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Backing out of an off-the plan contract – Part 2

By Daniel Wignall16 Dec 2015

In our previous article we discussed how in certain circumstances false representations made by a real estate agent prior to entering into the contract may provide a buyer with an opportunity to terminate an off-the-plan contract. 

There are two other key circumstances which can enliven your right as a buyer to terminate an  off-the-plan contract, those being:

when the developer fails to accurately disclosure important details about your off-the plan purchase; or

when the development is altered in some material way.

Have you received a Further Statement that’s turned your nest egg into an omelette?

Before you entered into the contract you would have been provided with two key documents being: 

  • a disclosure statement; and
  • disclosure plan.

Section 213 and 213AA of the Body Corporate and Community Management Act 1997 (Qld) sets out in detail the specific information that must be contained in these disclosure documents. 

The purpose of the disclosure documents is to assist you in making an informed decision about the property you’re purchasing.

The developer has an ongoing obligation to keep you updated of any changes made to the development that are inconsistent with the initial disclosure material provided to you. This is done by the developer providing you with a “further statement”. The further statement rectifies any inaccuracies in the initial disclosure material and must be provided to you at least twenty one (21) days before the contract is settled.

If the further statement changes the property in such a way that you are no longer interested in purchasing it, there is an opportunity for you to terminate the contract. However, you must be able to demonstrate that because of the changes you would be “materially prejudiced”, if compelled to complete the contract.

The test for “material prejudice” is best set out in the Queensland Supreme Court Case, Wilson v Mirvac Queensland Pty Ltd [2010] QSC 87. In that case, following receipt of the further statement, the buyer was able to terminate her off-the-plan contract because she demonstrated she was materially prejudiced by the removal of certain security equipment.

The Court said the following matters were relevant to the material prejudice test:

  • The test is objective having regard to the particular buyer's circumstances;
  • The material prejudice must be assessed in light of the buyer's circumstances (in this case the buyers circumstances when the further statement was received);
  • There must be a relationship between the inaccuracy and the prejudice;
  • There must be proportionality between the inaccuracy and the prejudice, that is, the inaccuracy must be appropriately significant to warrant the claim of prejudice; and
  • The legislation should be construed to benefit the buyer.

“This is nothing like the photos!”

Is hopefully not the comment you make when you first walk into your off-the-plan property. But it happens.

Just because you don’t receive a further statement doesn’t mean your termination hopes are dashed. Sometimes the failure by the developer to provide you with a further statement can be your ticket out of there.

If the property you are delivered is substantially lacking from what was expected you may have grounds to terminate. Again you need to be able to demonstrate that you would be “materially prejudiced” if compelled to complete the contract.

Don’t sit on your hands

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

By way of example, a buyer seeking to terminate their contract on the basis the further statement has substantially (and negatively) altered the development – the buyer only has twenty-one (21) days to terminate after receiving the further statement.

If your off-the-plan purchase is not living up to your expectations, termination may be an option – but your option to terminate has an expiry date.

If you need assistance in backing-out of an off-the-plan purchase, we would be more than happy to assist. 

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