Chong v Tasman 61 BH Pty Ltd: The Limits of Variation Powers in Off-the-Plan Contracts

Buying “off the plan” means signing a contract for a property before it is built. These contracts usually give the developer room to make changes as the project progresses. The recent Supreme Court of New South Wales decision of Richmond J in Chong v Tasman 61 BH Pty Ltd [2026] NSWSC 837 (Chong) provides a useful reminder that broad rights given to developers under off-the-plan contracts are not unlimited. The Court held that a developer could not rely on a general variation clause to remove a car space from the property being sold and could not validly terminate the contract after the purchasers lodged a caveat. The purchasers obtained an order for specific performance, including the transfer of the car space.

The decision highlights the importance of clear drafting, careful use of variation and termination provisions, and understanding how the different terms of an off-the-plan contract operate together.

Background

On 26 March 2021, the purchasers entered into an off-the-plan contract to buy a townhouse, garage and car space for $1,160,000.

The vendor extended the sunset date from 31 December 2023 to 31 December 2024, citing construction delays beyond its control, including inclement weather. The strata plan was registered on 1 August 2025. Valuation evidence before the Court indicated that the property was worth between $290,000 and $340,000 more than the purchase price, meaning the vendor stood to benefit if the contract came to an end.

When the final strata plan was registered, the townhouse and garage remained within Lot 20, but the car space had been removed and allocated to a separate utility lot, Lot 34. On 28 August 2025, the purchasers lodged a caveat over the property to protect their interest.

On 14 October 2025, the vendor issued a notice to perform requiring the caveat to be withdrawn within 14 days. It relied on a special condition in the contract restricting the purchasers from lodging a caveat that would prevent implementation of the contract or registration of a dealing.

On 26 November 2025, the purchasers commenced proceedings seeking specific performance against the vendor. Relying on the purchasers’ failure to withdraw the caveat, the vendor then purported to terminate the contract.

What did the Court decide?

A central issue was whether the contract allowed the vendor to remove the car space altogether. Although the contract contained a broad power to alter the draft strata plan, it also contained a specific clause dealing with changes to car spaces.

Applying established principles of contractual interpretation, including the principle that general provisions do not derogate from specific ones, the Court held that the specific provision prevailed over the general provision. While the vendor could change the car space (for example, its numbering, area or location), it could not remove the car space entirely from the property being sold. A change, alteration or modification of the car space assumed that the car space would continue to exist. The Court also observed that if the general clause allowed the car space to be removed, the purchasers might have no right to rescind or other claim, because the car space alone was less than 5% of the area of the lot and the related purchaser protection in the general clause would not be triggered. That would have nullified the specific protection given by the car space clause.

The Court also found that the purported termination under clause 9.1 of the standard form was invalid. The clause dealing with caveats was not expressed to be an essential term, unlike several other provisions in the contract. The absence of such wording, together with the availability of other remedies to address the caveat (a lapsing notice under section 74J of the Real Property Act 1900 (NSW), an injunction, or damages), indicated that the clause was not intended to confer an immediate right of termination. The Court treated it as an intermediate term, so that only a sufficiently serious breach would justify termination. While the Court accepted that it was arguable the purchasers had breached the clause by lodging the caveat, that breach was not sufficiently serious, particularly as damages would be an adequate remedy and the purchasers remained ready and willing to complete.

The vendor faced a further obstacle because it was already in breach of the contract when it issued its notice to perform. It had registered a strata plan that removed the car space, and it had failed to notify the purchasers within a reasonable time of the registration of the strata plan and the issue of the occupation certificate (an obligation the Court held was implied into the contract). Either breach rendered both the notice to perform and the notice of termination invalid. The Court also rejected the argument that the purchasers had repudiated the contract by lodging the caveat, noting that they consistently expressed a willingness to complete the purchase in accordance with the terms of the contract.

Ultimately, the Court ordered specific performance and required the vendor to transfer the property and the car space to the purchasers. This was because the property sold was the lot shown on the draft strata plan (subject to any valid changes), which included the car space now contained in the separate utility lot.

Key Takeaways

• Variation rights must be clear and specific - A broad right to alter a draft strata plan will not necessarily allow a developer to remove a specific feature of the property where another part of the contract deals with that feature more precisely. If a developer may need to remove or reallocate car spaces, storage areas or other components of a lot, the contract should say so expressly and should address the purchaser's rights if that occurs.

  
  

• General variation clauses may offer limited protection - General variation clauses will not necessarily override more specific contractual protections. Developers should not assume that a broadly drafted variation power will prevail where the contract contains more specific provisions dealing with particular property features. Special conditions should be reviewed together so that any overlap or inconsistency is resolved at the drafting stage.

  
  

• Termination rights should not be left to implication - If breach of a particular provision is intended to give a party a right to terminate, the contract should make that clear. Where some provisions are expressly identified as essential and others are not, it may be difficult to argue later that an unlabelled provision was also intended to be essential. Even where a right to terminate exists, the purchaser may still recover its deposit. In Chong, the Court said that, had the termination been valid, it would have ordered repayment of the deposit under section 55(2A) of the Conveyancing Act 1919 (NSW).

  
  

• A party's own contractual performance matters - Before issuing a notice to perform or seeking to terminate, a party seeking to enforce contractual rights should first ensure its own compliance with the contract. A termination right cannot be considered in isolation from the rest of the contract.

  
  

• Conduct during a dispute can become important - The purchasers' consistent position that they remained ready and willing to complete assisted them in defeating the vendor's argument that they had repudiated the contract. Clear communication can therefore be important when a disagreement arises before settlement.

  
  
  
  

• Purchasers should take care before lodging a caveat - Many off-the-plan contracts restrict the lodging of caveats. Although the clause in Chong was not an essential term, breaching such a clause may still expose a purchaser to a claim for damages and may be taken into account if the vendor applies to have the caveat removed. Purchasers should seek advice before lodging a caveat where the contract restricts it.

  
  

• Other termination rights will not necessarily be read more generously - Developers should not assume that termination rights outside the sunset clause (such as rights arising from purchaser default under clause 9 of the standard form) will necessarily be interpreted more broadly than sunset clause provisions.

Implications for developers and project structuring

Although the statutory sunset clause itself was not directly in issue, the case is significant in the broader context of off-the-plan developments. Legislative reforms have significantly restricted a developer's ability to rescind under sunset clauses without the purchaser's agreement or court approval.

As traditional sunset clause rights have become more constrained, greater attention may be given to other contractual provisions dealing with variations, purchaser default and termination. Chong demonstrates that those provisions will be construed carefully and in the context of the contract as a whole. Courts will not readily permit broad drafting to be used to alter a fundamental aspect of the original bargain or create termination rights that the contract does not clearly confer. Developers relying on newer, broader exit clauses that operate before the sunset date should not assume those clauses will be read any more generously.

For developers, the decision is a reminder to ensure contractual flexibility is expressly documented, and that where a vendor stands to gain significantly from ending a contract, courts are likely to look closely at the vendor's own conduct. For purchasers, it reinforces that broad variation and termination clauses remain subject to meaningful judicial scrutiny.

If you require assistance with drafting or reviewing an off-the-plan contract, please contact our people.

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333

Helen Jeon 0457 811 882