Once an off-the-plan Contract for Sale has exchanged and the 10% deposit has been paid, there are 2 other payments which a purchaser needs to be conscious of.

Stamp Duty

For all property purchases in New South Wales, the purchaser is liable to pay stamp duty. This liability arises when the Contract is signed and exchanged by both parties to the transaction. If you are eligible for the NSW Government’s First Home – New Home Scheme, you may receive a full exemption from stamp duty. If you are not eligible for this exemption, for off-the-plan Contracts stamp duty must be paid within three (3) months from whichever of the following occurs first:

  • at completion/settlement of the property;
  • assignment of the whole of any part of the purchaser’s interest under the Contract; or
  • 12 months from date that the Contract for Sale is executed.

Your Mortgage

Generally, off-the-plan Contracts are not subject to finance. This means that loan approval prior to exchanging Contracts is vital if you do not have sufficient funds to personally finance the purchase of your property. When purchasing off-the-plan properties, in particular, for a first home buyer, it can be very difficult to obtain full finance approval from a bank. This is simply because banks need to do a valuation before they can provide financial approval, and if a property has not been built, they cannot value it. Usually for off-the-plan properties, the bank will offer pre-approval. However, a pre-approval is not a guarantee that the bank will give you a loan and usually has an expiry date of 3 to 6 months. By the time settlement rolls around, the banks will reassess the loan application. When the property eventually settles, circumstances may have changed and the bank may not be willing to lend the same amount. After the development has been built, possibly a few years after you exchanged Contracts, you will receive a notice from your lawyer. Your Contract should indicate how many days after receiving the notice you have to settle on the property. If you miss your completion date, you may have to pay high penalty rates. In addition, if you delay settlement for an extended period, the developers can elect to terminate the contract and keep your 10% deposit. If your settlement on an off-the-plan property is approaching and you require unconditional loan approval, it would be wise not to do certain things, including but not limited to;

  • signing up for a new credit card;
  • obtaining other loans;
  • defaulting on existing commitments which you have; or
  • changing your employment, especially to a role which decreases your salary.

Conclusion

To conclude, you should be fully aware that investing in an off-the-plan property is long-term strategy. Careful consideration should be given to your contractual obligations, which could extend over a number of years, and your financial obligations which may not manifest until several years later. To speak with an experienced contract lawyer, call LegalVision on 1300 544 755.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer