Whether it’s your first home or your fourth, the decision to purchase property can be an exciting time. Will you buy an existing property or purchase off the plan?
Purchasing property ‘off the plan’ can be an attractive option for some buyers. It usually refers to vacant land, freestanding house and land packages or multi-story developments that haven’t been built yet. What this means is you’re usually entering into a contract where you haven’t seen the final product and where the plan or subdivision for the property has not been registered at the titles office at the time of signing the contract, but will be before settlement.
There can be some benefits in purchasing off the plan, including possible stamp duty savings, the ability to lock in a price now, and the appeal of having something newly built with brand new fixtures and fittings. Some new developments boast very nice facilities such as pools, gyms, communal rooftop areas and appealing landscaped gardens.
While these types of transactions can be great when they go smoothly they are often governed by a slew of ‘special conditions’ which almost always strongly favour the vendor or developer. It is essential to be aware of the effect of these before deciding whether or not to enter into a contract.
What to watch out for
Some common areas covered in these special conditions are the vendor’s rights to make changes to the plan before registration including:
• changes to a size or shape of any lot; and
• the vendor’s rights to make changes to the fixtures and fittings to be included.
This can result in a purchaser being obliged to accept at settlement something which is not quite what they had in mind when they purchased.
Other issues to be mindful of are post settlement rights of the vendor which can include:
• being able to restrict a purchaser’s re-sale rights after settlement; and
• being able to engage in further construction activities at the site without the purchaser being able to complain about noise, dust and other disturbances.
All of these things might seem distant and unlikely at the time of purchase but can be extremely frustrating if they come into play years down the track.
There are also other issues that might not be the subject of special conditions but still require consideration, these include:
• surrounding amenities
• the risk that the property might decline in value after the date of signing a contract; and
• the possibility of a significant change in the purchaser’s circumstances between the day of exchange and the day of settlement which might be some years later.
While there is no ‘one size fits all’ advice that can be given to fit every purchaser and to cover every development what can be said is that it is essential to have a good understanding of what you’re getting into before you sign anything. If you have any doubt whatsoever regarding anything in a contract or vendor’s statement you should contact your lawyer for advice.
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