Buying a Unit Off the Plan –the Contract – Part 2

Buying a Unit Off the Plan –the Contract – Part 2

Our previous article assisted in familiarising you with some of the salient points and considerations with off the plan contracts. We will further outline other important aspects for you to be aware of and to bring to your lawyer’s attention.  Andrew Pine solicitor can advise you on your off the plan contract, including outlining its salient points so you have the peace of mind in knowing that you are signing a document that is not unfairly prejudicing your rights.


Seller may terminate 

So you have paid your deposit. You may have to wait up to five and a half years until your unit is yours (more on that later). The Contract is either not conditional on finance, or you will be required to confirm your finance shortly, locking you in. As you are obliged to fulfil your obligations under the Contract, surely the Seller should be obliged to perform theirs, right? Wrong. An off the plan contract often has a clause allowing the seller to ‘pull the pin’ and terminate for a plethora of reasons. Common ‘get out of jail free clauses’ are where the developer does not receive adequate approval from Council to build the building, they do not sell enough units to make the development profitable enough for them, or they may even be able to terminate your contract for no reason whatsoever.

There are arguments as to whether such clauses are legally binding, but the point remains that developers have the practical advantage of being able to merely refund your deposit, apologise that they held it for up to five and a half years while you were not able to utilise it and require you to walk away while they move on to their next project because it is more profitable for them.

As alluded to above, it is arguable whether some clauses are legally binding, especially ones giving the Seller a wide discretion to terminate. Recent developments in New South Wales especially require the developer to show good faith in attempting to progress the development rather than them terminating due to a change of heart. It is worth noting that New South Wales law does not directly apply to Queensland, but may be looked to when deciding how our laws are to be interpreted.

Andrew Pine solicitor is experienced in advising buyers on a Seller’s ability to terminate. If you require advice on this matter, Andrew Pine lawyer can be contacted on the details at the bottom of this article.


Seller not necessarily the owner of the land

The Seller is selling you a unit on a plan. Surely it currently owns the land underneath where the unit will be built? Not necessarily. It is common for Seller’s to not yet own the land they are building on when you sign your contract to buy a unit. It is therefore worth asking your solicitor how the seller’s lack of ownership of the land will affect you. Usually there will be little or no impact on you, but it is best to have the contract reviewed by your solicitor to pre-empt any problems which may arise. Andrew Pine lawyer can advise you on how this ownership structure impacts on how your contract will function.


Material prejudice

So you have bought a unit of a particular size, located in a particular place with particular specifications which are specifically spelt out to you in the Disclosure Statement. You have decided on the size and location of your carpark, perhaps even been advised of the view you will receive. Surely you are guaranteed to receive all these promises? Unfortunately not. You are only protected from changes which are materially prejudicial to a buyer with your characteristics. Sounds like a lot of legal jargon doesn’t it! Let’s elaborate.

A Seller is entitled to change anything contained in the Disclosure Statement given to you before you sign the Contract. It may change the colour of the walls, change the size and dimensions of your unit, change the location of your carpark, remove the gym from the common area, in fact the Seller can change just about anything. But if a change is materially prejudicial to you, you have the right to terminate the contract (cancel the contract and walk away with all of your deposit) within 21 days of you being advised of these changes.

So what does ‘materially prejudicial’ mean? Material prejudice is where a change impacts on you in a negative way and this negativity is more than something minor. Changing the location of a power socket for example, is likely to be something minor, preventing you from being able to terminate the contract. Reducing the size of your unit by 10% however, is considered to be materially prejudicial as it impacts you in a negative way and is more than something minor. Material prejudice is a complex and evolving area of the law. It is one of the most common things buyers are unaware of when they enter into off the plan contracts. Andrew Pine solicitor is experienced in advising buyers on materially prejudicial changes to their unit before settlement.

In our next article we will look at what a Sunset Date is, as well as other aspects of an off the plan contract. As noted above, it is recommended that you seek legal advice which is tailored to your individual circumstances. Andrew Pine lawyer can advise you on your off the plan contract and is experienced in a wide range of Queensland off the plan developments.

Disclaimer: Andrew Pine solicitor is a property lawyer practising in Queensland. Andrew is not qualified to give accounting or financial advice. This article is written solely as an opinion of the writer. This article should not be relied upon for legal, accounting or financial advice. You should always seek advice which is tailored to your individual circumstances.

Related reads:

  1. Lessons from Perth Property Market
  2. Buying a First Home in Queensland
  3. Property Buyers Tip Post Contract


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