Buying a property “off the plan” allows you to secure a property – that may not yet be built – at today’s prices and that does not need to be fully paid for immediately. It usually means that you can also have a say in the interior finishes, too.
Despite these clear possible advantages, those purchasing “off the plan” properties should always proceed with caution and be aware of the following:
There is no “standard contract” for “off the plan” purchases
All contracts for buying real estate should be thoroughly reviewed, even “standard contracts” for existing properties, but for “off the plan” purchases, each contract will be completely unique, and it is even more vital that the contract is carefully reviewed by an experienced legal adviser prior to you signing on the dotted line.
You cannot see what you are buying
The fact that you cannot see what you are actually buying makes the level of detail in the contract so much more important. Also, developers often want to reserve the right to alter existing plans and to substitute inclusions in certain instances, so you need to understand your rights if these changes go too far and alter the character of the property you thought you were purchasing.
NSW legislation now requires a disclosure statement that includes a plan be attached to the contract for sale, and protection for ‘off the plan’ buyers in this realm is set to increase further with the parliament proposing the additional requirement of attaching, amongst other things, a schedule of finishes. Prior to completion, vendors are now required to give notice to the buyer of any material changes to the disclosure statement and provide the buyer with a registered plan and any other documents registered with it. Buyers will be able to rescind the contract and get their deposit back if they can establish that they would not have entered into the contract if they had been aware of the changes or inaccuracies
What can you do if the property is not completed on time?
“Off the plan” contracts will usually have a clause stating that the developer will do their best to complete the project by a certain date, often referred to as the “Sunset date”. If the property is not completed by the Sunset date, then ‘off the plan’ contracts usually allow either the purchaser or the developer to cancel the contract. There are usually provisions in the contract to allow the vendor to extend the sunset date under certain circumstances.
Money, money, money…
You should also think carefully about whether your financial circumstances are likely to change in a way that would impact on your ability to get finance to complete the purchase when the time comes. Also, you need to factor in paying stamp duty which will be due the earlier of either 12 months after the contract date or the completion date for owner occupiers and 3 months after the contract date for investors.
We can help
If you are thinking about buying an “off the plan” property, please don’t hesitate to get in touch with our property law expert, Monique Smiles on 4929 3995.