Off the Plan (“OTP”) contracts for the sale of property have advantages for both the vendors and the purchasers. Builders and developers can secure some financing for their project, purchasers can secure a new property at a price that will not change despite the long period between exchange and settlement (sometimes years).
Requirements
An OTP contract supplied to a prospective purchaser of a property must be in the correct format and contain several prescribed documents, including a disclosure statement. An OTP contract must include a draft plan that identifies the lot being purchased, the area of the lot as well as the floor plan and the location within the development.
Parking and storage areas that form part of the lot purchased do not need to be disclosed in a draft plan. Disclosure is only required when the plan is registered.
A prospective purchaser may rescind the contract if the disclosure statement or other prescribed documents are not attached to the contract.
Changes can happen during the building process of an OTP property. Material changes will adversely affect the use and enjoyment of the land. A purchaser must be informed of these changes. However, not all changes are material.
A purchaser may be able to rescind the contract if they make a material change to property Recent changes to regulations [1] permit purchasers to claim compensation for material changes instead of rescinding the contract. If the purchaser and the vendor cannot agree on compensation they can enter binding arbitration. The decision of the arbitrator will be final and the purchaser will no longer be able to rescind the contract.
Sunset Clauses
OTP contracts contain sunset clauses. They are a key clause that provides a timeframe for the Sunset event to occur. Additionally, there may also be a further clause that allows this sunset date to be extended.
Examples of sunset events in an OTP contract include registration of the plan, or the issue of certificate of occupancy. Sunset clauses allow either the purchaser or the vendor to rescind the contract if the Sunset event has not occurred by a nominated date [2].
The quality and safety of a newly built home is paramount to the new owners.
Recent Changes
Recent legislation concerning the building industry has become law in NSW [3]. A new authority, Building Commission NSW has assumed responsibility for areas related to building, including inspections, licensing, and complaints.
No warning inspections can occur which may result in rectification or stop work orders being issued.
Changes have also been made to protect purchasers against defective buildings. A new insurance product (Decennial Liability Insurance) aims to protect property owners. Developers will insure the common property of the building to protect from rectification costs, up to the contract cost of the building for a period of 10 years.
Antunes Lawyers can assist you with property matters, including Off The Plan contracts with our experienced and knowledgeable team.
Antunes Lawyers can assist you with any of your property matters, get in touch with our expert team on 02 9964 0499 or use the contact form below.
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