Planning to get into property investing? You may already be aware of one popular real estate investment strategy - off the plan properties. Buying off the plan means purchasing property that is yet to be built. Along with many investment benefits of off the plan, there are also financial and contractual risks involved – especially in situations where you don’t have a comprehensive agreement in place that protects you from significant drawbacks that can occur.
However, in 2018 the Australian Government approved new conveyancing laws to protect off the plan buyers from certain shortcomings of some developers. Today we explore what the changes entail and how they protect property investors and off the plan buyers.
Successfully passed by Parliament on November 13, 2018, the law will now provide stronger protection for off the plan property buyers. How? By providing security in the form of mandatory disclosures, notification of changes, registered documents, sunset clauses, and cooling off periods.
Through the mandatory disclosure regime, developers are required to disclose vital information about the property development to the purchaser. Sunset dates, proposed plans of the property prepared by a registered surveyor, proposed by-laws, and schedule of finishes should be appropriately disclosed before contract signing.
The new legislation requires developers to notify buyers of any changes made during the development. These are “material particular” - changes that can have adverse effects on the use of the lot being sold. A “material particular” includes a change to (1) the draft plan of subdivision (2) a provision of draft by-laws –if the property is to be strata titled (3) easement or covenants to be registered with the plan of subdivision (4) the schedule of finishes.
Buyers will have the ability to terminate the contract or claim compensation when they are materially impacted to changes made from what was disclosed.
Developers are now required to provide the buyer with a copy of the final registered plans and notice of changes at least 21 days before settlement.
Sunset clauses allow either party to terminate the contract in certain events, such as the plan not being registered by a specific date. The Supreme Court will be able to award damages wherein the developer terminates under a sunset clause.
There have been cases in the past wherein buyers lose out to developers through the contract being rescinded: the buyer’s deposit gets refunded, and the developer sells the project for a higher price to someone else, leaving the original buyer with no property and no financial benefit.
The current legislation builds on laws that prevent developers from using sunset clauses to end contracts with the Supreme Court’s order.
The cooling-off period has been extended to 10 business days. The extra 5 business days will aid the buyer to obtain finance approval from their bank and have more time to discuss the contract with their lawyer.
The new conveyancing laws ensure off the plan buyers are protected and that both parties remain transparent and fair throughout the whole process. We also recommend you to seek legal advice before entering into any contractual agreements as each contract vastly differs from one another.
Buying off the plan properties is a great way to lock in a lower price for a brand new property. When you buy off the plan, you’re able to secure the purchase at below market value. And if the property market grows in value, your property increases in value too. This strategy is very beneficial as capital growth allows you to buy another property and continue to build your property portfolio.
A9 Property is a team of property specialists helping first time homebuyers and property investors on their journey into the real estate market. Our weekly real estate blog touches on industry trends, market shifts and investment strategy, providing you with valuable insight on your property purchase journey. We are experts who specialise in off the plan properties – a popular investment strategy in Brisbane and Australia. Check out our carefully selected portfolio of off-market properties for sale or contact us for an obligation-free chat to discuss the best strategy to start building your portfolio.