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If you’re buying an off-the-plan house and land package or a unit or townhouse in a new development, this information will help you understand the contracts and building process associated with your new property.

What is buying off the plan?

Buying off-the-plan means buying a house or unit development that includes the cost of the land or unit title and the cost of building your home. Real estate agents and developers deliver these ready-made products to buyers at a fixed price.

If you are buying a house and land package or an ‘off-the-plan’ apartment or townhouse, certain aspects of the work will be fixed due to the nature of the package. This includes:

  • building work
  • inclusions
  • design
  • layout and
  • contract provisions

The landowner may have already engaged a builder, had the project approved, and will not make further changes for you. Some developers provide greater flexibility to customise the house or unit in some ways. Additional costs may be associated with any changes.

Before you start

Know your limits

Purchasing off the plan is often a fixed price, however if you can make changes to your building and inclusions, it is important to know your budget and stick to it. Picking out your appliances, benchtops, flooring, and other fixtures is fun. Remember that the higher the quality, the higher the cost, so keep this in mind. Consider having some extra funds set aside in case of unforeseen circumstances that result in additional costs. Depending on your contract, you may be required to pay progress payments in addition to your deposit. Make sure you pay these when they are due. If you are financing your project through a lender, understand what their requirements are as part of releasing funds for any progress payments that may need to be made under your contract.

Read and understand your contract

Read the contract and make sure you fully understand all the clauses and know your obligations well as your rights.

Get independent legal advice if there are clauses and terms in the contract that you are uncertain about or if you would like to add or change anything in the contract.

Know what's important to you

The contract should attach your building plans and inclusions. If your builder/developer is flexible in the sales contract, you should seek to specify your inclusions, even if they are only small items, so they can’t be changed without your agreement. As an example, this could include:

  • Higher quality tapware.
  • Needing a particular paint or paint colour to be used.

Not specifying means the contract may allow the developer/builder to change room dimensions or substitute products that are not acceptable to you.

Communication is key. The developer/builder won’t know your wants or needs unless you tell them. It’s also best to identify and decide on these items prior to signing a contract. That way you may be able to avoid extra cost to change your contract while the building is being built.

Ask about proposed completion dates

Buying off-the-plan means you often have to wait some time for your new property to be ready. Make sure this fits in with your plans. Building may only start once enough of the units or house and land packages have been sold. You may wait months, or even years, before the project is completed and you can move in.

The proposed completion date isn’t set in stone and may change multiple times.

Look at their work

Check out similar past work and recent developments by the builder or developer to determine the quality of work.

Do your research

You might consider looking into the history and structure of the developer or builder, such as

  • undertaking company searches
  • checking the disciplinary register to see whether compliance action has been taken against the builder or directors.

Get as much information as possible.

Get legal advice

If there are clauses and terms in the contract that you are not certain about, you should seek independent legal advice to help understand your rights and responsibilities under the proposed contract.

What type of contract is used

A contract is a binding document between you as the prospective homeowner and the seller. It includes a start and completion date and specifications for the building project. Ensure you fully understand all the clauses in the contract before you sign it.

The contract type and provisions you can change will depend on the building project. Your builder or developer may use a standard sale or building contract from an industry association or have a lawyer draft one. You should seek legal advice about the clauses of the contract and amend clauses or include additional clauses to protect yourself if required.

What is a disclosure statement?

When buying a unit off-the-plan, you will receive a Disclosure Statement from the seller. This outlines lots of information about the building, its construction and how it will be managed once completed. Since J1 July 2021 disclosure statements are compulsory for all new contracts when buying off the plan. The statement will include:

  • Proposed plans for the development and the unit.
  • Information and statements about the building, construction and ongoing management of the development.
  • Details of any proposed uses within the building, for example:
    • gyms
    • café
    • pubs
  • Information about owners corporation fees, contracts and rules that will apply.
  • Information and progress of Development Approval applications and registration of the unit plan.

The seller must also update buyers throughout the development and construction process of any significant changes to the building or how it will be managed. For example, this could include matters such as plan variations, floor area or unit entitlements, and changes to uses, rules or proposed levies.

Disclosure Statements improve rights for a buyer to rescind their contract if a developer alters the building or its management and has not disclosed to the buyer or they do not agree to the changes. Make sure you understand your obligations about rescinding the contract.

Maintenance and warranties

Statutory Warranties

Under ACT law, residential building work over the value of $12,000 carries statutory warranties. The Building Act 2004 defines provisions in relation to warranties, which include that work must be or will be carried out in accordance with the Building Act and in a proper and skillful way and in accordance with the approved plans.

There are different warranty periods for structural and non-structural elements of the building. Statutory warranties apply to the residence. They do not apply to items such as paving, fences, retaining walls, outdoor swimming pools, ponds, and antennas. Some residential buildings three storeys or less (excluding any storey used exclusively for parking) will also be covered by residential building insurance requirements in the Building Act.

For more information about statutory warranties.

Maintenance period

Many off-the-plan contracts provide for a maintenance or defect liability period from the time of completion. This is the period in which the buyer can raise with the builder any maintenance or defect issues that are identified after completion, for example, water leaks, issues with fixtures and fittings and problems with finishes such as paint, tiles, carpet, etc. The maintenance period will be specified in your contract and is often anywhere between 90 and 120 days after settlement. However, you can raise maintenance and defect issues with the seller at any time, not just during your contract's maintenance period. These periods do not limit your statutory warranties.

While statutory warranties protect you, you should ensure regular maintenance and servicing of the building to keep it well-maintained. For example, owners should:

  • undertake regular servicing of plant equipment such as heating and cooling systems
  • carry out work to clean roofs, gutters and downpipes
  • have regular inspections of swimming pools and lifts.

Some warranties may not apply if items have not been properly maintained.

Maintenance plan

Sellers must provide maintenance and warranty information for new unit developments as part of the maintenance plan.

Find out more information on the Managing Buildings Better reform.

Complaints and disputes

If you identify any building issues, bring this to the attention of the seller immediately as they should be afforded the right to examine and fix the problem in a timely manner.

If you cannot resolve the issue, you should seek independent legal advice about your rights under the contract. You can also seek information and advice from Fair Trading at Access Canberra (phone 13 22 81) to help you understand your rights under the Australian Consumer Law. It is important to keep records of complaints and responses from the seller/developer/builder, as this may be required later should the issues not be resolved.

Read more information about dispute management.

Common terms explained

Rates and taxes

At settlement, all outgoings, such as rates and other charges, will be adjusted between you and the seller. The seller is responsible for rates up until and including the settlement day. You are liable for these charges from the day after settlement.

Seller

Also sometimes referred to as the vendor, the seller is the party selling the property and will generally be the developer or builder in an off-the-plan purchase.

Settlement

This is when you make your final payments and become the official owner of the property.

Stamp duty

Also sometimes referred to as conveyance duty, stamp duty is a government tax calculated on the transaction's value at the date of the contract of sale. Some stamp duty exemptions or concessions may apply.

Pre-Settlement inspection

You are entitled to inspect and check the house or unit at any reasonable time if you stipulated in the contract that the sale was subject to a pre-settlement inspection. This may not be possible for an off-the-plan purchase. If you would like to bring other people to the inspection, get an agreement to this in the contract.

Unit Title

Commonly, unit title properties in the ACT are residential flats, units, apartments or townhouses. Some retirement villages, office buildings and commercial properties are unit title properties. Unit-titled properties have common property (shared space) for the use and enjoyment of owners.

Variations

This is the term used when your contract or disclosure statement changes. It is important to understand what variations are allowed under the contract and your rights if a variation impacts the property's suitability.