It’s easy to be seduced by glossy sales brochures when you’re viewing an off-the-plan display suite. However, in the cold light of day, you might reconsider your purchase and decide to pull out of your contract.
Luckily, in Victoria, you’re entitled to a three-day cooling-off period during which you can terminate the sales contract without losing your deposit (less $100 or 0.2% of the purchase price – whichever is greater).
But what happens if you want to walk away from the purchase after the cooling-off period has expired? After all, off-the-plan developments can take years to complete – so there might be a long wait until settlement. And a lot can change during this time, such as your finances or market conditions.
What are the grounds to terminate?
Contracts are legally binding agreements. So once you‘ve signed on the dotted line, there are limited grounds on which you can terminate the contract. These include:
- Misleading or deceptive conduct on the part of the seller or their agents
- Failure to comply with the Sale of Land Act 1962 and Domestic Building Contract Act 1995
- Changes or variations to the building or disclosure statements
- Construction not being completed before the sunset date expires
You may also end the contract if you include a ‘subject to finance’ clause and your loan application is rejected. However, this applies only if you:
- Immediately apply for a home loan
- Do everything reasonably required to gain approval for the mortgage
- Serve written notice to the vendor within two business days after your rejection
- Are not in default under any other condition of the contract when the notice is given
What counts as misleading and deceptive conduct?
Under Australian Consumer Law, you are entitled to a full refund of your deposit if the seller or its agents make false or misleading representations during the sales process or pre-contractual negotiations.
For example, if a sales agent promises you unrestricted views from a penthouse apartment but the developer is, in fact, planning on building another development that will subsequently block those views (as in this case) – that’s clearly misleading and deceptive conduct.
That said, misleading and deceptive behaviour can be hard to prove without descending into a ‘he said, she said’ argument.
What happens if the property is different from what you were promised?
Developers usually reserve the right to change the apartment or building’s plans or specifications, so you might not end up with a property you were expecting to buy.
This doesn’t mean you can cancel the contract without consequences, though. That’s because your right to do this under the Sale of Land Act hinges on how significantly different the finished property is from what you agreed to purchase.
What happens if there are construction delays?
Most off-the-plan contracts contain ‘sunset clauses’ to protect the buyer and the vendor if construction overruns. A sunset clause sets a deadline on how long the contract of sale is valid, allowing either party to walk away when it expires.
In the past, unscrupulous developers used this clause to their advantage. They purposefully delayed the project so they could cancel the contract without consequences, before reselling the property for a higher price. However, under amendments made to the Sale of Land Act in 2019, developers now need the permission of buyers, or the Supreme Court of Victoria, to exercise the sunset clause.
Rhiannon Leonard is an off the plan conveyancing lawyer at Off the Plan Conveyancer.
Buying an off-the-plan property? Protect your interests by having an expert off-the-plan conveyancer review your contract before you sign. Call Off the Plan Conveyancer on 03 9070 9810.