Buying a property “off the plan” can be an appealing option—especially for first-home buyers and investors seeking access to brand-new apartments, townhouses, or house-and-land packages. However, while purchasing before construction is complete can offer benefits such as locked-in pricing and potential stamp duty concessions, it also carries specific legal and financial risks. Below are some of the key risks you should be aware of before signing a contract.
1. Changes to the Finished Product
One of the most common risks when buying off the plan is that the completed property may not exactly match what was originally promised. The developer may alter layouts, finishes, or common areas—sometimes within their rights under the contract.
A carefully reviewed contract should include detailed specifications, approved plans, and clear rights of termination or compensation if material changes are made.
2. Construction Delays and Sunset Clauses
Delays in construction are not unusual and can have knock-on effects if you are planning to move in or settle on a specific date. Off-the-plan contracts often include sunset clauses, which allow the developer to rescind the contract if the project is not completed by a certain date.
It is crucial to understand how these clauses work and whether they favour the developer. In some cases, sunset clauses can be misused to cancel contracts and resell properties at higher prices in a rising market.
3. Market Fluctuations and Property Value Risk
By the time the development is complete, the market may have changed significantly. If property values fall, the final valuation may be lower than the original purchase price—potentially leaving you unable to secure the finance you had planned for.
Legal advice prior to signing can help you understand how to structure the contract to protect your interests if valuations shift.
4. Financing Challenges
Most lenders will not approve unconditional finance for off-the-plan purchases until construction is near completion. This means buyers often sign contracts without a formal loan approval in place, exposing them to risk if lending criteria change before settlement.
We can help review contract terms to ensure you are not committing to a purchase that you may not be able to fund.
5. Developer Solvency and Project Viability
If the developer becomes insolvent or the project is cancelled, your deposit may be at risk—even if the developer has placed it in a trust account.
Before committing to an off-the-plan purchase, it is essential to conduct due diligence on the developer’s track record, financial stability, and project approval status.
Final Thoughts
Off-the-plan purchases can be a strategic way to secure a new property, but they come with a unique set of legal and financial risks. These risks are often buried in the fine print of the contract and not easily understood without expert advice.
Our experienced property lawyers can review your off-the-plan contract, explain your rights and obligations, and help you avoid costly surprises at settlement. Contact our team today if you are looking for practical legal advice before committing to an off-the-plan property purchase.
