Off-the-Plan Conveyancing Sydney: Can a Buyer On-Sell the Apartment Before Settlement?

Yes, sometimes, but an off-the-plan buyer in Sydney cannot assume the contract can simply be passed to a new purchaser. Whether an on-sale can occur before settlement depends on the signed contract, developer consent, the chosen transaction structure and NSW duty consequences. Assignment may bring forward duty obligations, while a back-to-back resale can leave the original buyer responsible for settling first. Legal and tax review should occur before a second transaction is committed.

An apartment bought off the plan can change considerably as an investment before the buyer ever receives a key. Construction may take years. Interest rates can move. Finance capacity can change. A purchaser may relocate, separate, need liquidity or simply decide that the apartment no longer fits their plans. In a rising market, another buyer may also be willing to pay more than the original contract price.

That creates an apparently simple question: can the original purchaser sell the apartment before the developer calls for settlement?

The difficulty is that, before settlement, the purchaser may not yet own an apartment capable of being transferred in the conventional sense. What they hold may principally be contractual rights and obligations under the original development contract. The exit therefore becomes a conveyancing and transaction-design problem rather than an ordinary resale.

Before Settlement, the Buyer May Be Selling a Contract Rather Than the Apartment

NSW legislation treats an off-the-plan contract as a contract for a residential lot that has not yet been created when the contract is entered into. The lot is created when the relevant plan becomes registered.

That distinction matters. A purchaser who exchanges on a proposed Sydney apartment today may have paid a deposit and assumed substantial contractual obligations, but legal title to the completed strata lot does not pass to that purchaser until settlement.

The Australian Taxation Office similarly distinguishes between an off-the-plan contractual right before settlement and the completed residential property acquired at settlement.

NSW Fair Trading specifically encourages prospective off-the-plan purchasers to establish whether their contract allows them to on-sell during the construction period. That question belongs at contract-review stage, not when a replacement buyer has already been found.

Buyers considering a longer-term development purchase can review Elyment's off-the-plan conveyancing in Sydney pathway for the wider contract, disclosure and settlement context.

The Signed Contract Decides Whether an Exit Route Exists

There is no useful shortcut that says every Sydney off-the-plan contract is assignable, or that every developer must accept a substitute purchaser.

The starting point is the actual contract already signed by the buyer.

A conveyancer or property lawyer may need to examine provisions dealing with:

• Assignment of the purchaser's contractual interest
• Nomination of another purchaser
• Novation or substitution of the purchaser
• Whether the developer's prior written consent is required
• Conditions that the developer may impose before giving consent
• Administration, legal or processing fees
• Restrictions on advertising or marketing the purchaser's interest
• Whether the original purchaser remains liable after a permitted transfer
• How the original deposit is treated
• Completion notices and short settlement periods
• Confidentiality provisions
• Defaults that prevent an assignment proceeding
• Any special condition dealing specifically with resale before completion

Some contracts provide a defined pathway for an assignment. Others require consent. Some make an assignment commercially difficult through restrictions or costs. Others may leave a purchaser looking at a completely different structure.

Finding another willing buyer does not itself release the original purchaser from the developer contract.

Assignment, Nomination, Novation and Subsale Are Not the Same Transaction

The language used by agents and purchasers can become loose. Someone may say they are "transferring the contract" when the legal structure being proposed is actually an assignment, nomination, novation or separate resale.

Revenue NSW distinguishes these structures because they can produce different duty consequences.

Assignment

• What happens operationally: The original purchaser assigns contractual rights to an assignee who may then complete the purchase.
• Critical issue: The original contract must permit the proposed arrangement or any required consent must be obtained. NSW duty consequences also need to be assessed.

Nomination

• What happens operationally: Another person is nominated to take the purchaser position or complete the transaction under an agreed mechanism.
• Critical issue: A nomination should not be treated as a cost-free change of name. Revenue NSW specifically addresses nominations as dutiable transactions.

Novation

• What happens operationally: The original contractual arrangement is replaced so a substituted purchaser becomes party to the transaction.
• Critical issue: This generally requires participation by the developer because the contractual parties themselves are changing.

Subsale or back-to-back resale

• What happens operationally: The original purchaser remains responsible for buying from the developer while separately contracting to sell to a second buyer.
• Critical issue: Two legally distinct transactions must be funded, documented and sequenced so the original buyer can deliver title under the second contract.

These labels should not be selected because one sounds administratively easier. The documents, contractual rights, duty position, tax treatment and settlement mechanics determine what the transaction actually is.

Transfer Duty Can Crystallise Before Anyone Collects the Keys

Duty is one of the most important reasons not to agree on an assignment price and work out the legal mechanics later.

Revenue NSW states that an eligible purchaser of an off-the-plan home may be able to defer transfer duty. Importantly, where that deferral applies, the duty liability can become payable earlier when the whole or part of the purchaser's interest under the agreement is assigned.

