Buying off the plan: legal issues to understand

Buying off the plan means purchasing a property that hasn’t been built yet — or hasn’t been registered as a separate lot. You’re committing to a purchase based on plans, specifications, and a contract that describes something that doesn’t yet exist in the form you’ll eventually receive it.

Off-the-plan contracts are longer, more complex, and carry different risks to standard residential purchases. That doesn’t make them a bad idea — but it does mean they need more careful review than a standard contract, and they require buyers to understand some specific legal concepts before signing.

An off-the-plan contract is a promise about a future property. Understanding the limits of that promise is the most important thing a buyer can do.

The sunset clause

A sunset clause specifies the date by which the property must be completed and the contract must settle. If the project isn’t complete by the sunset date, either party — usually the buyer — may have the right to terminate the contract and have their deposit refunded.

Sunset clauses exist to protect buyers from being indefinitely committed to a project that never completes. But they have limitations:

• The sunset date may be many years away, meaning you’re committed to a purchase for longer than you expected
• Some contracts allow developers to extend the sunset date under certain conditions
• In some cases, developers have used sunset clauses to exit contracts entered at lower prices, rather than as a genuine protection for buyers

Before signing, understand the sunset date in your contract, whether it can be extended, and what happens to your deposit if the contract terminates under the sunset clause.

Variations to the property

Off-the-plan contracts typically give the developer some degree of flexibility to make changes during construction. These variation rights vary significantly between contracts — some are narrowly drawn, others are broad.

What’s less commonly understood is that some contracts allow significant changes — to the floor plan, the number of units in the development, or the amenities that were promised — without giving the buyer the right to exit.

Read the variation provisions carefully. If the developer can make material changes to what you’re buying without triggering a buyer termination right, that’s something to understand — not discover at settlement when the balcony is smaller than the plans showed.

Deposit and deposit bond

Off-the-plan purchases typically require a deposit to be paid at the time of signing — often 10% of the purchase price. Unlike a standard purchase where settlement follows within weeks or months, an off-the-plan deposit may be held for years while the property is constructed.

The way your deposit is held matters. In most cases, deposits are held in trust and released to the developer when certain conditions are met. In some cases, a deposit bond may be accepted instead of cash — an insurance product that guarantees the developer will receive the deposit if the buyer defaults, without the buyer needing to provide cash upfront.

Finance and the settlement date

One of the most significant practical risks of an off-the-plan purchase is the gap between when you sign the contract and when you settle. Property markets, lending policies, and your personal financial circumstances can all change substantially during that period.

• Pre-approval you obtained when you signed will almost certainly have expired by the time settlement arrives
• The property will be valued at settlement — if the market has moved down, the valuation may be lower than the purchase price, meaning the lender may not provide the full amount you expected
• Your own financial circumstances may have changed in ways that affect your borrowing capacity

Confirm your finance position closer to the expected settlement date — not just at the time of signing — and understand what the contract provides for if you can’t settle.

What you’re actually buying

In a standard purchase, you can inspect what you’re buying. Off the plan, you’re relying on a description. Contracts typically include plans, specifications, and a schedule of inclusions. Before signing, understand:

• What the plans show, including dimensions, orientation, and any features that are important to you
• What the specifications say about finishes, materials, and fittings
• Whether common property amenities — car parking, storage, facilities — are included in what you’re buying or subject to separate arrangements
• How body corporate levies are estimated, and what the basis for that estimate is

Developer financial position

Unlike a standard purchase, your transaction depends on the developer completing the project. If the developer runs into financial difficulty — whether due to construction costs, funding withdrawal, or insolvency — the project may be delayed, reduced, or abandoned.

Understanding who the developer is, their track record with comparable projects, and what protections the contract provides in the event of insolvency is part of a prudent evaluation of any off-the-plan purchase.

What a contract review covers for off-the-plan

A contract review for an off-the-plan purchase looks at all the elements above — and takes longer than a standard residential contract review, because the documents are longer and the issues are more nuanced.

A thorough review will identify the variation rights, the sunset clause, the deposit provisions, the settlement trigger conditions, and any terms that differ significantly from what you understood when you agreed to buy. It will also flag anything that should be negotiated or clarified before you sign.

Off-the-plan contracts deserve a slower, sharper read. If you’re being pressured to sign quickly, or if the contract is being presented as non-negotiable without any opportunity for review, that’s worth pausing on.