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Buying off the planĀ 

Sometimes properties are advertised for sale before they have been built. You may be able to inspect a demonstration property or show suite to get a sense of the final product.

Buying such property is known as 'buying off the plan'. This has different risks and considerations compared with other property purchases. Also, how an 'off the plan' property is sold can vary between different developments. In some instances, the developer may be able to vary the design of the property without the buyer's approval, or buyers may need to pay more if the cost of construction varies. Delays in construction (eg. due to poor weather or further planning approval required) may also delay when the property is completed.

The contract

Potential buyers must review the contract carefully to understand exactly what they are buying. When buying off the plan, the date for completing the contract is usually not until the building is finished. Often the buyer pays a deposit to secure the property with the balance payable upon settlement.

Carefully check the conditions of the contract, obtaining legal advice on the benefits or restrictions provided by the terms of the contract. Buyers need to understand what they become liable for if they withdraw from the contract. Questions that buyers may want to ask include:

  • Can I make changes to the finishes in the kitchen and bathroom?
  • Can I select appliances, such as stoves and dishwashers, and items such as floor and wall tiles?
  • Can I visit the site during construction?
  • If the building is finished earlier or later than expected am I still able to arrange finance?
  • What are my rights if construction is delayed or the design is altered?
  • Is my deposit secure if the building doesn't go ahead?
  • Can I on-sell the property to someone else during the construction period?
  • Can the developer make changes to the design of my property without my consent?

IMPORTANT: Always read your contract and get advice from a lawyer or licensed conveyancer.

Making an offer or an expression of interest

The conditions under which properties are offered for sale can vary by development. Often properties are sold either to the highest bidder or at a fixed price. The method of sale for any particular property may also change over time.

Developers sometimes contract several real estate agencies to sell each property. Also, agents may be marketing and selling properties at the same time as the developer’s own marketing and sales activities are happening. Each agent may offer the property on slightly different terms and conditions.

An expression of interest payment will not secure the property. It signals your ‘interest’ only. When you pay an expression of interest, the agent must give a receipt and confirm in writing that:  

  • there is no obligation to sell the property to you
  • you have no obligation to buy the property
  • they will refund your deposit if you don't end up entering in a contract to buy the property.

Agents can take several deposits for the same property from other prospective buyers. Agents must tell you if other offers are later made on the property, or if it is sold to someone else.

If several agents are selling the same property, it may take some time for the specific agent you dealt with to become aware that the property has been sold to someone else.

Prohibited marketing tactics

Agents must not mislead or deceive any parties during a negotiation or transaction. When selling properties off the plan, sales agents are not allowed to:

  • advertise a property less expensive than other similar properties, if the advertised property is no longer available
  • indicate a price range for a property, where the lower end of the range is significantly less than the value of the property
  • hold on to your expression of interest payment or use high pressure tactics to get you to buy a more expensive property if the property you made a payment for ends up being sold to someone else.

Things you should think about

Where there is high demand for housing in popular areas of NSW, it may be easy for developers to market such properties months before building work is complete. Consider the following before buying off the plan:

