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Buying property off-the-plan means purchasing before construction is complete, often when only plans and marketing materials exist. For many buyers, particularly first-time purchasers and investors, the appeal is clear: potential capital growth during construction, ability to secure property in competitive markets, and opportunity to customise finishes. But here's what catches buyers by surprise: the contract you sign today for a property you'll settle in 18-24 months creates risks most buyers don't initially consider.
I work with property buyers navigating off-the-plan purchases where understanding what can change between contract and settlement makes the difference between a successful purchase and finding yourself committed to something quite different from what you expected. The Northern Beaches property market, like much of Sydney, sees significant off-the-plan activity, and I've watched both the opportunities and complications these transactions create.
In this guide, I'll explain how off-the-plan contracts actually work, what protections exist (and their limitations), and what factors determine whether this purchase method suits your situation. Let's look at what you need to know before committing.
Off-the-plan purchases involve buying property before construction completion, with settlement typically 18-24 months after contract. Sunset clauses allow buyers to terminate if completion doesn't occur by the specified date. Developers can only terminate with the buyer's written consent or a court order, providing significant buyer protection under NSW law. Finance approval at contract stage doesn't guarantee settlement finance due to property value and lending criteria changes. Your cooling-off period is 10 business days for off-the-plan purchases (compared to 5 business days for established property), though developers often require cooling-off waiver in exchange for price benefits. and the contract includes clauses about plan variations, defects, and what happens if the development doesn't proceed. Professional contract review identifies which risks your contract protects against and which remain your exposure.
Think through your finance position not just today but in 18-24 months - consider how interest rate changes, your employment situation, or lending criteria shifts might affect your ability to settle. Review carefully what the contract says about plan variations, particularly whether developer can make changes without your consent and how material those changes can be. Understand your sunset clause from both sides - it protects you if the project is delayed, but developers increasingly use sunset clauses to terminate contracts when property values have risen significantly. Consider whether your purchase is conditional on selling existing property, and how the extended settlement timeline affects your position.
The decision to purchase off-the-plan rather than established property typically comes down to several factors.
Market Access and Timing In competitive markets, off-the-plan offers opportunity to secure property in locations where established stock is limited. This is particularly relevant in high-growth areas or where new developments provide housing stock that didn't previously exist. For locations with limited housing availability, such as the Northern Beaches, new developments may be the only way to enter certain markets.
Potential Capital Growth During Construction The prospect of the property increasing in value during the 18-24 month construction period appeals to many buyers. If you purchase at $850,000 and the property is worth $950,000 at settlement, you've gained equity before moving in. However, this works both ways - if property values decline during construction, you're settling on a property potentially worth less than your contract price.
Customisation and New Property Benefits Buying off-the-plan typically allows selection of finishes, colours, and sometimes layout modifications. You're purchasing a brand new property with modern inclusions, no immediate maintenance concerns, and builder's warranty protection. For some buyers, particularly owner-occupiers, these factors outweigh the risks of purchasing something they can't physically inspect.
Understanding the typical timeline helps clarify where risks arise.
Contract Stage (Day 1)You sign the contract and typically pay 10% deposit (though it is possible that this can be negotiated). The contract includes plans, specifications, and various clauses about what happens between now and settlement. Your cooling-off period for off-the-plan purchases is 10 business days (longer than the 5 business days for established property), though many developers require cooling-off waiver in exchange for price benefits.
Construction Period (Months 1-18+)The developer builds according to plans (subject to variations the contract permits). You've got finance pre-approval, but this isn't the same as unconditional approval for settlement. Most contracts require you to obtain formal finance approval closer to completion. During this period, market conditions can shift significantly - property values may rise or fall, interest rates can change, lending criteria might tighten, and your personal circumstances could evolve.
Approaching Completion (Months 15-20)The developer provides updated completion timeline. You need to arrange building and pest inspection (typically limited to defects, not structural issues hidden in walls), organise settlement finance, and prepare for practical completion. This is when buyers discover whether their pre-approval still translates to actual finance approval, and whether the property being delivered matches what they expected.
Settlement (Month 18-24 typically)You settle on the property you contracted to purchase 18-24 months earlier. The property you settle on needs to match the contract specifications (subject to permitted variations), and you take possession. If you can't settle - due to finance issues, changed circumstances, or the property not meeting contract specifications - consequences depend on your contract terms and the reason for non-settlement.
Sunset clauses specify the date by which the development must reach practical completion. If completion doesn't occur by this date, buyers can terminate the contract and receive their deposit back with interest. This provides clear protection against indefinite delays.
Here's the critical NSW protection: under section 66ZL of the Conveyancing Act 1919 (introduced in 2015), developers cannot simply terminate when the sunset date passes. They must either obtain the buyer's written consent OR get a court order.
