5 Conveyancing Tips For Buying Off The Plan
Extra care is required with conveyancing when buying Off The Plan property as there are a few unknown pitfalls to be avoided.
Most concerning is that many Solicitors and Conveyancers are unaware of some pitfalls associated with Off The Plan purchases and may not bring these to your attention.
E.g. Developers will often insert a clause that allows changes to the finishes in the apartment, which is a major concern if the changes are not of an equal quality finish.
Tip 1: The importance of the Contract Of Sale.
This a critical document for Buying Off The Plan Property as what you are buying has not actually been built yet and you need to ensure you are going to get what you think you are going to get.
It is important to review the contract of sale carefully to ensure that it properly reflects, in writing, what you have been promised by the developer. Your contract of sale needs to include a detailed schedule of all fixtures, fittings and finishes and you need to be satisfied with the level of detail in the contract.
What is described in the contract needs to line up with what you think you are going to be getting in your new property once it has been constructed.
The developer will usually reserve the right to change the plans or specifications if he thinks it is necessary and you need to ensure that you will not be impacted in a negative way.
Make sure you read the contract and supporting documents from the developer and real estate agent carefully to ensure everything is well detailed prior to signing your contracts.
Tip 2: Research the Developer and Builder
As you are not able to see the finished product for your Off The Plan purchase it is important to research the Developer. You can start with looking online to see what sort of industry reputation they have. Ask for a list of past projects to check that they have been successfully completed.
In most cases the Developer will engage a separate builder so it is also important to check out the reputation of the builder as well and look at the build quality of past constructions.
Tip 3: Your legal rights
Make sure you understand what your legal rights are in relation to your off the plan purchase.
For example, what are your legal rights should construction be met with excessive delays? Are you able to withdraw from the contract and if yes, are there any special conditions or costs.
In a worst case scenario, if the construction does not proceed and the developer rescinds the contract what happens to your deposit?
Tip 4: Completion
The contract will provide the developer with some flexibility as to when the project is to be finished. Obviously delays can occur for various reasons, such as striking rock or water when excavation commences and this is not the fault of anyone in particular.
Usually, the contract provides that the developer must complete the development as quickly as possible, but if he is unable to complete within a certain period of time then either party will have the legal right to cancel the contract.
You need to ensure the contract has a realistic sunset date for completion of your new property. The contract should also contain a clearly defined mechanism for the developer to extend it (within reason). This is nothing to be alarmed about, you just need to be sure you understand how delays will be handled from a legal perspective.
Tip 5: Early Finish Date
Will your finance be available if the building is finished early and how much time is stipulated in the Contract of Sale regarding how soon you must settle once notified that the building is completed.
Most contracts will give you 14 days and this can be a bit tight if you are reliant on bank finance and are hit with unexpected or seasonal delays (e.g. Christmas or Easter Holiday breaks) You may want to request changing this to 21or 30 days dependant on your financial situation.
It is important to note that despite the potential pitfalls associated with Buying Off The Plan, it also offers some excellent benefits when careful selection of property is undertaken.
Make sure you use reputable providers and take some extra time to research and build your knowledge for Off The Plan property before committing to any purchase.
These tips were a small sample from our 27 point Conveyancing Checklist
About Darryl Simms
Darryl Simms specializes in helping individuals invest in property for less than a latte a day, reduce their tax and create enjoyable lifestyles.
Latte Property has a large following of successful property investors who have enjoyed professional guidance in the purchase of quality new apartments, new townhouses and new homes.
Darryl is also the Author of “50 Must Know Property Investing Tips” and is currently busy writing his next Property Investment publication.
Darryl’s favourite quote is:
“Try not to become a man of success, but rather try to become a man of value” – Albert Einstein
Contact Darryl at www.latteproperty.com.au/ask-darryl