Revenue NSW's professional guidance also treats a nomination or assignment as a dutiable transaction. The original acquisition cannot simply be assumed to disappear from the duty analysis because someone else will ultimately take the apartment.

That makes the duty question broader than:

"How much profit am I making on the on-sale?"

The better question is:

"What transactions are legally occurring, who is acquiring which interest, and when does each duty obligation arise?"

Elyment has separately examined why transfer duty can become a live cash-flow issue before settlement. The on-sale problem is different because the purchaser may deliberately trigger a new transaction before the original purchase has completed.

A Second Buyer Does Not Automatically Remove the First Buyer's Funding Risk

The commercial attraction of an on-sale can obscure the funding sequence.

Assume a purchaser contracted to buy a Sydney apartment for $950,000 during construction. Near completion, comparable apartments are selling for approximately $1.05 million and another buyer is interested.

The apparent position is a $100,000 increase in value. The operational position can be considerably more complicated.

The original purchaser may still need to account for:

• Their existing deposit under the development contract
• Transfer duty and any loss of a previously available deferral
• Developer consent or administration costs
• Legal work for the assignment, novation or resale contract
• Agent commission and marketing costs if a conventional resale is used
• Finance needed for the first settlement if assignment is unavailable
• Settlement adjustments
• Potential GST or other tax consequences
• The risk that the replacement buyer's valuation comes in below their purchase price
• Holding costs if the two settlements cannot occur in the intended sequence

The original off-the-plan deposit also should not be treated as cash that can simply be redirected through the second transaction. NSW's off-the-plan regime contains specific protections for deposits and instalments, including requirements concerning the way those funds are held.

Likewise, a downstream purchaser's deposit does not automatically solve an upstream settlement shortfall. Deposit release, trust-account treatment and settlement funding must be established from the documents rather than assumed in a spreadsheet.

The Completion Notice Can Turn an On-Sale Into a Timing Problem

Off-the-plan projects can spend months or years in construction and then move quickly once registration, certification and contractual completion requirements are satisfied.

A purchaser who has been casually marketing their position may suddenly receive a completion notice requiring the original transaction to settle within the period specified by the contract.

At that point, the replacement buyer may still be arranging:

• Formal finance approval
• A lender valuation of the completed apartment
• Verification of identity
• Transfer-duty assessment
• Contract review
• Strata due diligence
• Insurance arrangements
• Final inspection access
• The balance of their deposit or settlement contribution

If the first purchaser remains contractually responsible for completing with the developer, a delay on the second sale may not excuse a failure to settle the first purchase.

That risk is similar to the broader principle considered in Elyment's analysis of buyer-side settlement delays and default interest in NSW: a problem involving the buyer's financier or another downstream participant does not automatically move the contractual risk back to the vendor.

When Assignment Is Not Available, Two Settlements May Need to Operate as One Project

A separate resale can sometimes provide another pathway where the original purchaser will acquire the apartment and then sell it to a second purchaser. The exact legality and documentation must be reviewed for the particular contract and transaction.

Operationally, a linked or back-to-back structure can involve the following sequence:

1. Review the first contract. Confirm the original purchaser's settlement obligations, resale restrictions and completion mechanics.
2. Prepare the downstream transaction correctly. The second contract needs to reflect that the proposed seller does not yet hold registered title and must first complete the upstream acquisition.
3. Resolve duty and tax before exchange. The parties need to know what the structure creates rather than discovering the consequences at settlement.
4. Confirm the downstream buyer's finance. Their lender must be able to value the completed lot and meet the intended settlement date.
5. Reach readiness on the developer settlement. The first buyer's lender, conveyancer and settlement funds must be capable of completing the original purchase.
6. Coordinate the electronic settlement sequence. Funds, title and registrations need to move in the correct order.
7. Allow for failure scenarios. The downstream contract should not be drafted as though the upstream transaction cannot be delayed, disputed or terminated.

This is why the phrase "sell it before settlement" can be misleading. In some structures the original purchaser does not avoid settlement at all. They may instead be creating a second settlement immediately behind the first.

The Downstream Buyer Is Not Necessarily Buying the Same Risk Position

During a long construction programme, the development documentation can evolve.

NSW's off-the-plan disclosure regime requires specified information to be provided with off-the-plan contracts and includes processes where material particulars change. Relevant changes can involve the draft plan, proposed by-laws, easements, covenants or schedule of finishes.

That creates an important question for any on-sale:

What exactly is the second buyer being promised?

The first purchaser may have signed years earlier using a draft strata plan and an earlier schedule of finishes.

By the time the second transaction is negotiated:

• The registered lot dimensions may be finalised
• The strata plan may differ from the original draft
• By-laws may have changed
• Easements or restrictions may now be known
• Finishes may have changed within the developer's contractual rights
• The owners corporation may be close to commencing operations
• The completion date may be imminent
• New building or strata information may be available that did not exist at the first exchange

A downstream purchaser therefore needs current due diligence rather than simply receiving the original buyer's historical contract pack.