The process requires developers to give 28 days' written notice explaining why they want to terminate and the reasons for delay. If you don't consent, and they apply to court, you can oppose the application. The court will only grant an order if it's "just and equitable" - and courts scrutinise these applications heavily, considering factors including whether the developer acted in good faith, whether they used best endeavours to complete on time, whether property values increased (making termination unfair to buyers), and the financial impact on purchasers.
Most off-the-plan contracts are unconditional - once your cooling-off period expires, you're committed. You typically obtain finance pre-approval at contract stage, which provides comfort you can borrow the required amount. But pre-approval isn't a guarantee of finance at settlement.
Between contract and settlement, several factors can affect your finance position. Banks re-assess the property value at settlement - if the market has declined, the bank's valuation may come in below your purchase price, reducing their lending. Lending criteria can tighten - requirements around income verification, deposit source, or debt levels that didn't affect your pre-approval might impact settlement finance. Your personal circumstances might change - employment situation, other debts, or even having children can affect borrowing capacity.
If you can't obtain finance at settlement, the contract doesn't automatically terminate. Unless your contract includes a specific finance condition (uncommon in off-the-plan sales), inability to obtain finance isn't a defence. The developer can terminate for your breach, retain your deposit, and potentially claim damages if they re-sell for less than your contract price.
Off-the-plan contracts include clauses allowing developers to make variations to plans. The scope of permitted variations depends on your contract wording. Some contracts restrict variations to minor changes that don't materially affect the property. Others give developers broader discretion to modify plans, materials, or finishes.
Common variations include changes to communal areas, external finishes, lot numbering, and landscaping. Sometimes these variations occur due to DA modifications, construction challenges, or cost management. Under NSW law (effective from December 2019), developers must formally notify you of changes to "material particulars" - changes that would adversely affect your use or enjoyment of the lot.
If you receive formal notice of a material change at least 21 days before settlement, and you can prove the change materially prejudices you and you wouldn't have entered the contract knowing about it, you can either rescind within 14 days or claim compensation (capped at 2% of purchase price). Whether a change actually constitutes "material prejudice" often comes down to contract wording and common law principles - it's not always clear-cut.
The contract defines "practical completion" - the point at which settlement can occur. This doesn't mean the property is perfect; it means construction is substantially complete and the property is suitable for occupation. Minor defects don't prevent practical completion.
You're entitled to building inspection before settlement, but this inspection is limited. You're inspecting for defects and non-compliance with contract specifications. Your statutory warranty rights under Home Building Act protections are important, but they come into play after settlement, not before.
You're committing to settlement at a future date you don't control precisely. If you're selling existing property to fund this purchase, coordinating settlement dates becomes complex. If you need rental income from this property to support your loan, delays in practical completion affect your financial position. If you're an investor purchasing for expected rental return, 6-month delays mean 6 months of loan interest without rental income.
Under NSW disclosure requirements draft by-laws must be included with your contract disclosure statement. This means you should know about by-law restrictions on renovations, pets, or short-term letting before you sign the contract, not after.
However, the actual strata levy amounts aren't determined until the first Annual General Meeting, which occurs within 14 days of strata plan registration (usually before settlement). During marketing, you typically see estimated levies, but these estimates can differ significantly from actual levies once the scheme is operating. The complexity of building design, insurance costs, and maintenance requirements affect actual levies in ways that marketing estimates don't always capture accurately.
Recent NSW reforms aim to improve this - from April 2026, developers of multi-storey schemes must engage independent qualified surveyors to review and certify the initial maintenance plan and first-year budget. Under current law, if the first-year levies are found to be unrealistically low compared to actual costs, the owners corporation can seek compensation via NCAT. But practically, by the time this becomes apparent, you've already settled.
If property values decline during construction, you're settling on property worth less than your purchase price. This affects more than just your equity position. If the bank values the property at $800,000 but you're paying $850,000, you need to find an additional $50,000 plus your original deposit to settle. For buyers who calculated their position based on 90% LVR, this can make settlement unachievable.
While less common, developer insolvency during construction creates significant complications. Your deposit should be held in trust, providing some protection. But if construction stops mid-project, you're dealing with administrators, potential project completion by another developer, extended delays, or contract termination. The outcome depends on project status, whether another developer steps in, and your contract protections.
Off-the-plan purchases offer entry to competitive markets and potential stamp duty savings. But first-time buyers are particularly vulnerable to finance risk - you're relying on pre-approval based on current circumstances with less experience in property purchases. The extended settlement timeline means your life can change significantly before settlement - new job, relationship changes, or unexpected expenses all affect your settlement capacity.
