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Buying off the plan – the detail

Off The Plan

The term ‘off the plan’ is not so much a legal term but rather an industry one, referring to all types of units and land being sold (but not settled) before legal title actually exists. Below are some of the essential elements of off-the-plan contracts, along with some things to consider before signing up.

The Developer

Like any popular tourist destination, the Whitsundays has seen its fair share of developers, some successful and some otherwise. A little bit of research on your part via an agent to establish who it is that is building your product, and their track record to date might help in making an informed decision.

Conditions Precedent

Off-the-plan sales are often conditional upon the developer:

generating enough pre-sales to make the project viable so they can secure construction funding; and
obtaining satisfactory development approvals from the relevant authorities.
Usually, the developer cannot satisfy these conditions by certain date deadlines then it (not you) may elect to cancel the contract. Although you don’t usually have termination rights at this stage, you still you’ll still be refunded your deposit. In our experience, this is rare as developers generally have a reasonable idea as to the market and costing issues, before going to the market to sell their product.

Schedules of Finishes and Furniture Packages (units only)

Off-the-plan Unit contracts go into some detail about ‘quality fittings, tiles, tapware etc.’ to be included in the finished product. Similarly, if the unit is to be placed into a letting pool (where the unit is being let out to holidaymakers for example), then a furniture package will also typically form part of the purchase. These schedules and lists often refer to finishes and appliances in very general terms, allowing developers a bit of latitude in settling on the type and price of the finished product.

If you have any particular preferences regarding your finishes, or you thought the items were a particular model of a particular brand, then make sure this has been made clear. Otherwise, the general conditions of contract may let the developer supply and install whatever it can source at the time at the best price, though as long as it’s the same or similar quality.
Although that sounds reasonable, there’s little that can practically be done at settlement if you’re disappointed with the quality of your finishes. You’re generally not allowed to terminate, withhold money or delay settlement at all. In fact, you usually have to settle first and then prove that the alternative finishes you have been given are substandard. To prove this will mean at the very least some form of mediation or arbitration (after settlement), or worst case, court. Given the very cost prohibitive nature of court proceedings, this leaves buyers in a tough position.

Defects Liability Periods (units only)

Most off-the-plan contracts provide for a defects liability period of up to 90 days, and require a buyer to provide a list of defects to the developer within a specified period of time, failing which the buyer loses their right to have any defects rectified. This type of condition often goes on to provide that defects due to poor workmanship or poor materials will be rectified at the developer’s expense. All the documents

Statutory warnings, cooling off periods, disclosure statements … the list seems to be growing each year. in the interests of consumer protection, the law has evolved to a point where very stringent processes must be followed to ensure that a contract is valid and binding. Incorrect document preparation has led to many developers’ projects stall and fail as buyers’ lawyers continue to test legislation for loopholes.


Off the plan contracts provide that Settlement is due 14 days after title to your lot issues. Title is issued by the titles office when the survey plan, signed by the local council, is lodged and registered. The local council generally won’t seal the plan until the developer has carried out all of the work to complete the development.

The developer has a statutory time frame within which to complete the development and settle on each contract with off-the-plan buyers. This is often referred to as the sunset date in the contract. If by this date title has not issued, contracts become automatically void and buyers have their deposits returned. This is subject to any rights the developer might have with respect to extending the Sunset Date.

Staged developments

Some off-the-plan purchases may form part of a development being completed in parts or stages. This is not unusual and generally does not affect you unless, for instance, you are buying a unit and proposing to enter it into a letting pool and construction works are continuing, which may result in low occupancy rates.

It can be problematic when purchasing a unit off-the-plan on the assumption that the unit being bought it will form part of a larger resort or development with all the amenities and benefits that follow. Almost always, developers’ contracts state that they are not obliged to continue with subsequent stages. If the developer fails to proceed with subsequent stages, a buyer of a stage 1 unit may be left without any subsequent stage amenities, benefits, increased value, or recourse to a developer for any losses sustained.

Coming Up With The Money

One major attraction for buying off-the-plan is that you do not need to come up with any major outlay beyond the initial deposit. Transfer duty, legal costs and the balance purchase price are all deferred until the unit is complete. As attractive as this sounds, it is unwise to enter into an off-the-plan contract unless you are certain you’ll have the money to complete.


A resale is when a buyer agrees to on-sell the unit or land they contracted to buy before they have actually settled. Typically both settlements occur simultaneously. Whether this is allowed depends on the contract terms. Some prohibit this, usually because developers do not want to be competing with buyers whilst trying to clear their original development stock. If you are not contractually prohibited and you decide to resell during the course of the construction of the development, you need to bear in mind that the resale price needs to be considerably higher than your original contract price before the transaction makes the risk of buying the property in the first place worthwhile (if indeed that is why you are buying it). You should take into account the following:

Tax – take advice from your accountant before you agree to re-sell. Remember that, under the current capital gains tax regime, you will be required to pay tax on the capital gain you make when you re-sell the property, at your marginal rate;

  • Agent’s commission – if an agent brokered the resale deal for you, then you will be liable to pay agent’s commission on the resale as well as the date for completion;
  • Stamp duty buying in – although it doesn’t seem that you actually own the property for any period of time, the law considers that you will, requiring you to pay stamp duty;
  • Additional legal fees – it is not a simple exercise for any lawyer to re-produce an off-the-plan contract. Additional costs are inevitable;
  • Net effect – the net effect of these deductions can result in a very marginal capital gain;
  • You remain bound – additionally, even though you have a buyer, if that buyer does not complete his contract with you, you are still bound to settle with the developer.