Representing the size of apartments in off the plan transactions.
By Jonathan Tisher
24 March 2015
As a general rule, the bigger the apartment, the more the apartment can be sold for. This leads to greater profitability for a developer.
There is currently a major inconsistency in the property industry in respect to determining the size of an apartment. There are two major documents which deal with the size of an apartment being architectural drawings (usually prepared by town planner and the architect) and the plan of subdivision (prepared by the surveyor). Theoretically, the documentation should be consistent. In practice they are usually not.
The architectural drawings identify the size of the apartment adopted by the Property Council of Australia (“PCA”). Conversely, the plan of subdivision identifies the size of the apartment based on the Subdivision (Registrar’s Requirements) Regulations 2011 (Vic). The PCA guidelines treat the boundaries as being; for the case of shared walls, the centreline of those walls and for external walls, to the external finished surface of the dominant purpose of such walls. In circumstances, where the plan of subdivision defines the boundary of the interior walls by reference to the interior face on the plan of subdivision (which is the more commonly used method for multi-level developments), there will be an inherent inconsistency.
The physical usable space for a Purchaser may not differ depending on which method is used, however the actual size of the lot purchased will differ. In most cases, the Purchaser will be advised (during the marketing campaign) of the size of their apartment based on the PCA guidelines. However, when they come to settlement and they have the apartment size measured, it will be smaller than anticipated. This in turn may impact on the amount that a mortgagee is prepared to lend to a purchaser and may in certain circumstances give a purchaser a right to terminate a contract.
The difficulty for a Purchaser is that plans of subdivision within a multi-level development will usually not contain measurements so it will be difficult for a Purchaser to determine the size of the premises that they are purchasing based on the plan of subdivision.
It is therefore very important that this issue is considered and discussed with your lawyer prior to preparing a contract to address the potential concern. Failure to properly deal with the issue may give a purchaser a right to avoid the contract.