" Off the Plan " Sales !

The ever increasing prices of Australian housing have made buying "Off the Plan " popular in this country, but in many cases the final outcome is not what the buyer expected.  The concept involved is quite clear.  A developer offers a proposed plan to construct an apartment building on a site that appeals to prospective buyers.  Glossy architectural drawings and illustrations extol the layout of apartments and the view that will be delivered and the buyer puts down a deposit and signs a contract of purchase before the first sod is turned.

In many cases, all this is before the relevant council has signed off on final approval for the plans and council by-laws may dictate change.  Building heights may become higher or lower and the entire aspect of the building changed to fit in with council rules and regulations.  It may even take a zoning change to allow construction to proceed - and in many cases the expected completion date may be extended by months - or even years.

In some cases, the chosen apartment may be vastly changed from the concept on which a deposit was paid.   It may contain less rooms or even move to another facing of the building, and in some cases the builder may opt not to continue with the deal and simply refund the deposit and call the deal off.  In that case, the buyer has lost the opportunity to live in that chosen suburb and position, and the deposit money has been unproductive while it has been waiting in limbo.

The amazing surge in Sydney unit pricing may have induced some developers to deliberately opt out of these "Off the Plan " contracts.  Ever rising prices mean that an apartment sold at a fixed price before construction can be resold at a much higher price when the building is eventually completed.  The loser is the customer who has patiently waited for his or her dream home to finally emerge, only to find the sale is off and the deposit returned.

Now the state government is tightening the Conveyancing Act of 1919.  No longer will the developer be able to cancel an Off the Plan contract without the explicit approval of the buyer.  The legislation is still being drafted and hopefully it may outlaw this form of sale until the plans for the building have actually been approved.  In some cases, the concept plans are way outside the present zoning for the area concerned and the height and floor ratios do not meet the relevant guidelines.  In such cases, it is unlikely that the concept plan will ever fully proceed and hence the offer of units off that plan is not realistic.

Many such developments are based on "an expectation of a rule change ", but that is not a valid reason for accepting a deposit and entering into a binding contract.  It is also hoped that these "binding contracts " will have teeth.   In cases where changes to the building cause a three bedroom apartment to shrink to two bedrooms and the floor ratio to contract sharply, what is being delivered bears no relation to the concept on which a deposit was paid.

Off the Plan must deliver certainty to both parties.  It is not a viable excuse that planning laws caused changes to building plans - if those laws were in force when the concept plan was offered to the public.  We have an ideal opportunity to clean up this "Off the Plan " style of selling to ensure that what is offered has a realistic hope of becoming the eventual outcome !