During the development and construction of a project, circumstances may arise which require the Seller to make changes to the Lot or the scheme. Sometimes the initial drawings and designs need to be changed because of a requirement of an authority such as Council, or for some practical reason arising during construction.
Seller has the right to make changes under a contract
Under most standard off the plan contracts, the seller gives limited warranties and reserves the right to make changes to deal with various issues that might arise. By signing the contract, the buyer agrees to accept and not object to certain changes such as, for example, minor changes or changes that are not material that are made by the developer before settlement.
A buyer can try to limit the risks associated with buying an off the plan property by requesting amendments to the contract, but sellers may be reluctant to make changes to the contract because:
- they want to maintain a consistent approach with all buyers;
- they wants to keep flexibility to deal with cost increases, and issues arising during the development and construction of the project; or
- their construction financier will only accept contracts which comply with the financier’s lending requirements and one of these requirements is that a certain number of complying and unconditional contracts are entered into before any funding is provided to a buyer.
What are some of the main changes that can be requested to be made to an off the plan contract for a buyer?
Car Parking
For units, the proposed plan shown in a contract will usually allocate an exclusive use car park or car parks to each lot and usually the location is not important to buyers, but sometimes:
- there is more than one car park and the car parks for a unit are next to each other;
- there are buyers who negotiates additional car parks as part of the purchase; and
- there are elderly or infirm buyers who negotiates the allocation of a car park near the elevators.
The contract will usually allow the developer great leeway in changing the car park and other exclusive use area allocations. This means that if the car parks are changed between contract and settlement, there isn’t much a buyer can do about it so sometimes you may request a condition whereby the car parks must be as allocated on the proposed plan, unless they need to be changed due to any authority requirement.
Material change in area of the plan
Traditionally, off the plan contracts state that a buyer cannot object if there is what is defined as a “minor variation” in the area or dimensions of the completed block of land or unit, which is up to 5% or less compared to the proposed disclosure plans in the contract.
It is possible to request that the amount of 5% be amended to a lesser amount, however it is most likely not to be agreed upon.
The next question that can be asked is whether termination rights arise if there is a more than 5% variation of the proposed lot size. You can ask for the contract to provide that anything more than 5% is materially prejudicial, but usually developers are very reluctant to agree and in this case, it is important you take this into consideration.
Where material prejudice isn’t specifically defined in the contract, termination rights depend largely on the wording of the contract, but it often comes down to common law principles relating to material prejudice. If the completed area differs by 10-20%, there would usually be a strong case for termination on the basis that the buyer is getting something fundamentally different from what they contracted to buy.
Big increase in body corporate levies compared to disclosure statement
It is fairly common for the eventual body corporate levies to be higher than those disclosed in the disclosure statement. However, it would have to be a very large increase to potentially be a cause for termination by the buyer, if there were no other issues.
How do I ask for these changes to be made?
It does not mean that these changes will always be agreed upon when asking for them to be made, however it is something that could be considered by certain developers if they are a make or break for you.
Please contact us with any queries you may have in relation to off the plan contracts and changes that would suit you.
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