchaser is entitled to end the Contract and receive their deposit back (which cannot be more than 10% of the purchase price).
If you intend to purchase Off-the-Plan we recommend you contact our office for advice before signing a Contract. We can assist with some special conditions that may minimise your risk. For more information, please contact Patricia Sheedy of our office (Victorian Property Law Specialist) on 9707 1155.