Off-the-plan Contracts – New is Not Always Better


Due to the exponential growth of the Newcastle population, many buyers are deciding to purchase “off-the-plan” in order to break into the property market. However, there are often many risks associated with purchasing off-the-plan that buyers need to be aware of before making such a decision.

Newcastle is one of the fastest growing cities in Australia. With this growth comes a range of new property developments that are enticing people to break into the Newcastle property market. As at the date of this article, Newcastle is host to many off-the-plan developments, including:

  1. Sovereign Park;
  2. The Store;
  3. Dairy Farmers Towers;
  4. East End; and
  5. One Apartments.

So, what exactly does off-the-plan mean?

Off-the-plan Contracts

When you buy off-the-plan, you are purchasing a property that does not yet exist. You purchase the property based on the plan of subdivision, the architectural drawings, and the specifications in relation to fixtures, fittings and finishes.


Although the common saying goes: “new is always better”, this is not always the case when buying off-the-plan. There are often many risks associated with such purchases in comparison to buying an existing property, such as:

  1. Modifications to plans and materials – With off-the-plan contracts, plans can change. During development, modifications can be made to the property you are purchasing, and you can be left with something different to what you originally envisaged. Normally, you are only entitled to terminate the contract if such changes are “material”, and you would not have entered into the contract if you were aware of such material changes at the time of exchange.
  2. A fall in the property price – Another risk with buying off-the-plan is that the property price may fall while the property is being built, or the valuation a financier provides at the time of settlement may be less than expected or advised at the time contracts were exchanged. Given this risk, it is always prudent for purchasers who are taking out a mortgage to have contingency finance in place, so that if a finance valuation does return short, the purchaser can still complete the contract.
  3. Major defects – Unfortunately, it is a common occurrence that off-the-plan properties are built with defects. Generally, the vendor will be liable to rectify major defects for a period of six years after completion or the date the defect becomes apparent. However, owners commonly lose recovery rights by failing to take required actions within the stipulated time periods under their contracts. Unsurprisingly, defects can be significant and expensive – as was evident from the Opal Towers development in Sydney Olympic Park that finished in 2018.
  4. Large periods of time between exchange and settlement – Off-the-plan developments may take several years to be completed. There are many stages involved in completing construction, and settlement is usually scheduled shortly after a final occupation certificate is issued or when all plans, by-laws or other necessary land dealings have been registered with the NSW Land Registry Services. However, this usually does not happen until many years after purchasing. Additionally, such contracts commonly contain what is known as a “sunset clause”, allowing the vendor to extend the date for settlement if plans are not registered by a certain date. As such, you may exchange contracts to buy a property in 2023, but not settle until 2027.

Although there are certain risks associated with off-the-plan contracts, there are also benefits. These include:

  1. A longer cooling-off period – Generally, purchasers of residential property in NSW are entitled to a 5-business day cooling-off period after exchange of contracts, during which, they can terminate the contract and only forfeit 0.25% of the purchase price of the property. However, when buying residential property off-the-plan, purchasers are granted additional protection with a 10 business-day cooling-off period after exchange of contracts.
  2. Additional time for saving – At the time of exchange, purchasers are normally required to pay a 10% deposit and the balance of the purchase price at settlement. As there is usually an extended period of time between the date of exchange and settlement, purchasers will be able to save additional amounts before they are required to start paying off their home loan (depending on when funds are advanced).
  3. You benefit from a brand-new property – You may even have the opportunity to negotiate changes to the interior style of the property.

Purchasers should always obtain legal advice prior to entering into an off-the-plan contract. This will ensure they fully comprehend their rights under such contracts and understand the risks accordingly. SWS is experienced with such contracts and has advised many purchasers with their decision to purchase off-the-plan.


This article was co-written by Lawyer, Jack Harman.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.  Please contact us if you require advice on matters covered by this article.