Sale and Purchase of Property Off The Plan

It is becoming increasingly common to buy and sell property off the plan – especially new residential units and homes in housing developments.

Buying and selling off the plan can provide a number of unique advantages to both the vendor and purchaser, but there are also significant risks presented by such transactions.

What is off the plan?

Off the plan means buying and selling property before the building has been completed. The property is built from a plan of a subdivision of land.

If you are going to purchase off the plan, you will generally have to pay a 10% deposit when you exchange contracts with the vendor. You will have to pay the remainder of the purchase price once the property has been completed.

The vendor must include detailed plans and specifications in the contract for sale. The contract should include:

details of development approval;
a scale plan of the property;
a copy of the draft Strata plan;
a list of fixtures and fittings;
a list of communal facilities (eg gardens, security system, garbage disposal and parking);
rules of the body corporate (eg whether pets are allowed);
the timeframe for completion;
a dispute resolution procedure; and
a provision for fixing defects (such as cracks in the wall) that occur within a short time after construction.

The contract should also put an obligation on the vendor to ensure the property is constructed with good workmanship.

Buying off the plan

Advantages

There are a number of potential financial advantages to buying an off the plan property:

The property may rise in value between the time you enter into the contract and when it is completed;
You may save money on stamp duty;
Because you only have to pay the balance when the property is completed, you will have more time to save money for mortgage repayments.

Risks

Some risks involved in buying a property off the plan include:

The property may drop in value by the time it is completed;
There may be delays in construction – this may mean you cannot move into your home, or rent it out, at the time you had planned;
The finished property may not look exactly as you expected – sometimes developers have not received planning approval before selling off the plan and may have to make changes.

Research the property

If you are considering buying a property off the plan, it can be difficult to get a good idea of what you are actually buying. It is important to research the property as thoroughly as possible.

Make sure the contract includes detailed specifications – and get advice to make sure these are binding. For example, sometimes developers can change the brand of fixtures and fittings if they are of the same quality as those specified in the contract.

Developers usually have display properties that you can visit to get a better idea of what the property will look like when completed. You should also inspect samples of materials that will be used in the construction.

Compare the specifications of the property to the size and features of the property you are currently living in – this may give you a better idea of what the finished property will look like.

It is also important to research property values in the area – you will want to buy somewhere that will increase in value.

Selling

Advantages

If you are a developer, there are major financial advantages to selling property off the plan:

It is much easier to get finance from banks when some of the properties in a subdivision have already been sold;
There is more time to generate interest in the property among purchasers.

Risks

Vendors may face substantial contractual obligations for under this type of arrangement. For example:

You may be subject to penalties if the building is not completed in time;
You may have to advise the purchaser of any changes to the plan – even if they are minor.

Buyers may also be able to investigate your financial affairs and any previous property transactions you have been involved in.

Conclusion

Buying and selling property off the plan can present financial incentives to both purchasers and vendors. But there are also many risks, especially for purchasers.

Whether you are a purchaser or vendor, it is important to get good legal advice to ensure you are making the right decision. It is important to be fully aware of your rights and obligations before you enter a property transaction in case there is a dispute.

Woodgate Lawyers are experienced in all aspects of property conveyancing – including transactions conducted off the plan. We can help you make sure everything goes to plan.

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The information you obtain at this site is not, nor is it intended to be, legal advice.
You should consult a lawyer for individual advice regarding your own situation.