What does it mean to buy off the plan? Are you aware of the risks associated with purchasing off the plan? You can avoid common mistakes by being aware of the differences between buying off the plan and purchasing an established dwelling.
What does it mean to buy off the plan?
Unlike purchasing a house, a unit or any other established dwelling, when you buy off the plan, there is no finished building for you to walk through or inspect. Whilst there are a number of positives that can result from buying off the plan, such as tax incentives (e.g. stamp duty concessions) and having more time to save for a deposit, there are a number of added risks and complexities that can arise in these transactions.
What are the common risks and complexities in off the plan purchases in comparison to buying a completed dwelling?
1. The property remains unbuilt:
The ultimate risk is that the property you have purchased off the plan is never completed. You may waste time, money and stress on a property which is never built. Often, off the plan Contracts of Sale will contain extensive and complex clauses about the prospective plan of subdivision for the land in question.
Contracts will also specify the terms and conditions as to when, if at all, a developer can cancel construction, hence leaving performance under the contract incomplete. For these reasons, it is always advisable that, prior to entering into an off the plan contract, you should consult a specialist property lawyer who can explain to you what your rights are under a specific contract and advise whether or not it is a contract which you should enter.
2. The developers may complete the property and it is not what you were anticipating: what can you do?
This will be completely dependent on what the contract stipulates. Some off the plan contracts will include room for minor variations to occur, and others will not provide for that flexibility. Often, there are terms included in the contract as to what recourse you will have if the property is not what you had anticipated.
3. The property is partially built and the developer goes into bankruptcy: what are your rights?
This is a common risk that is associated with purchasing properties off the plan, whereby you pay a deposit to the vendor, only for the builder to run out of money. Whether you can claim any of the deposit, or whether you can rely on guarantees will be issues needing legal advice.
Guarantees are often contained within detailed clauses of the contract, which derive from a complex and contentious area of law. You may need to also consult with a lawyer who is expert in bankruptcy, as well as a property lawyer, if this becomes an issue. They can work together to determine your rights and advise you as to your position under your contract.
How can Sharrock Pitman Legal assist?
Overall, there are a number of positive incentives which you can look to take advantage of when purchasing off the plan. Numerous individuals buy off the plan and face no difficulty at all.
However, the potential risks which are involved, even if they do occur infrequently, can be significant.
It is always advisable when considering purchasing any type of real estate to have a lawyer review the contract to advise you of your rights or of any untoward provisions contained in the contract. If you have any queries or concerns, or are contemplating purchasing a property off the plan, feel free to contact Andre Ong (Accredited Specialist in Property Law) to guide you through your property transaction. Call us on 1300 205 506 or complete the form below.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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Shubha Rao is a Senior Associate in the Property Law team at Sharrock Pitman Legal.