Off-the-plan

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An off-the-plan contract is used to sell a parcel of land or strata unit that does not have its own title at the time contracts are signed.

These are a popular way for buyers to enter into the property market, as buyers can commit to purchasing a property that will not be settled for some time. Buyers pay a deposit when contracts are exchanged, with the balance due after construction and registration (which is often several years later).

Because purchasers are generally unable to physically inspect an off-the-plan property before entering into a contract, they must rely on the written information that the developer gives them.

The Government has recently conducted a review of the law surrounding off-the-plan contracts and has introduced legislation that prescribes greater disclosure obligations for developers stronger protections for buyers. These changes came into force on 1 December 2019.

Vendors who sell property off-the-plan need to give purchasers more information than when selling an already constructed home. New requirements apply to contracts exchanged from 1 December 2019.

These new disclosure requirements apply in addition to the disclosure regime imposed by Part 2 of the Conveyancing (Sale of Land) Regulation 2017 which prescribes documents and warranties for inclusion in all contracts for the sale of land.

What must be provided?

Vendors need to attach a Disclosure Statement to the contract that outlines key information, like sunset dates and other conditional events. The approved form of Disclosure Statement is available on our Forms page in both interactive PDF and Word formats.

The Disclosure Statement must include a draft plan, prepared by a registered surveyor. This needs to show:

  • the proposed lot number and area of the subject lot, and sufficient information to identify its location. For proposed strata lots, it is not necessary to show the location or area of any parking or storage area
  • the site of any proposed easement or profit à prendre affecting the subject lot, and the site of any proposed restriction on the use of land or positive covenant affecting only part of the subject lot
  • for lots in proposed strata schemes - the draft floor plan and draft location plan
  • for lots in proposed community, precinct or neighbourhood schemes - the draft location diagram, draft detail plan and draft community, precinct or neighbourhood property plan.

Other draft documents must also be provided. These are:

  • any proposed schedule of finishes
  • any s88B instrument proposed to be lodged with the plan
  • for lots in a proposed strata scheme, the draft by-laws
  • for lots in a proposed community, precinct or neighbourhood scheme, the draft management statement and the draft of any proposed development contract
  • for land that comprises or includes a lot in a proposed development scheme, the draft strata development contract
  • for lots in a proposed strata scheme that relates to a part strata parcel, a draft strata management statement required under section 99 of the Strata Schemes Development Act 2015 for the registration of the strata plan,
  • for land that will be subject to a building management statement under Division 3B of Part 23 of the Conveyancing Act 1919, the draft building management statement.

NOTE: For strata schemes, the location of parking and storage areas don’t need to be identified on the draft plan, and there doesn’t need to be provision for the allocation of the costs of shared expenses in a building management statement or strata management statement.

Required documents are included in the Disclosure Statement if they are attached to the contract

There is no need to attach more than one copy of the same document to the contract and the Disclosure Statement.

Purchasers can rescind the contract within 14 days of exchange if the Disclosure Statement, draft plan or relevant prescribed documents are not attached to an off-the-plan contract before it is signed.

Changes often occur during a development, and the end product can differ from what the purchaser was originally promised. For contracts entered into from 1 December 2019, vendors must notify purchasers of changes that make what was disclosed inaccurate in a ‘material particular’.

Material particulars are changes that will adversely affect the use or enjoyment of the lot being sold, and may include changes to:

  • the draft plan
  • by-laws
  • schedule of finishes
  • easements or covenants
  • a strata management statement or building management statement
  • a management statement for a community, precinct or neighbourhood scheme
  • a development contract or strata development contract.

However, some things are not material particulars and notification of changes is not required. These include:

  • changes to the proposed lot number or street name
  • a change to, or the inclusion of, a provision for the allocation of the costs of shared expenses in a building management statement or strata management statement;
  • for lots in a proposed strata scheme—a change to, or the inclusion of the specific location or area of the parking or storage area, but only if the change or inclusion is made according to the terms of the contract

For more information about material particulars, see section 66ZL of the Conveyancing Act 1919 and clause 19A of the Conveyancing (Sale of Land) Regulation 2017.

Vendors should use the approved form Notice of Changes which is available on our Forms page in both interactive PDF and Word formats.

Ending the contract

In some cases, purchasers can rescind the contract because of a change to a ‘material particular’. This relief applies to contracts entered into from 1 December 2019, and is only be available to purchasers who can show that they would not have entered into the contract had they been aware of the change, and that they are materially prejudiced by the change.

This might happen when the purchaser receives a Notification of Changes as outlined above, or because the purchaser is served with a registered plan that reveals a change to a material particular. For more information on service of registered documents, see 'Vendor to provide registered plan 21 days before settlement' section below.

Claiming compensation

As an alternative, purchasers may choose to remain in the contract but claim compensation (up to 2% of the purchase price) for the change. This relief also applies to contracts entered into from 1 December 2019.

If the parties cannot agree to resolve a compensation claim, the claim can be referred to arbitration. The arbitrator’s decision is final, and the purchaser is no longer able to rescind the contract because of the change to the material particular.

Affected purchasers must exercise their rights to rescind or claim compensation within 14 days of being notified of the change to a material particular, or of being served with the registered plan that reveals the inaccuracy, as the case may be.

Purchasers under off-the-plan contracts have a longer cooling off period than when buying already constructed homes.  From 1 December 2019, off-the-plan contracts have a 10 business day cooling off period, which recognises these contracts are often lengthier and more complex than those for existing dwellings.

The cooling off period for contracts relating to established homes is 5 business days.

A new warning notice about cooling off rights will be required in all sale of land contracts (not only off-the-plan) from 1 December 2019. The Law Society of NSW has updated the standard form Contract for Sale of Land to include the new form of warning notice.

The new warning notice is prescribed by Schedule 1, Form 5 of the Conveyancing Sale of Land Regulation 2017.

While conveyancing practitioners adjust to the change, transitional provisions allow contracts for established properties (i.e, not off-the-plan) to use the old form of warning notice for 6 months after commencement of the new requirement.

From 1 June 2020, all contracts for sale (whether for off-the-plan or established properties) will need to use the new form of warning notice relating to cooling off rights.

Developers will be required to provide purchasers with a copy of the final registered plan, and any associated documents, at least 21 days before settlement. Purchasers cannot be compelled to settle within that 21 day period.

If the registered plan and associated documents reveal an inaccuracy in a material particular that the developer has not notified, rescission and compensation rights still apply. A materially impacted, purchaser who would not have entered the contract had they known about the change, may rescind or claim compensation within 14 days of being served with the registered documents.

Any money paid by the purchaser by way of deposit or instalment under an off-the-plan contract must be retained by the stakeholder in a trust or controlled money account during the contract period. These monies cannot be released to the vendor before settlement, meaning that deposit and instalment monies are protected in the event of the developer’s insolvency.

Restrictions on how deposit/instalment monies are held do not prevent purchasers using a bank guarantee or deposit bond in lieu of a cash deposit.

Sunset clauses allow either party to a contract to terminate an off-the-plan contract should a certain event, like the registration of the plan, not occur by a specified date. In 2015, the Government introduced laws preventing developers from using sunset clauses to end contracts without an order from the Supreme Court (unless the purchaser agrees).

Recent changes to the law extend the definition of a sunset clause to capture other events which trigger termination of the contract, like the issue of an occupation certificate. Changes also confirm that the Court can award damages if the vendor is permitted to end the contract under a sunset clause. These changes are contained s66S of the Conveyancing Act 1919.

While s66S commenced on 1 December 2019, this provision applies to all off-the-plan contracts, irrespective of whether they were signed before or after commencement.