Are there differences between House & Land packages and an Off-the-plan purchase?
We have found that there is some confusion about what it means to buy a house and land package and what the obligations or benefits are. The term house and land package is often used interchangeably with off-the-plan.
House & Land Package – Two contracts
When buying a house & land package, it is important to be clear that there are usually two contracts: one is the sale of land contract and the other is building contract. It does not matter if, as a purchaser, you have only been dealing with one contact person. In such a transaction, the vendor is the entity or person who owns the land and the builder (who may or may not be the same person or entity) is required to build your house according to the specifications listed in the separate building contract.
Typically, the process involves putting down two deposits, one for the land and another sum for the build. The difference here is that you pay stamp duty on the land component only.
In terms of finance, one of the issues buyers typically encounter here is that they may be paying off a mortgage for the land while the house is being built. You will typically have a loan for the land and a separate construction loan for the build. Check with your financier about the structure of your loan or loans. Often, once the home is built, you may be able to consolidate your loans.
Please note that the new home grant is no longer available unless your a first home buyer of a new home about to be built of less than $750,000. For all other new homes that have already been built but not yet lived in the threshold is $600,000.
Off the plan purchase
An off the plan purchase is an agreement for the sale or transfer of land that is intended to be used as the site of a new home, and the home (or unit) is built before completion of the agreement. In this context you pay stamp duty on the complete build because you are buying a completed home and you own nothing until the last day when the home is built.
In this case, there is just one deposit, and your mortgage repayments will commence when the property is finalised and you settle the sale.
Risks of purchasing house & land or off-the-plan
Whether you purchase a house and land package or off-the-plan, you do not have the capacity to physically inspect the property until the property is built and the contract completed. So there is a risk on this front.
This means that you need to rely on plans, specifications and marketing material that may not be very detailed. Despite the risks purchasers take, vendors are not obliged to make further disclosure. In fact, there is no protection to the buyers of off-the-plan purchasers beyond what has already guaranteed by the vendor’s statutory disclosure obligations.
Registration
Usually, developers offer off-the-plan or house and land packages before the subdivision of the land is registered. If this is the case, construction will not start until the land subdivision is registered.
Under the contract, the vendor promises to register the subdivided land within specified time. However, the vendor has no control of registration apart from submitting the plans. This is the Council’s decision. The vendor often has a right to extend the specified time limits for a further period awaiting registration. Further, contract can be ended completely if the land does not get registered at the end of the wait.
Post-registration changes
It is important to appreciate that all the documents disclosed in the original contract for sale relate to the parent parcel of land that is subject to subdivision. The disclosure documents do not relate to the specific lot/unit that you are purchasing and that will only be available after subdivision. This means that everything disclosed is subject to change and do often change once the lots are registered.
Variations to plans
Quite often builders reserve rights to alter plans, such as use substituted materials. This gives them considerable leeway in varying the plans. However, check with your solicitor if you do receive notice of a variation and it detrimentally affects your proposed lot, you may have a right to rescind the contract and get your deposit back.