Purchasing Property by Buying off-the-plan

When buying a property, a purchaser will need to inspect, scrutinise and understand intimately the property they are planning to invest their money (not to mention their dreams) in. Knowing the full nature of the property being purchased is, of course, an essential step in the conveyancing process. Often, however, estate agents and developers will offer properties for sale that cannot be inspected because they are nothing more than architectural drawings on a plan. This approach to purchasing property is called ‘buying off-the-plan’ and presents unique opportunities but also unique challenges and potentially dangerous pitfalls.

Buying Off-the-plan Explained

When a purchaser buys ‘off-the-plan’ it means that they purchase a property that is not yet constructed and, often, not yet approved. This form of purchasing property arose during the 1980s when property developers operating within the booming economy of that decade began to find demand for inner city units beginning to outstrip supply. Seeking to meet this surging demand faster than construction deadlines allowed, developers began to offer apartments that had not yet been constructed.

This system of purchasing homes and offices that are not yet built continues to be popular, especially in the inner metropolitan areas of Australia. As mentioned earlier there are potential benefits for a purchaser in buying off-the-plan. Indeed, buying off-the-plan can sometimes mean purchasing a property that will be worth a lot more when completed. (Of course, the opposite may also be true.) While buying off-the-plan can make financial sense, the purchaser should be aware of the large number of legal issues associated with buying a property that is not yet built. When buying property having knowledge and good legal advice is the best defence to falling prey to those potential problems.

Pitfalls and Problems

The purchase of off-the-plan property comes with many potential pitfalls. These are changes in value, plan modification, quality of construction, and strata management issues.


While the market value of the property may grow during construction, there is no real guarantee that the selling price will reflect the market value of the property when it is completed.

Plan Modification

When completed, the final product may not be quite as you imagined it. As ‘off-the-plan’ purchases will be no more than architect’s drawings, it is quite likely that they will be subject to alteration during construction. In many cases, local council approval may not have been forthcoming for the project at the time of your purchase and this may mean further alterations to the final product before approval.

Particularly if you are buying the property as a family home, you will need to think very seriously about whether the planned development will fit into the surrounding environment that you will live.

Quality of Construction

Generally, there will be no guarantee with an unfinished building that elements such as fixtures and quality of workmanship will be upheld. With a finished building it is a simple matter to have building inspections carried out. Of course, with a plan on a drawing board this luxury is not available.

Strata Management Issues

An essential element in purchasing strata title property is running a check on owner’s corporation records to see what arrangements have been made for management of the property. In terms of off-the-plan strata title properties, the assurance given by this process is not available. When buying into a scheme in this manner you may not know what arrangements the developers have made in order for the development to be managed. The example of the troubled Regis Towers development in Sydney and its issues regarding management should serve as a cautionary tale for many seeking to buy strata units or offices off-the-plan.

Protecting Yourself

When buying off-the-plan (and, indeed, in purchasing any property) your solicitor will become a very important figure in your life. Sound legal advice can be invaluable when negotiating the many potential hazards of buying off-the-plan. Two elements to be especially aware of will be the nature of the contract for sale and insurance.

The Contract

The date for the completion of the contract will be the date that the building is completed, the strata plan registered and it is ready for occupation. Normally, the purchaser will pay a 10% deposit at the point of contract exchange.

Your solicitor should very carefully check the conditions of the contract for sale. During this process you should be aware exactly of what benefits and restrictions are implicit in the contract. You will need to understand whether there is a penalty for withdrawing from the contract, and what changes (if any) you can make to the finishes and fixtures before occupation. You will also need to be sure that if the building is completed ahead of schedule that your finance is arranged for the contingency of an uncertain settlement date.


Insurance is a very important factor in an off-the-plan purchase. Insurance will insure you against the risk that the building is not completed. Normally, the certificate of insurance will be attached to the contract. However, in the case of strata development the developer will be exempt from attaching a certificate of insurance.

The Home Building Act 1989, however, requires the developer of a strata unit development to have insurance and they must provide this certificate to the purchaser within 14 days of the insurance being obtained. If this certificate is not forthcoming, you can (and would be wise to) withdraw from the contract.

If you need legal advice in relation to Conveyancing contact Graeme Heckenberg today for an appointment on 02 9221 2779. Offices conveniently located in CBD, Sydney, close to all public transport!