" Off the Plan " Boondoggle !

When unit prices were rising on an almost weekly basis the best way for price relief seemed to be to buy into a new building under construction on an " off the plan " basis.  It offered price certainty and there was the expectation of a completion date when the contract was signed.

As many people discovered,  the building that finally emerged often had little relation to the plan and illustration contained in the promotional brochures.  More floors may have been added and the unit plans changed to delete a bedroom or face the view in an entirely different direction, and often the quality would not meet the specifications advertised.

The developer was quite happy to cancel the sale and return the deposit.  The rising price of units meant that they could be put back on the market at a higher price and the loser was the patient buyer, deprived of the home that was within their financial reach when they were thrust back into the ever rising price bubble.  In contrast, the developer achieved a profit boost.The state government stepped in to end this boondoggle.  In 2015 it passed legislation to stop developers cancelling contracts to take advantage of upward price movements.  It's aim was to prevent developers creating false or misleading work delays to take the completion date beyond the rescission clause contained in off the plan contracts.

Now a case is before the courts and permission is sought to rescind the sales contracts of twelve buyers in a sixteen unit block in a fashionable suburb.  The developer contends that after the construction started the builder went into liquidation and he was unable to find a suitable replacement or raise any more finance.   The court heard that one purchaser was told the apartments may shrink from sixty five square metres to forty five square metres and each have a smaller balcony..  Others were offered their deposit back because the building had become " unviable ".

Those off the plan buyers saw it differently.   They contend they were not only kept uninformed about the situation they were deliberately misinformed. and this was intended to cause uncertainty in the hope that they might choose to rescind their contracts voluntarily.   The site has since been sold and the new owner is described as a " commercial pirate " who decided that he wants more money and embarked on a " bizarre and extraordinary "  series of correspondence to those holding contracts.

This is fast becoming a totally untenable situation.  If the court favours the buyers it seems unlikely that the finished apartments will bear much resemblance to the plan on which the buying decisions were made.  This could easily descend into endless litigation to try and force an unwilling builder to either compensate or lower the price charged to be more in accordance with what was delivered.

It is clear that the government needs to go back to the drawing board and design new legislation to keep " off the plan " contracts on track - and on time.  The easing of home and unit prices now taking place is unlikely to eliminate this scare and delay tactic to extract additional profit by artificially delaying new building completion.  These contracts need to be legally enforceable !