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Backing out of an off-the plan contract

03 Nov 2015

Buying-off the plan is similar to going on a first date. You don’t know what to expect and it doesn’t always end well for one of the parties.

Preparing for your first face-to-face encounter you feel nervous. You’re confident you have done your research, you’re on top of your game and the photos look promising. However, do photos always tell the truth? Is the agent a bit too smooth – did they oversell it in the initial chat?

So what do you do when the property you were promised falls short of what’s delivered? Unlike a restaurant or date, if something nasty turns up in your soup or your date is dodgy, you can’t just stand up and walk out. When you buy off-the-plan there are strings attached that prevent you from getting up and walking out.

There are limited circumstances in which a buyer can back out of an off-the-plan contract. In many cases strict deadlines apply. You have to act quickly and know what you’re doing, otherwise getting out of the contract will be very difficult.

Do any of these scenarios apply to you?

  1. You were made promises (verbal or written) prior to entering into the contract that have not been delivered.
  2. The developer has given you a “further statement” that changes the property in such a way that you no longer want to purchase it.
  3. The property delivered to you is significantly different to the description in the disclosure material.

If any of the above applies to your situation, you may be able to terminate your off-the-plan contract.

Did the Real Estate Agent lie to you?

We all know real estate agents may at times embellish the truth, but at a certain point if the truth is stretched far enough it becomes lie. 

Section 30 of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) (ACL) deals specifically with false and misleading statements made to buyers in connection with the sale (or possible sale) of a property. 

Section 30 prohibits developers and their agents from making false or misleading representations to buyers concerning:

  • the nature of the interest in the property;
  • the price of the property;
  • the location of the property;
  • the characteristics of the property;
  • the capable use of the property; or
  • the availability of facilities associated with the property.

A representation is not limited to what is contained within your contract, but extends to advertising material and oral statements made to you prior to entering the contract.

In a recent decision of the District Court in Queensland, the buyers of a unit on the Gold Coast were successful in terminating their off-the-plan contract as a result of false representations made to them by a real estate agent prior to entering into the contract.  

In that case, one of the two buyers had visited a sales office and was advised by the real estate agent that once the building was complete, the unit would fetch $1,000 a night at eighty percent (80%) occupancy. These figures were written on a brochure the buyer took home and shortly thereafter both buyers entered into the contract.

The buyers inspected the unit when it was close to completion and became concerned it was not going to achieve the $1,000 per night return as promised by the real estate agent. The buyers refused to settle the contract alleging they had been induced by misleading and deceptive conduct.

The Judge found in favour of the buyers, stating the real estate agent’s representations regarding the nightly return rate for the unit and the occupancy rate were misleading and deceiving. 

Can you terminate your off-the-plan-contract?

In most circumstances a buyer only has limited windows of opportunity in which an off-the-plan contract can be terminated.

If any of the above three (3) scenarios sound familiar to you, we can review your off-the-plan contract and let you know whether you have any grounds to terminate.