  • Are you paying too much? Market prices fluctuate and growth rates today may vary in the following years. The resale value of your property once it is completed may be less than your expectations or predictions.
  • Funding the purchase: You may need to sell your present home to raise the money to pay the balance owing upon settlement. Problems could arise either if you sell your home too early or too late. This may be a particular issue for those buying retirement village accommodation off the plan.
  • Changes to plans: Changes to the building plans are often needed during construction. This may mean that the finished complex or date is not exactly as described in the original plan.
  • Quality of finish: When signing the contract, you may not know exactly how your property will look when construction is finished, nor the precise quality or standard of fixtures and fittings. Sometimes, the fixtures and fittings are different from how the buyer imagined or what was in a demonstration display.
  • Management contracts in place: In a strata scheme, the developer may have signed binding management contracts between the owners corporation and caretakers/building managers. Prospective buyers are entitled to know the details and see copies of any such contracts. Your lawyer or licensed conveyancer can arrange the necessary searches.
  • Exclusive use or special privilege by-laws: The developer is not permitted to register by-laws which give exclusive use of desirable parts of the common property (eg. a roof garden or parking) to owners of certain lots. This type of by-law can only be made after the initial period (ie. after one-third of the lots have been sold).
  • Unit entitlement: The unit entitlement of the various lots within a strata scheme (which determines voting power at meetings and the required levy contributions) may not be specified or even known when properties are advertised for sale. Voting rights and strata levies have ongoing impact on owners, so keep these issues in mind.
  • Payment of deposit: When you pay a deposit, take note of where it is paid into. It can be held in a trust account (eg. the real estate agent’s trust account), or paid directly to the developer. Some developers offer to hold the money themselves and offer a higher rate of interest. As some developments can take several years to complete, that extra interest can make a difference. However, your money will be at risk if the developer becomes insolvent.

Concessions for buying off the plan

The NSW Office of State Revenue provides certain concessions to people buying property off the plan. These include stamp duty exemption and grants. Check whether or not you are eligible at the Office of State Revenue website or call 1300 130 624.

Home Building Compensation Fund

Builders carrying out residential building work (including the construction of strata units) valued over $20,000 must take out insurance under the Home Building Compensation Fund (previously called Home Warranty Insurance). However, there is an exception to this requirement for new multi-storey buildings constructed after 31 December 2003. A multi-storey building is a building of more than three storeys (not including the car park) and containing two or more dwellings. Exemptions also apply to certain types of retirement villages.

All other residential building work that is not exempt must be covered by insurance under the Home Building Compensation Fund. When builders take out insurance under the fund, they are issued with a certificate of insurance (see examples of a certificate of insurance and a certificate of eligibility on the Home Building Compensation Fund page for Tradespeople on the Fair Trading website). 

Attaching the insurance certificate to the contract of sale

A copy of the insurance certificate must be attached to the contract of sale. The certificate shows that the necessary insurance has been taken out by the builder.

Insurance is required to protect the buyer against:

  • the risk of non-completion of the work
  • breach of statutory warranties relating to the work.

Check that your certificate is valid by using the Home Building Compensation Fund certificates register online.

Exemptions for attaching the insurance certificate to the contract of sale

Sometimes builders only take out insurance shortly before building commences. In that case, the builder does not need to attach the insurance certificate to the contract if certain requirements are met. These requirements are that the contract informs the buyer that:

  • the developer selling the property does not need to give a certificate of insurance if the building work has not yet started
  • the law requires insurance under the Home Building Compensation Fund to be in place before commencement of the work
  • the developer is required to give the buyer the certificate of insurance within 14 days of the insurance being taken out, and
  • the buyer can cancel the contract of sale if the certificate of insurance is not provided within 14 days of the insurance being taken out.

For more information on making a claim under the Home Building Compensation Fund, visit the Home Building Compensation Fund claims page on the Fair Trading website.


The legal right to cancel the contract under the Home Building Act 1989 is limited to situations without insurance under the Home Building Compensation Fund at the arranged time. In this circumstance, the prospective buyer can only cancel before the contract has been completed (settlement).

Warning to buyers

A contract could be completed before the building work is finished and before any insurance is taken out. Where a contract of sale is completed and settled, the legal right to cancel the contract no longer applies, even if the builder has broken the law and not provided the necessary insurance.

When you buy off the plan, you are paying for a property where the end product may not only differ from your expectations, but be worth less than what you originally paid by the time it is finished.

If you are thinking of entering into a contract to buy premises not yet built, exercise caution and gain appropriate legal and other advice before signing any documents or paying any money.

When an expression of interest is paid, the agent must provide a receipt and confirm in writing that:

  • there is have no obligation to sell the property to you
  • you have no obligation to buy the property
  • they will refund your deposit, if you don't end up entering into a contract to buy the property.

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