Buying off-the-plan means you sign a contract to buy a new home, like an apartment, a townhouse or a home on a new housing estate, based on the plans and specifications, not the finished product. You pay a deposit, usually 10%, and then wait for the construction to be finished before you pay the balance.
Pros and Cons of Buying Off-The-Plan
- There are financial incentives like stamp-duty concessions, and the potential that the property will increase in value by the time it is finished.
- You can customise fixtures, fittings and layouts before construction.
- You are buying a brand new home with better energy efficiency and fewer immediate maintenance issues.
- There are often construction delays, and projects often run behind schedule.
- There is a risk that the developer could go bankrupt, and you may lose your deposit and potential new home.
- New buildings can have defects like water leaks or structural issues because they haven’t been lived in before, which can be costly and stressful to fix.
- There may be a valuation shortfall if your lender values the finished property at less than the contract price.
- The standard cooling-off period may not apply if construction takes too long.
The Need for Expert Conveyancing
Buying off-the-plan involves more risks than buying a house that has been lived in for decades, and it is important to weigh up these risks and know exactly what is involved. Delays are all too common in the construction business, and some developments never get completed due to financial issues or planning problems. There are key legal issues to consider here, and you need to ensure your contract protects you from any developer changes.
When you buy off-the-plan, you are relying on those plans, not the finished building, and because the final product is unseen when you agree to purchase it, the results may differ from what you expected. A conveyancer can review the contract for clauses allowing for developer changes and ensuring your rights are protected. You may require insurance or legal action if the builder goes bust and the project is halted.
Expert advice can help you identify unusual clauses in the contract, which differ from traditional property contracts, in order to help manage the risks of buying a property that is not yet built. A conveyancer can investigate a developer’s track record, checking approvals and verifying fees, and negotiate contract terms to ensure your interests are safeguarded.
Key Elements to Consider
One of the most important things is the completion date, because you can be waiting anywhere from 12 months to 2 years for completion, and delays are common. Know your rights if the project timeline changes.
Make sure you are aware of any sunset clauses, as these allow either party to terminate the contract if the property isn’t ready by a certain date.
You should receive specific plans and detailed information about the property, including the proposed layouts and finishes, and body corporate fees. To avoid any discrepancies between what is promised and what is delivered, be vigilant when signing. The developer must provide you with legally mandated information about the property, such as floor plans and finishes, special conditions or restrictions, and your conveyancer can explain the clauses and advise you of any potential risks.
Understand market fluctuations and what they may mean for you. The property’s value can rise or fall significantly from the time that you signed the contract to the settlement date, and this uncertainty can be a risk you may not want to take.
