Off the plan: what to check before you sign

You are buying a drawing

An off-the-plan contract is a promise to build something that does not exist, on terms the developer wrote. The disclosure statement and the draft plan attached to the contract are the specification, and what is not in them is not promised.

The 10-day cooling off

Off-the-plan residential contracts carry a cooling-off period of 10 business days, and the deposit must be held in trust or covered by a deposit bond. The disclosure statement must attach the draft plan, the draft by-laws, any draft strata management statement and the schedule of finishes.

Changes the developer can make

Most contracts allow variation to the plan and to finishes. What matters is the threshold. Look for the clause allowing changes to the lot area, commonly permitted up to 5 per cent, and the clause allowing substitution of finishes with items of equivalent quality, which in practice means the developer decides what is equivalent. If a material particular disclosed changes and you are materially prejudiced, you may have a right to rescind, and you have 14 days after being served the notice of changes to elect to rescind. The 21-day period is a different one — the minimum notice the vendor must give you before completion.

Defects

Statutory warranties under Part 2C of the Home Building Act 1989 (NSW) run for six years for a major defect and two years otherwise, from completion of the work. For a residential or mixed-use strata building of four or more storeys, the developer must also lodge a building bond of 2 per cent of the contract price under Part 11 of the Strata Schemes Management Act 2015 (NSW). Buildings of three storeys or fewer are covered by home building compensation cover instead. Whether the bond was lodged is a matter of record.

Finance

A valuation done at settlement, two years after exchange, in a flat market, can come in below the price you agreed. The contract is not conditional on finance, so you must still complete.