There’s something to be said about buying something that’s brand new – and buying your home off-the-plan can be a prime example of this.
Buying off-the-plan means buying a property that hasn’t yet been built. You pay a deposit, and the remaining balance once the development is finished.
But it can be a complex process – and having the advice of a specialist legal firm in NSW, like CM Law, can help you navigate the pitfalls and end up with an investment or the home of your dreams.
Changes in NSW laws for off-the-plan properties
Recently the NSW Government made a series of changes to the legislation, Conveyancing Legislation (Amendment) Act 2018 and Conveyancing (Sale of Land) Amendment Regulation 2019.
These new laws are designed to provide you with greater transparency and protections when you buy off-the-plan.
Here’s a general round-up of the new laws.
1. Sellers must disclose key details about the property
When you’re preparing to buy a property off-the-plan, the developer or selling agent must provide you with a Disclosure Statement along with the sale contract. The Disclosure Statement is a form that they need to complete that sets out key information, like sunset dates, whether development approval has been obtained, and whether you as the purchaser have to pay anything additional if you don’t complete on time. It must also include draft documents like a plan, proposed schedule of finishes, draft strata by-laws, and a draft building management statement.
As a purchase, you can rescind (or cancel) the contract within 14 days of exchanging if any of the required documents are not attached to the off-the-plan contract before it’s signed.
2. Sellers must notify you of any ‘material’ changes and advise you about your options
There are times when a property you’re buying on spec ends up being different to what was agreed.
Under the NSW Government changes, the vendor must let you know about the material differences – these are changes that will affect your use of enjoyment of the property. These might include reducing your property from a two-bedroom to a one-bedroom, for example.
In some situations, you might be able to withdraw from the contract and get your deposit back – or finalise the purchase but get money back.
They also need to give you a copy of the plan that’s been registered 21 days or more before you settle.
3. 10 days for ‘cooling off’ period
This was originally 5 days but was doubled to make it easier for buyers. So for off-the-plan purchases, you can pull out of the agreement during the first 10 days after signing the contract. The cooling-off period can be varied or removed in certain circumstances – speak to your lawyer.
4. Deposits must be held in a trust or other controlled account
In other words, your deposit can’t be released to the seller before the purchase has been settled. This protects you in case the vendor becomes insolvent.
Looking for a better way to sell or buy a property? CM Lawyer’s are Investors Choice Winner for Best Conveyancer in NSW.
5. Sunset clause protections
A sunset clause is the time limit on an off-the-plan property contract, allowing you or the developer to walk away if settlement had not taken place by the agreed date. However, this was often misused, and often to the buyer’s detriment. Now, the developer must gain your consent before ending the contract – otherwise they’re required to go to the Supreme Court.
Buying your first home?
The NSW Government has also introduced a package to help first home buyers. This includes:
• abolition of stamp duty on all homes up to $650,000
• stamp duty relief for homes up to $800,000
• a $10,000 grant for builders of new homes up to $750,000 and purchasers of new homes up to $600,000
• abolition of insurance duty on lenders’ mortgage insurance.
Other key information
Keep in mind that if you’re buying the home as your main residence, you can defer your stamp duty for up to 12 months after you sign the agreement, or until the property is completed or handed over – whichever comes first. This gives you time to save money before the balance and taxes are due.
If it is an investment, there may be tax depreciation benefits – this means you might be able to claim tax deductions on whatever expenses you incur.
Is now the right time to buy your dream home, off-the-plan?
Off-the-plan properties are currently eligible for HomeBuilder, one of the measures in the Australian Government’s COVID-19 stimulus package. HomeBuilder offers a grant of $25,000 as a tax-free grant to people looking to build a new home or substantially renovate an existing one. There are some provisos, however. Here’s a brief summary.
• This can’t be an investment property – you must be living in the residence as an owner-occupier
• Contracts must be signed between 4 June 2002 and 31 December 2020
• Construction must start within three months of signing the contract.
This last one is tricky when you’re talking about buying a property off-the-plan as it’s difficult to control the timing for a development that’s being managed by others. So make sure you’re sure about the timing to avoid missing out on the grant.
There are other requirements – you must be an Australian citizen over 18, plus there are caps on your income as well as the value of your home/land.
The NSW Government is working to put HomeBuilder in place for local residents. Read more about HomeBuilder.
As you can see, the rules are extensive and complicated. Make things easier on yourself by engaging CM Law to give you solid advice for the home you desire.