Off the Plan Purchases

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Purchasing “OFF THE PLAN”

Purchasing off the plan?  The team at ALA Law can assist you to purchase land, or house and land off the plan.

What are off the plan purchases?

Off the plan property purchases in NSW are purchases of property that has not be subdivided, that is, large lots of land which are being divided into smaller for sale.

An off the plan purchase can either:

  1. Include a proposed residence on the property which is built as part of the subdivision and, when the contract is completed, and you become the owner of the land, the land, along with the new home is transferred to you. The building itself only exists on paper at the time that you enter into the Contract and can be for any type of real estate, including units, townhouses and even standalone houses.
  2. Be land only which you build on after completion of the Contract and you become the owner of the land.
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What are off the plan contracts?

Off the plan property purchases in NSW are purchases of property that have not been built yet. The building itself only exists on paper as plans and Council proposals. Off the plan purchases, also known as OTP, can be for any type of real estate, including units, townhouses and even standalone houses.

The most popular example of off the plan purchases are units in a new apartment building that hasn’t been built yet. Another example of an off the plan purchase is a new house in a still developing suburb where land is yet to be cleared or services are still to be connected.

Off the plan contracts will include the builders plans, including suburb design, building design, individual dwelling design (for houses) and the types of material proposed as well as things like design of common areas, proposed communal amenities and any areas for shop fronts, restaurants and recreational activities.

Construction for off the plan houses can take months to a year or two, and construction for off the plan units and apartments generally take up to a few years or more. When purchasing off the plan, the developer will generally request a deposit of 10% then the purchaser has no more to pay until the building has been completed.

What should you know about purchasing off the plan property in NSW?

The benefits of purchasing off the plan property in NSW are:

  • Once contracts are signed the price of the property is locked in. If property prices rise, the price of your off the plan property does not rise with them though you do get the benefits of equity in the property.
  • If you are the one of the initial off the plan purchasers you may have the opportunity to weigh in on design decisions or choose from options such as the floor level direction and the floorplan of your off the plan apartment.
  • If you are a first home buyer, you may have access to concessions on stamp duty, assistance with deposits, government guarantees and cash rebates for off the plan purchases in NSW.
  • Sellers of off the plan property generally ask for an initial deposit of 10% with no more to pay until settlement completion date. This gives you more time to save the remainder of your 20% deposit, or extra cash to reduce your loan.

The disadvantages of purchasing off the plan property in NSW are:

  • You will not be able to view the physical building that you are buying and will be reliant on the builders plans and your own imagination to understand what the finished product may look and feel like.
  • Beware of Special Conditions in the Contract for Sale that allows the builder or developer to make changes to the property after you have signed. Depending on the Contract, developers may be able to change appliances, style or the floorplan.
  • Issues with building material, weather and labour will cause delays to handover of off the plan properties and ultimately delay you moving into your new home.
  • Beware of sunset clauses which provide the builder or developer with additional safety nets in the event they face issues such as weather conditions, material scarcity and Council hurdles which may result in delays to construction completion causing delays to completion.
  • If the property value has fallen and you are borrowing the remainder of the property price (less the deposit), your lender may only lend to a certain percentage value of the property. If there is a shortfall, you will be required to make up the shortfall amount between the deposit and the financed amount.

Tip: If your off the plan purchase is facing delays, keep an eye on the expiration of your finance approval. You may need to seek an extension of your finance approval, or your lender may need you to undergo further serviceability checks.

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Can you negotiate off the plan?

Off the plan sellers in NSW may still be open to negotiating some changes to the type of build, primarily in relation to the finishing’s of the building. For example, some off the plan vendors may offer upgrade packages to the standard inclusions for the off the plan purchase. Additionally, in relation to apartments, some off the plan vendors may allow you to select the location (e.g., floor level, size of apartment, side of building, or close to amenities such as tennis courts or swimming pool) and may allow you to suggest design changes to the building, such as carpet in loungerooms instead of tiling throughout.

Can changes be made to an off the plan contract?

Most off the plan properties come with fixed price and a take it or leave it approach by builders or developers; they also come with a range of Special Conditions that provide the vendor of an off the plan property a lot more flexibility than they would have under a Standard Contract for Sale in NSW.

Nevertheless, purchasers still have a level of negotiating power when entering into a contract for an off the plan purchase in NSW. Areas for contract amendments include, but are not limited to, cooling off periods, sunset clauses, land tax adjustments and payments, settlement periods post-construction completion, the ability to rescind the contract as a result of changes to size and layout of the property, and obligations on the purchaser in the event they become incapacitated or die during the construction period.

Checklist: Before you enter into an off the plan contract

  • Some questions to consider before you start looking at purchasing off the plan property in NSW:
    • Whether the property is good value – do your research on past sales and other new developments in the local, or similar, area.
    • The success of the developer – look at the developers past projects. Were they on time? Did they delay? Did they have build issues? Did the end product vary from the initial design and by how much?
    • Protections from sunset clauses –look at how long the sunset clauses is set for and the options for extension for the developer or rescission for the purchaser
    • Whether you have the financial capacity to meet any financial shortfall if the value of the property decreases at settlement
    • What is included in your purchase – does the contract for the off the plan purchase include appliances or access to a certain area of the building (e.g., roof access or tennis court access)
    • Are you able to customise your home – look at whether there are packages or upgrades available for your purchase
    • How the developer is funding the construction – look at whether they have finance backing or some other funding; be aware of the possibility of bankruptcy
    • Does the developer have Home Building Compensation cover – look at whether the builder has HBC cover and the level of cover.
    • Are there any outstanding NSW Building Commissioner or NSW Fair Trading Orders in relation to the developer – look for any Prohibition Orders or Building Rectification Orders.


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Step by Step Guide

Please contact us for a step-by-step guide to assist you to purchase your property.

Where to from here?

Please contact one of our amazing staff on 0247 616 935, or head to our contact page, to discuss your sale and the steps going forward!