For homebuyers struggling to get their foot into the market, buying off-the-plan can be an inviting option.
From flexibility on the term in which they need to arrange their finances, to the possibility of owning a modern apartment otherwise out of their reach – for some, it can be a deal too good to turn down.
For others, buying off-the-plan is seen as an investment fraught with risk.
Changes to off-the-plan contract laws because of the Conveyancing Legislation (Amendment) Act 2018 (NSW) and Conveyancing (Sale of Land) Amendment Regulation 2019 (NSW) come in the hope to alleviate some of the current risks associated with buying off-the-plan – and better protect potential purchasers.
Originally tipped to commence in September, the New South Wales government is now expecting to bring in the changes as of the 1st of December.
Once the changes come into effect vendors will have to attach a disclosure statement to the contract. This must contain a draft plan from the surveyor, the proposed lot number, a proposed schedule of finishes, draft by-laws and more.
If the disclosure statement, draft plan or other prescribed documents aren’t attached to your contract before it’s signed, you’re able to back-out of the deal within 14 days of exchange.
One of the risks associated with buying off-the-plan is that plans can change. During development modifications can be made to your property – and you can be left with something different to what you imagined. New laws require vendors to notify buyers of any changes to ‘material particulars’, which can adversely affect the use of the lot. These include changes to the draft plan, by-laws and the schedule of finishes.
Under the new legislation purchasers will, in some cases, be able to rescind their contract or claim compensation for certain changes to a material particular. This will only be available to buyers who can show they wouldn’t have entered into the contract, had they been aware of the change. If this is a road you want to take, you will have to act within 14 days of being notified of the change.
Deposit to be held in a Trust
One of the biggest fears when buying off-the-plan, is the developer goes bust during the building process and the buyer’s deposit is lost. Under the changes any money paid by a purchaser under the contract must be held in a trust or controlled account until settlement, preventing this from occurring.
Stronger sunset clauses
Under the changes, stories about developers cancelling sales contracts to take advantage of higher market prices will no longer exist. Tightening of sunset clauses means if a developer does run over schedule, they are only allowed to cancel a contract if either the buyer agrees, or it is approved by the Supreme Court.
The buyer can also be awarded damages by the Court, if the vendor is permitted to pull out of the contract under a sunset clause.
The cooling-off period for off-the plan contracts has been extended from 5 business days to 10 business days.
Developers will need to provide a full copy of the registered plan and any associated documents to the purchaser at least 21 days before settlement.