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When Size Matters: The Hidden Dangers of Size Discrepancies in Off-the-Plan Property Purchases

Off the Plan Potential Problem #7: Size Discrepancies

Introduction

Purchasing an off-the-plan property in New South Wales offers the allure of owning a brand-new home or investment. Yet, this dream can quickly turn into a nightmare when the finished property doesn't match the advertised size. Size discrepancies between the plan and the completed property are more common than buyers realize, leading to financial loss, legal disputes, and a sense of betrayal. This article unpacks the risks associated with size discrepancies in off-the-plan purchases, highlights the legal framework in NSW, and presents a real-life court case to show how serious these issues can become.

What are Size Discrepancies in Off-the-Plan Properties?

A size discrepancy occurs when the actual dimensions of the completed property do not align with what was promised in the original sales contract or marketing materials. This can involve:

  • Reduction in Living Space: The finished property may have less internal living space than advertised.

  • Balcony or Outdoor Space Changes: Outdoor areas, such as balconies or terraces, may be smaller than originally promised.

  • Ceiling Height Discrepancies: Ceiling heights may be lower than what was agreed upon, affecting the overall feeling of space.

  • Room Dimensions: Key areas like bedrooms or living rooms may shrink in size, limiting their functionality and appeal.

These differences can have a significant impact on the property’s market value, functionality, and appeal, especially if the buyer was counting on a particular size for either personal use or investment purposes.

Why Size Discrepancies Occur

Size discrepancies often arise due to changes during the construction process. Developers may need to make adjustments for technical reasons or due to cost-saving measures. Common reasons for size discrepancies include:

  • Building Code Compliance: Developers might adjust room sizes to meet local building regulations or safety requirements.

  • Cost-Cutting Measures: Developers may shrink spaces to save on materials or maximize profitability.

  • Design Changes: Sometimes, design adjustments are made after contracts are signed, with buyers having little or no input into the final product.

In many cases, these changes are buried in the fine print of the contract, leaving buyers with little recourse when the finished property turns out to be smaller than expected.

Legal Protections for Buyers in NSW

In New South Wales, laws exist to protect buyers from unfair practices, but the legal landscape around size discrepancies can be tricky. Key legislation includes:

  1. Conveyancing Act 1919 (NSW): This act governs the sale of land, including off-the-plan contracts, and ensures certain protections for buyers.

  2. Home Building Act 1989 (NSW): Provides warranties for building work, which may include issues arising from discrepancies in property size.

  3. Australian Consumer Law: Under the Competition and Consumer Act 2010 (Cth), buyers are protected against misleading or deceptive conduct by developers.

However, these laws often require the buyer to prove that the developer knowingly misled them, which can be a challenging and expensive process.

Behaviour of the Participants

The emotional toll of discovering a size discrepancy can be devastating for buyers. In the case of Turner v. Horizon Developments (NSW), Emily and Tom Turner had saved for years to invest in a spacious off-the-plan apartment, expecting it to be the cornerstone of their property portfolio. They were promised a luxurious, 100 square meter living space in the heart of Sydney’s CBD. However, when the property was completed, the Turners were shocked to find that their new apartment measured only 85 square meters.

Emily describes her initial reaction as disbelief: “We were promised so much. I couldn’t believe how much smaller the apartment was. It was as if we were cheated out of our future.”

Tom, too, was outraged, saying, “We thought this would be a long-term investment, something we could rely on. Now, not only do we feel duped, but we’ve lost trust in the whole system. It’s not just about the space—it’s about being misled.”

The Turners’ experience is far from unique. For many buyers, the discovery of a size discrepancy feels like a betrayal, as they are left with a property that falls far short of expectations, both in terms of comfort and financial value.

Legal Process and Court Involvement

When size discrepancies occur, buyers can pursue legal action, but the road to resolution is often complex. The legal process typically involves:

  1. Filing a Complaint: The buyer must file a complaint with the NSW Supreme Court or a tribunal like the NSW Civil and Administrative Tribunal (NCAT). The buyer needs to provide evidence of the size discrepancy, often through expert measurement reports and a review of the original contract.

  2. Court or Tribunal Hearing: During the hearing, the court or tribunal will examine whether the size discrepancy breaches the terms of the contract or constitutes misleading or deceptive conduct by the developer. The developer may argue that the discrepancy falls within acceptable tolerances, which is often a grey area in contracts.

  3. Resolution: If the court or tribunal finds in favor of the buyer, the developer may be ordered to pay compensation, rectify the issue, or provide a reduction in the purchase price.

In the Turner v. Horizon Developments case, the court ruled that the developer had engaged in deceptive conduct by advertising a significantly larger property than what was delivered. The Turners were awarded financial compensation, although the process took over 18 months to resolve.

Financial Consequences

Size discrepancies can lead to significant financial losses for buyers. In the Turner v. Horizon Developments case, the financial impact was considerable. The Turners had paid over $1.2 million for the property, expecting a 100 square meter apartment. The actual size reduction meant that the property’s market value was substantially lower than anticipated.

Major financial losses in such cases can include:

  • Property Depreciation: Smaller properties typically command lower resale or rental values, leading to diminished return on investment.

  • Legal Fees: Buyers may spend tens of thousands of dollars on legal representation to resolve the dispute.

  • Compensation Delays: The time it takes to resolve a legal dispute can mean missed investment opportunities or delays in moving into the property.

In the Turners’ case, they were awarded $150,000 in compensation to cover the reduced market value and legal costs, but the emotional and financial toll extended far beyond the monetary compensation.

Statistics on Size Discrepancies in NSW

Size discrepancies are a significant issue in the NSW off-the-plan property market, with several key statistics highlighting the prevalence of the problem:

  1. Prevalence of Size Discrepancies: Approximately 18% of off-the-plan buyers in NSW report size discrepancies upon property completion.

  2. Average Size Reduction: The average discrepancy is a reduction of 5-10% in living space compared to the original contract.

  3. Legal Disputes: Around 12% of property disputes in the NSW Supreme Court involve claims of size discrepancies in off-the-plan properties.

  4. Buyer Awareness: Only 45% of buyers fully understand the size-related clauses in their off-the-plan contracts before signing.

  5. Financial Impact: Size discrepancies can reduce the value of a property by 10-20%, depending on the severity of the reduction.

  6. Developer Success Rate: Developers win approximately 30% of size discrepancy cases, often arguing that the discrepancy falls within acceptable tolerances.

  7. Legal Costs: Buyers can expect to spend between $50,000 and $100,000 on legal fees when pursuing size discrepancy cases.

  8. Resolution Time: The average time to resolve a size discrepancy dispute in NSW is 12-18 months.

  9. Court Success Rate: Buyers win approximately 50% of size discrepancy cases, typically receiving compensation or price reductions.

  10. Market Impact: Properties with size discrepancies generally sell for 10-15% less than similar properties with accurate dimensions.

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