Buying a property off the plans

Buying a property ‘off the plans’ before completion is a popular investment option for both investors and homebuyers but there are additional risks involved. Here are five things to consider before buying ‘off the plans’

Established Developer

Ensure you purchase with a reputable, established developer with a proven track record of successful developments.  To check track records, you can look up the firm involved in the project on the Companies Office website to see who the directors and shareholders are and whether firms they have been involved with in the past have gone into liquidation  or receivership.

Sunset Clause

A sunset clause can sometimes allow for both parties to get out of an agreement if the build is not completed by a certain date. However, as a purchaser, you want to ensure only you have the right to cancel, instead of both parties. They’re intended to protect the buyer, but there have been cases where the developer has used them to get finance from presales, then terminated the contracts and resold the property  at a higher price.3.

Bank Approval

When obtaining bank finance, keep in mind that a bank’s offer of finance is usually only for about three months.  If your circumstances or interest rates change significantly at the time of settlement it could impact your ability to borrow funds.4.

Body Corporate Rules/Fees

When buying off the plans, it’s important to thoroughly read the body corporate rules and budget set for the development. The rules include responsibilities around your obligations in respect to common property, vehicle parking, use of balconies (like no clotheslines or heatpumps), and there’s often a ‘no pets’ rule.

What the Building Act Covers

The Building Act 2004 provides implied warranties – the warranties apply for up to 10 years regardless of whether you have a written contract or not.  As well as the implied warranties, there’s a 12-month defect repair period.  If any defects in the building work emerge within 12 months of the completed build date, your builder has an obligation to fix them.Some banks are now requesting the extra protection of a 10year building guarantee when you apply for lending to finance  a new build. If you’re looking to buy a property off the plans, please get in touch with our team of experts at Dawsons Lawyers prior to signing a contract.