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    4 reasons buying a home "off the plan" is not all that it seems

    Sep 30, 2020 3:33:29 PM

    Buying a home unit off the plan is not all that it seems. There are many risks involved which buyers may not be aware of.

    What does “buying off the plan” mean?

    “It’s when you are buying into something that has not been built yet and the plan has not been registered.”

    Buyers may think they are getting a good deal when buying off the plan, but buyers should think carefully before signing a Contract to purchase a property.

    Here are some issues that may concern a buyer when buying off the plan:

    1. Difficulty in recovering the 10% deposit paid on exchange

    Buyers usually pay a sizeable deposit of 10% of the purchase price. The balance of the purchase price is paid on completion. Buyers can sometimes pay the deposit then wait up to for example 4 years until completion. This timeframe is identified by the terms of the Contract. While waiting for the plan to be registered, the vendor/developer may experience financial difficulties which may result in the developer not being able to complete the project. This can make it difficult for buyers to recover the 10% deposit paid on exchange.

    2. Changes with your financial situation 

    A buyer’s financial circumstances can change during the course of time after the exchange and while waiting for the plan to be registered. As well, due to the Banking Royal Commission, lenders are applying stricter tests on applicants. Banks may decide your loan is no longer reflective of the property value. Here is an example of a situation in which a buyer could find themselves:

    A buyer has signed and exchanged a Contract, paying the deposit with the expectation that the unit will be built within 2 years. The buyer at the time of exchange of the Contract was in well paid, steady employment. Due to COVID, the buyer loses his job in circumstances beyond his control. The plan becomes registered and the vendor requires settlement whereby the buyer is required to pay the balance of the purchase price. Even though the buyer had pre-approval for a loan at the time of exchange, the lender has now decided that because the buyer is unemployed, they are a risk and do not comply with the lender’s criteria. The application for the loan is rejected and the buyer therefore does not have funds to complete the purchase. As the buyer cannot complete the purchase, the buyer forfeits the 10% deposit to the vendor. The vendor can also sue the buyer for damages.

    3. Changing property value

    Variations over time in the property market can also be a big issue if the buyer is relying on a loan from a lender. Just as the value of a property can increase over the time of construction, it can also decrease. If the value of the property decreases, a buyer could be at risk of not being able to find a lender willing to loan the money to fund the purchase. For example:

    It took approximately 3 years for the property to be constructed and the plan to be registered. Once the buyer’s lender carried out their standard valuation of the property, the value of the property had decreased which left the lender with no choice but to reject the loan application. The buyer’s broker approached approximately 10 different lenders and was faced with the same situation. In the end, the buyer could not complete the Contract due to having no funds and therefore he lost his 10% deposit.

    4. Buyers can be led astray by the advertising 

    Buyers may also be led to believe that upon settlement they will receive the improvements as referred to on the front page of the Contract and as shown by the developer or real estate agent on behalf of the developer on the advertising material inspected prior to exchange. Unfortunately, this is not always the case. For example: 

    A client was advised by a Sales Representative that they were buying a 2 bedroom + study + storage + 1.5 car space. During the course of the construction of the unit complex, the buyer was advised that the layout of the unit needed to be changed to comply with council requirements. The buyer actually received a 2 bedroom + utility room + car space on settlement. Although they received a unit with approximately the same floor area, the layout was changed resulting in a loss of the study and storage. Those rooms were replaced with the utility room. Strictly speaking the variations were in the terms of the Contract.


    As the Contract is drafted for the benefit of the vendor, we encourage all buyers when thinking about buying off the plan to:

    • Carefully consider their personal circumstances and the risks associated with the purchase which may impact their ability to fund the purchase; and
    • To obtain timely legal advice as to the terms of the Contract before signing the Contract.

    If you have further questions please contact us at

    This is not legal advice. 

    Lisa Pizzonia

    Written by Lisa Pizzonia