Investors are typically focused on rental return and capital growth. Off-the-plan means 18-24 months of loan interest with no rental income, affecting your cashflow calculations. You're also exposed to market conditions at settlement - if rental yields have compressed or property values declined, your investment case has changed substantially from contract signing.
When you're selling existing property to fund off-the-plan purchase, timing coordination becomes critical. Selling too early means bridging finance or temporary accommodation. Selling too late means scrambling to settle or risking delays. The uncertainty around practical completion date makes this particularly difficult to manage.
Consider a couple who contracted to purchase a two-bedroom apartment off-the-plan in early 2022 for $950,000. They obtained pre-approval based on their combined income, paid their 10% deposit ($95,000), and planned to settle in late 2023.
By mid-2023, several factors had shifted. One partner changed jobs (still employed, but now in probation period). Interest rates had increased substantially. Property values in their area had softened slightly. When they sought formal finance approval for settlement, the bank's valuation came in at $920,000 - $30,000 below purchase price.
The bank would lend 90% of their valuation ($828,000), not their purchase price. The couple needed to find $122,000 plus settlement costs to complete - substantially more than their planned contribution. They hadn't factored this scenario into their planning.
The contract had no finance condition. The developer wasn't obliged to reduce the price to match the valuation. The couple faced a difficult decision: find additional funds somehow, attempt to negotiate with developer (who had no obligation to negotiate), or breach the contract with potential loss of deposit and damages claim.
This scenario isn't unusual. The gap between contract signing and settlement creates exposure to factors buyers can't control or predict with certainty.
This work involves reviewing contracts before you're committed, identifying which risks your contract actually protects against and which remain your exposure. I work with property buyers to understand sunset clause protections (and limitations), assess plan variation provisions, clarify what happens if finance isn't available at settlement, and identify whether the contract terms are standard for the development type or contain unusual risks.
The value isn't just knowing what the contract says - it's understanding how these provisions actually operate when problems arise, recognising which risks are material for your situation versus theoretical, and having worked through the scenarios that seem unlikely until they happen. I also help buyers understand their position if developers seek to terminate under sunset clauses, or when practical completion is approaching and issues arise with finance, valuations, or property condition.
Get advice before signing any off-the-plan contract, particularly if:
Professional guidance is particularly valuable when the contract contains variations from standard terms, when you're uncertain about finance position strength through extended timeline, or when you need to understand practical implications of specific clauses. The time to clarify your position is before you're committed, not when settlement is approaching and issues arise.
I work with property buyers to review off-the-plan contracts before commitment, identifying risks specific to your situation and clarifying what protections actually apply. Whether you're considering an off-the-plan purchase or you've already signed and need to understand your position, let's ensure you know what you're committed to.
You have a cooling-off period (typically 5 business days, though developers often require cooling-off waiver in exchange for price benefits) during which you can terminate by paying 0.25% of purchase price. After cooling-off expires, you're generally committed unless the contract allows termination (sunset clause triggered, developer breaches, or contract includes specific conditions). Changed circumstances or inability to obtain finance aren't automatic termination rights unless your contract specifically includes these conditions.
As the buyer, you can terminate by providing notice and receive your deposit back with interest. However, developers in NSW cannot simply terminate - they need either your written consent or a Supreme Court order under section 66ZL of the Conveyancing Act 1919. The developer must give you 28 days' written notice explaining why they want to terminate and the reasons for delay. If you don't consent, they must apply to court and prove termination is "just and equitable." Courts scrutinise these applications heavily, particularly where property values have increased, making it difficult for developers to terminate contracts for financial gain. While this provides strong buyer protection, it doesn't eliminate all risk - developers can still apply to court, creating uncertainty and potential legal proceedings even if they're unlikely to succeed.
You can't eliminate this risk entirely in an unconditional off-the-plan contract. The property value at settlement might be higher or lower than your purchase price - you're taking on market risk during construction period. This is why understanding your actual equity position at settlement matters, and why having genuine capacity to settle regardless of minor value shifts is important. Some buyers obtain deposit bonds rather than paying cash deposit, preserving liquidity, though this has separate costs.
This creates a finance gap you need to cover. If you contracted to pay $900,000 but the bank values property at $850,000, they'll lend based on their valuation. With 90% LVR, they'll lend $765,000, meaning you need to find $135,000 plus costs rather than the $90,000 you originally planned. The contract doesn't terminate due to valuation shortfall unless it includes a specific finance condition. This is one of the most common complications I see in off-the-plan settlements.
Yes, though understand its limitations. You're inspecting for defects and non-compliance with contract specifications, not conducting full structural assessment like you would for established property. The inspection identifies defects you can raise with developer before settlement, but most buyers settle and pursue any defects through statutory warranty processes afterward. The inspection provides documentation of property condition at settlement, which is valuable if disputes arise later.
