Buying a property of the plan means that a buyer enters into a contract either, prior to the building being out of the construction phase or prior to the title to the lot being created. This method of purchase allows a buyer to potentially have input into the design of the home and also to potentially save money on the purchase price. However, risks of purchasing off the plan include the inability to see the final result until the property has already been purchased and unexpected delays arising during the building process.

When buying and selling property off the plan in a CTS, there are several things purchasers and vendors should be aware of.

  1. Deposits

    Sellers may require buyers to pay a deposit of up to 1/5th of the purchase price without running the risk of the deposit being a penalty or deeming the contract an instalment contract. As is common practice, deposits are held in either a solicitor’s or real estate agent’s trust account. If the parties are in dispute, the deposit holder may release the deposit, provided prior notice of their intention to pay is given to the buyer or seller. Importantly, developers cannot pay expression of interest monies into their own bank accounts. These funds must be paid into a trust account.

  2. Bank guarantees

    As security for a deposit payment, a bank guarantee may be given. A solicitor or real estate agent must keep the bank guarantee under the terms of the contract, or as required by law. If the bank guarantee is called upon, it must be treated by the holder in the same manner as if it were trust money, and the proceeds must be deposited into a trust account.

  3. Sunset dates

    The buyer and seller under a contract for the sale of a lot in a CTS may agree between themselves as to timeframes for when the seller must give the buyer a registrable transfer. The only restriction is that the agreed timeframe does not exceed 5.5 years after the contract date. This has been extended from 3.5 years.
    However, if there is no sunset date within the contract then there is a prescribed sunset date which remains as 3.5 years from the contract date. The buyer has the right to terminate the contract if the registrable transfer is not supplied by the seller on or before this date.

  4. Disclosure Statement

    A buyer of a proposed lot in a CTS must be provided with a disclosure statement and plan prior to signing the contract. These plans must be provided by a cadastral surveyor; architectural plans will no longer satisfy this requirement. Any changes to the disclosure plans must be prepared in the same way. Notice of the changes must be provided at least 21 days prior to settlement and must be clearly able to be understood by the buyer.If a buyer is “materially prejudiced” by the changes, they have the right to terminate the contract by giving written notice to the seller within 21 days. There is an onus on the buyer to prove that they have been “materially prejudiced” by the buyer.
    In the event there are operational works for standard format lots, additional detail is required to be provided to the buyer.

How we can help

If you would like to know more about how we can help you navigate through an OTP purchase or sale, you can contact our office today on (07) 3036 0649.

This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this update to specific issues or transactions. For more information or specific advice on your circumstances please contact tracey@robinsonnielsen.com.au.