Off-the-plan apartments are how a lot of Melbourne first home buyers get into the market: a smaller deposit, a stamp duty concession in some cases, and time to save while the building goes up. They are also the purchase where the contract does the most work, because you are buying something that does not exist yet, from a developer whose lawyers wrote the document.
What you are actually signing
An off-the-plan contract is a contract to buy a lot on a plan of subdivision that has not yet been registered. Settlement happens after the building is finished and the plan is registered, which may be one, two or three years away. Between now and then, the developer controls almost everything, and your deposit (usually 10%) is locked up. The contract will set out the sunset date, the permitted variations, and what happens if things change. Those three clauses matter more than the fittings schedule.
The sunset clause
The sunset date is the long-stop date by which the plan must be registered and the building completed. If it is not met, the contract can be ended. Victorian law now restricts a vendor’s ability to rescind under a sunset clause. A developer generally needs the purchaser’s written consent or an order of the Supreme Court, and must give notice and reasons. That reform exists because developers were once able to cancel contracts and resell at higher prices in a rising market. Check the sunset date, satisfy yourself it is realistic, and understand that if the project runs past it you may have a choice to make rather than an automatic exit.
Variations: what the developer can change without asking you
Most off-the-plan contracts permit changes to the plan, the layout, the finishes and the area of the lot within stated tolerances. A common formula allows the developer to alter the area by up to 5% without compensation. On a 60 square metre apartment that is three square metres, a real amount of living space. Read the variation clause and the schedule of finishes together, and note what is described as “or equivalent”. If a specific inclusion matters to you, it needs to be specified, not illustrated in a render.
Stamp duty and the concessions
Victoria has at various times offered an off-the-plan duty concession that assesses duty on the land value plus construction completed at the contract date, rather than the full price, which can be a substantial saving on an apartment bought early. Eligibility rules, price caps and whether the concession is limited to owner-occupiers or first home buyers have changed several times in recent years, and the temporary settings introduced in 2024 have their own end dates. Do not rely on the agent’s summary. Check the current position with the State Revenue Office or ask us, because the difference between qualifying and not can be tens of thousands of dollars. The first home buyer stamp duty exemption and the First Home Owner Grant may also apply, and a new apartment is one of the few purchases that can attract the Grant.
Finance: the risk nobody explains at the display suite
Your lender will not give unconditional approval today for a settlement two years away. What you get is an indication. At settlement the bank values the completed apartment, and if the valuation comes in below the contract price (which happened widely in some Melbourne apartment markets), you must cover the shortfall in cash. Lenders also restrict lending in some postcodes and buildings, and apply lower loan-to-value ratios to small apartments (often under 50 square metres). Ask your broker about the specific building and the apartment size before you sign, and have a plan for a valuation shortfall.
Owners corporation and the ongoing cost
The contract will include a proposed owners corporation budget. Treat it as an estimate by a party with an interest in it looking low. Pools, gyms, concierges, lifts and extensive common areas all carry cost forever. Ask for the proposed rules as well as the budget. Some restrict pets, short stays or renovations in ways that matter later.
Defects and the building itself
You will get an inspection opportunity shortly before settlement. Use a professional inspector, list every defect in writing, and understand that in most off-the-plan contracts you cannot refuse to settle over minor defects. The remedy is the developer’s rectification obligation and, behind it, statutory warranties and the domestic building insurance regime. Check who the builder is and whether they are still solvent and registered. A developer’s brand and the builder’s track record are not the same thing.
Before you sign: the short list
- Have the contract and the Section 32 reviewed. Off-the-plan contracts are long and the special conditions do the damage.
- Confirm the sunset date and what happens if it passes.
- Understand the variation tolerances on area and finishes.
- Confirm your stamp duty position in writing before you commit.
- Ask your broker about valuation and lending risk for that specific building and apartment size.
- Read the owners corporation budget and rules.
- Identify the builder, not just the developer.
We review off-the-plan contracts for first home buyers across Melbourne, with our fees disclosed before you engage us. Book a free first consultation or read more about our conveyancing service.
Frequently asked questions
Can I get out of an off-the-plan contract if the apartment is smaller than the plan?
Only if the reduction exceeds the tolerance in the contract, which is commonly around 5% of the area. Within the tolerance the developer is entitled to make the change and you have no right to rescind or to compensation. This is why the variation clause is worth reading closely before you sign.
Do first home buyers pay stamp duty on an off-the-plan apartment?
It depends on the dutiable value after any off-the-plan concession, and on the current first home buyer thresholds. In some cases the concession reduces the assessed value enough to bring the purchase under the first home buyer exemption threshold, meaning no duty at all. The settings change, so confirm the current position before you sign.
What happens if my valuation comes in low at settlement?
You are still bound to settle at the contract price. If the bank lends against a lower valuation, you must make up the difference in cash or find alternative finance. Failing to settle can mean losing your deposit and being sued for any shortfall on resale, so this risk needs to be planned for at the outset rather than discovered at settlement.