Is this the end of the 5% tolerance in off-the-plan developments?

A recent Supreme Court decision has caused some unease in the industry, as it found that a reduction in size of a lot, of less than 5%, "materially affected" the lot in question, entitling the purchaser to rescind the off-the-plan contract. What does this mean for the future of the 5% tolerance?

It has been commonly accepted across the market that a variation of 5% or less in the size of a lot does not materially affect a lot, so it has been interesting to unpack the findings of Burger & Ors v Longboat Holdings Group2 Pty Ltd [2021] VSC 469 (Burger v Longboat), which found a variation of less than 5% did have material affect.

As we discuss below, this is not the end of the 5% market tolerance, but a timely reminder that the practical implications of changes to a plan of subdivision need to be carefully considered.