Buying off the plan – Don’t go in Blindfolded
In Queensland, the majority of residential property is sold via a standard REIQ residential contract which provides for industry accepted terms and conditions which are fair and transparent for both the buyer and the vendor. Where a client is buying a brand-new property and the title is yet to be registered with the Titles Registry Office, the type of transaction is not capable to be contracted via a standard REIQ contract and instead will be offered for sale via a non-standard agreement for sale and purchase prepared by the developer’s solicitor – often referred to as an ‘off the plan contract’.
It is important to reiterate the fact that the developer’s solicitor has prepared the ‘off the plan contract’ – this means in general the terms that are outlaid in the contract are heavily weighted towards the developer’s benefit. Thus, before signing such an agreement, a potential purchaser should consider the inherent risks associated with signing an ‘off the plan contract’ which greatly vary from contract to contract, such as:
- The ability for the vendor to make changes to the development and lot
- Sunset dates where the developer will sometimes have up until 5 and a half years to complete the development
- The buyer granting the vendor a power of attorney to exercise their body corporate voting rights for the first 12 months after settlement,
- Adjustment of rates and outgoings (including land tax) skewed in the developer’s favour.
Buyers should not necessarily be put off due to the associated additional risks from buying through an ‘off the plan contract’, rather they should be informed and aware of risks so they can make an educated decision prior to signing.
Land tax – A bug bear that MAP Lawyers often recommends that our clients seek changed in the contract is the apportionment of Land Tax on settlement. The inclusion of this provision has become industry norm in Queensland for ‘Off the plan’ contracts, however just because it has become the norm does not necessarily mean that it could not be negotiated. The inclusion of this provision exposes a Buyer to the risk of an apportionment come settlement for the developer’s land tax which could range from a couple of hundred dollars to thousands. Given that this is a developer known expense, we believe that in most cases it should not be apportioned.
At MAP Lawyers we are experts at residential conveyancing and offer an ‘off the plan’ review service which provides our clients with confidence prior to signing an ‘off the plan’ contract that they are aware of specific risks associated to the purchase.