Buying Off-The-Plan Properties
Buying off the plan involves signing a contract for a property that is yet to be built or in the process of being built. Your decision to buy this type of property is influenced purely by plans and artistic renderings made by the property seller which is usually a property developer.
In recent years there has been a lot of negative press around off-the-plan developments. Many new property buyers have been left disappointed by the final results of their newly built property. Sadly, in many of these circumstances, issues with a buying off-the-plan can be avoided when a thorough review of the property documents has been made.
Here at P&B Law, our professional Property Lawyers can conduct a thorough review of your property purchase documents. They can look for any red flags or potential for legal issues that could show this new property purchase isn’t what it seems. To help safeguard yourself from disappointment, consider the following risks:
Developer going into administration
Be wary of the fact that if your developer goes administration during construction while you should be entitled to a refund of your initial deposit on the property, provided that the funds were correctly paid into a trust account but will miss out on other opportunities and prices may have gone up during the time.
A great way to check on your property developer is to see evidence of past building projects. Contacting previous customers of the developer is another great way to gauge how good they really are. If possible, consider looking at previous building projects by the developer to assess their quality.
Sunset clause expiration
In the contract of sale for your off-the-plan property, you’ll find what’s called a sunset clause. This is a statement that puts a time limit on the validity of the contract. If the developer fails to complete the project by the date specified in the clause then the contract may be declared null and void. In this scenario, the deposit must be returned to you.
The sunset clause is essentially created to protect you from excessive building delays. In some cases, developers have purposely run over the date specified in the sunset clause in order to resell the property for a higher price. That’s why it’s so important that a legal professional such as a property lawyer reviews your contract and ensures the building deadlines for your property are within a reasonable timeframe.
Your checklist for buying off the plan
Before committing to the purchase of an off-the-plan property it’s important to make plenty of checks. The following items are just some of the things a Property Lawyer should be checking for you before it’s time to sign on the dotted line.
- check the contract;
- do your homework;
- inspect other properties;
- measure the land;
- confirm any restrictions;
- look for easements;
- confirm the chattels and fixtures;
- see what the rates and taxes are;
- look up government charges;
- book the connection of services;
- investigate zoning and town planning;
- check your funds;
- confirm the cooling-off period; and
- document all promises and commitments in writing.
- WHAT ARE YOU BUYING?: You should carefully examine the architect’s plans and the list of specifications to ensure you are satisfied with what you are contracting to buy. Also carefully examine the proposed Plan of Subdivision to identify your lot, its location and aspect and its size.
- A display home may not truly represent what will be delivered to you once construction is completed.
- CONTRACT SPECIAL CONDITIONS: Off the Plan Contracts usually contain an array of Special Conditions which can leave you confused. Make sure you read and understand the terms before you sign the contract.
- LOT ENTITLEMENT & LIABILITY: Are the lot entitlement and liabilities
shown on the Plan of Subdivision appropriately apportioned for each
property that forms part of the building?
- SUNSET CLAUSE: A Contract of Sale should contain a sunset clause, which will enable the Purchaser to cancel the Contract if the Plan or development is not completed by a certain date. Make sure the Off the Plan Contract contains such a Clause.
- STAMP DUTY BENEFITS: In Victoria, stamp duty benefits may be available to off-the-plan buyers of real estate. You should check and document any representations that have been made to you by the Vendor or selling agent.
NOTE: This is information of a general nature only and cannot be relied upon as all-encompassing. You must seek legal advice from a professional such as a property lawyer for a property purchase and never commit to an agreement unless you have obtained that legal advice. Contact us for further information.