Final Inspection Rights Also Need to Be Sequenced

A buyer who intends to on-sell may assume the replacement purchaser can attend the developer's pre-settlement inspection and deal directly with the project team.

That should not be assumed.

Before an assignment or novation has taken effect, the developer may continue to recognise the original purchaser as its contractual counterparty. In a back-to-back sale, the original purchaser may still need to undertake the upstream inspection while separately managing whatever inspection rights have been promised to the downstream buyer.

This can matter where the second buyer discovers incomplete finishes, damaged flooring, appliance issues or other defects close to settlement.

Access should also be distinguished from possession or authority to alter the apartment. Elyment's analysis of early-access licences before NSW settlement explains why physical access does not automatically create ownership rights or permission to begin works.

Tax Advice Becomes Relevant Earlier Than Many Purchasers Expect

An off-the-plan on-sale is not only a conveyancing issue.

The Australian Taxation Office notes that selling an off-the-plan contractual right before settlement can, depending on the circumstances, constitute an enterprise and may create GST consequences.

Income tax and capital gains treatment can also depend on the purchaser's circumstances, intentions and transaction history. A purchaser who originally intended to occupy an apartment but later sells because their circumstances changed may present a different tax profile from someone systematically acquiring contractual interests for resale.

The important operational point is that the sale price should not be negotiated on the assumption that the difference between the two contract prices equals the seller's net profit.

Conveyancing, duty and tax advice need to meet before the second transaction is locked in.

Marketing Before the Exit Structure Is Known Can Create the Wrong Deal

The highest-risk sequence is often:

1. The purchaser decides they want out.
2. An agent finds another buyer.
3. A resale price is agreed.
4. Commercial expectations become fixed.
5. Only then does somebody read the original developer contract.

By that stage the parties may discover that the proposed assignment requires consent, attracts fees, brings forward duty, does not release the original purchaser or cannot be implemented in the way the parties expected.

A stronger sequence reverses the process.

Establish the legally available exit structures first. Calculate their cash-flow and tax implications second. Only then decide how the property or contractual interest should be offered to the market.

A Practical Pre-On-Sale Review for Sydney Buyers

Before instructing an agent or accepting an offer, an off-the-plan purchaser should be able to answer the following:

• What exactly do I own today: registered property or contractual rights?
• Does the original contract permit assignment?
• Does the developer need to consent?
• Can the developer charge an administration or legal fee?
• Will I be fully released after the transaction?
• Does an assignment cause deferred NSW transfer duty to become payable?
• What transfer-duty liability may arise for the incoming purchaser?
• Could GST apply to the sale of my contractual interest?
• If assignment is unavailable, can a properly structured subsale be used?
• Would I still need finance to complete the first settlement?
• Can both settlements occur within the developer's completion timetable?
• What happens if the downstream buyer's finance or valuation is delayed?
• What current disclosure information must the second buyer receive?
• Who controls the pre-settlement inspection?
• What happens to the second transaction if the original contract is rescinded or disputed?

If several of those answers are unknown, the apartment is not yet ready for an orderly on-sale process, even if another purchaser is ready to make an offer.

The Real Issue Is Exit Readiness, Not Just Resale Demand

Sydney's off-the-plan market creates long gaps between the decision to buy and the obligation to settle. It is therefore unsurprising that purchasers sometimes need to exit before completion.

The important distinction is that market demand does not create contractual flexibility.

A buyer may have a willing purchaser and a higher resale price while still facing restrictions in the original contract, immediate duty consequences, tax questions, developer consent requirements and a settlement sequence that requires the original acquisition to complete first.

For that reason, an off-the-plan on-sale should be treated as a transaction project with four streams running together: contract rights, government charges, funding and settlement delivery.

Confirm the Exit Structure Before You Commit to the Next Buyer

Review assignment rights, developer consent, duty timing, settlement sequencing and the downstream transaction before marketing or exchanging an off-the-plan on-sale.

Request a Project Review

What Sydney Buyers Should Take From This

A Sydney buyer can sometimes on-sell an off-the-plan apartment before settlement, but there is no universal right to substitute another purchaser and walk away from the original contract.

The practical route may involve an assignment, nomination, novation or separate resale. Each structure changes who remains liable, when money is required and how the two sides of the transaction reach settlement.

The earlier that review occurs, the more options the purchaser is likely to have. Waiting until the developer issues the completion notice can turn a manageable exit strategy into a short-deadline funding and settlement problem.

General information only: This article does not provide legal, taxation or financial advice. Assignment rights, duty, GST, settlement obligations and resale structures depend on the executed contract and the purchaser's circumstances. NSW purchasers should obtain advice from the solicitor or licensed conveyancer acting in the transaction and seek taxation advice where required.

Sources and References

• Elyment: Off-the-Plan Conveyancing Sydney
• Elyment: Transfer Duty Deadline Before Settlement
• Elyment: Settlement Delayed by Your Bank and Default Interest
• Elyment: Early-Access Licences Before NSW Settlement
• Elyment: Contact and Project Review