4 off-the-plan traps to look out for

4 off-the-plan traps to look out for

By Katherine Hawes | 14 March 2016

Buying a property off-the-plan can be a very good investment, so long as you watch out for hidden traps in the contract.

Blogger: Katherine Hawes, founder, Aquarius Lawyers

Quite often the developer will insert certain clauses, which grant them power to rescind the contract of sale.

Here are four reasons why you should invest the time in reading your off-the-plan contract carefully:

1. Sunset clauses


A sunset clause is one of the most common hidden traps in an off-the-plan contract. This clause allows a developer to rescind a contract if they do not complete the construction of the development by a certain date. Developers have been known to use this clause when there has been growth in the property market between the time the buyer signed the contract and the date of completion. The developer is then able to sell the property for a higher price. Recent legal developments mean a developer is required to give the buyer notice of the delay in completion, providing reasons. The buyer must then agree to have the contract terminated. If they do not agree, the developer can take the matter to the Supreme Court and request to have the contract rescinded.

2. Clauses about the floor area of the property

Purchasers should look out for a clause in the contract that permits variation in the size of their property. Generally speaking, these clauses will permit a 5 per cent reduction in the size of the property without any penalty to the vendor. However, it is best to read your contract carefully because there have been situations where developers have intentionally decreased the size of units by 30-40 per cent in order to ensure that the buyer pulls out of the sale. To avoid falling victim to this kind of clause, make sure that you negotiate any term in your contract that allows the developer to reconfigure the property.

3. Clauses about the number of contracts exchanged by a particular date

Some contracts may contain a clause that stipulates that a certain number of contracts for properties in a development must be exchanged by a particular date. If this quota is not met, then the developer has the right to rescind all contracts. Developers may take advantage of this clause by delaying the exchange of some contracts. Thus, if the property market has experienced a boom, the developer can sell for a higher price.

4. Stamp duty

Although it may take two to three years for your property to be completed, you need to pay stamp duty within 15 months of signing the contract of sale or on completion, whichever date comes earlier. If you are late in paying this, you will be charged interest.


About the author

Katherine Hawes

Katherine Hawes

Katherine Hawes is the founder and principle solicitor of Aquarius Lawyers.

With over 20 years’ legal, property and business experience, Katherine’s expertise lies in helping consumers understand the 'legals' in order to make the right decision and also providing access to affordable legal solutions. Lawyer, educator and speaker, Katherine is a director of the World Aquaculture Society (WAS) Asian Pacific Chapter (APC) and also a Tradebusters Connect Top 3 Local Business... Read more

4 off-the-plan traps to look out for
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