Selling Off the Plan Before Settlement in Victoria: Your Options

You signed for an apartment or townhouse that isn't built yet, and your plans have changed before settlement, the day the purchase completes and the balance is paid. Before you call an agent, remember that what you hold is a contract to buy a lot.

The short answer: Yes, through one of three routes, and your contract decides which are open. You can settle and then sell as the owner, pass your place to a new buyer by nomination or assignment if the contract allows it, or sign a separate resale contract that settles after your own purchase. Each route changes who pays stamp duty, whether you need the developer's consent and whether you stay answerable to the developer, so have the contract reviewed before you list.

What are you actually selling before settlement?

Until settlement, you aren't yet the registered proprietor, the owner recorded on the title. Under the Sale of Land Act 1962, an off the plan contract is a contract for the sale of a lot on a plan of subdivision (the plan dividing the land into lots) that hasn't been registered.

Whether you can pass that contract on, advertise the lot or sign a new sale depends on its wording, including any special conditions (extra terms added for this development), which may require the developer's written consent. Read the clause before anyone markets the property; walking away without settling raises separate questions, covered in our guide to whether a buyer can pull out of an unconditional contract.

Option 1: settle first, then sell as the owner

The simplest route is to complete your purchase, become the registered proprietor and then sell. You'll need finance to settle, and as the vendor (seller) you must give your buyer a signed Section 32 statement, the statement of information and documents the Sale of Land Act requires, before they sign.

Land transfer duty, often called stamp duty, is payable when you buy property in Victoria, so you pay duty on your purchase and your buyer pays on theirs. Exemptions and concessions may reduce or remove either amount.

If you planned to claim a first home buyer duty exemption or concession, the State Revenue Office requires you to be buying as your principal place of residence, meaning your home, and at least one buyer must live there for 12 continuous months within 12 months of settlement (vacant land has a different move in deadline). Selling soon after settlement doesn't fit that requirement, so read about first home buyer duty clawback before choosing this route.

Option 2: pass your contract to a new buyer by nomination or assignment

Here the new buyer takes your place and the developer transfers the lot to them at settlement. The State Revenue Office describes nomination, naming a substitute buyer, as the usual way to obtain this 'transfer right' (the right to have the lot transferred), with assignment or novation as alternatives. Our guide to nomination clauses in Victorian contracts of salecovers deadlines, fees and mechanics.

Do you stay liable to the developer?

An assignment passes on only your rights and leaves the original contract unchanged. A novation ends the original contract and replaces it with a new one, transferring both rights and obligations, and needs the consent of everyone involved. Check whether the nomination or assignment documents expressly release you from your obligations to the developer; unless they do, assume you may still be answerable if the new buyer fails to settle.

When does it mean two lots of stamp duty?

Victoria's sub sale rules, the duty rules for a purchase passed on before it completes, charge two lots of duty on a nomination or other transfer only if it involves additional consideration or land development. Consideration is what is given for the property, and additional consideration is anything above what you agreed to pay, such as a nomination fee or premium. Repayment of your deposit, legal costs, survey or valuation payments or reasonable selling agents' fees is treated as an excluded cost and doesn't count as additional consideration. Where the rules apply, you pay duty on your contract and the new buyer pays on what they gave.

The developer's construction after your contract date counts as land development. The State Revenue Office's land development ruling says that where your contract price covers that construction and neither you nor anyone associated with you was involved, your contract isn't subject to sub sale duty on that basis.

Suppose Priya signed to buy an apartment for $620,000 and paid a $62,000 deposit. A new buyer takes her place by nomination, repaying her deposit, paying the balance of her price and paying her a $40,000 premium, so they give $660,000. Priya would generally be liable for duty on her $620,000 contract and the new buyer for duty on $660,000 (or market value, if higher), subject to any exemption or concession. If the new buyer had only repaid her deposit and no relevant land development had occurred, duty would generally not apply to Priya's contract, leaving one lot on the new buyer's side.

Option 3: sign a separate resale contract before the plan is registered

Another route is a fresh contract with a new buyer for the same lot, timed to settle after your own purchase. If you sign before the plan is registered, that contract is itself an off the plan contract and you're the vendor, so these Sale of Land Act rules apply to your side:

• the deposit can't exceed 10% of the price;
• it must be paid to a legal practitioner, conveyancer or licensed estate agent acting for you and held on trust, meaning kept for your buyer's benefit, until the plan is registered, as our guide to off the plan deposit protection under section 9AA explains;
• the contract must contain a conspicuous warning notice that the deposit is negotiable within that limit and that a substantial period may pass before your buyer becomes the registered proprietor, during which the value may change; and
• you must give your buyer a signed Section 32 statement before they sign.

Your buyer's settlement depends on yours, so a delay in registering the plan or completing your purchase flows through to them, and our guide to off the plan settlement delays covers your rights if that happens. As in Option 1, you pay duty on your purchase and your buyer pays on theirs, and your original contract may restrict resale or advertising before you settle.

Which route fits your situation?

What to send your conveyancer before you list

• Your signed contract, special conditions and any later changes.
• Any nomination, assignment, resale or advertising clause.
• Developer notices about registration or settlement timing.
• Any first home buyer exemption or concession claim, and any offer received.

Frequently asked questions

Do I get my deposit back if I nominate someone else? Your deposit was paid under your contract with the developer, so on a nomination you'd look to the new buyer to repay it. The State Revenue Office treats that repayment as an excluded cost, so it isn't additional consideration. Agree the amount and timing in writing before the nomination is signed.

Do I need the developer's permission to sell before settlement? It depends on your contract's wording. Your contract may require written consent before you nominate, assign or advertise, or may allow a nomination within set limits. Have your conveyancer read the clause before you list.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing acts for buyers and sellers of residential property across Melbourne and Victoria, from contract and Section 32 work through to settlement and title transfers. Reviewing off the plan contracts, nominations and resale contracts is part of that work.

Sources we consulted

• State Revenue Office Victoria: Sub sales and duty
• State Revenue Office Victoria: Revenue Ruling DA 064v2, meaning of land development
• State Revenue Office Victoria: Land transfer (stamp) duty
• State Revenue Office Victoria: First home buyer duty exemption or concession
• Sale of Land Act 1962 (Vic), authorised version
• Australian Government Solicitor: Novation and assignment of contracts

Talk to us before you list

If you've signed an off the plan contract and want to sell before settlement, send us the contract first. We can review your options, then prepare the contract and Section 32 for your sale and manage it through to settlement.

Email contact@pearsonchambers.com.au.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.