Are you thinking of purchasing a property off the plan? Property & Commercial Lawyer, Andrea McGarry, explains how to protect your home or future investment.
Unit developments are steaming ahead in the Gold Coast and Brisbane areas. Our skyline is full of cranes erecting everything from duplexes to high rise towers. Behind the exciting buzz of new developments are ‘off the plan’ Contracts – and these Contracts are not be underestimated.
As we have seen with the Ralan development collapse, unit buyers can lose their deposits and life savings if they don’t do their homework on developers and thoroughly assess their property sale Contracts.
READ MORE: Ralan Group ‘ponzie scheme’ collapse: what should Ruby and Sapphire apartment buyers do now?
Buying a property ‘off the plan’ means you are purchasing a property which is yet to be constructed or have its own lot created from an existing piece of land. It comes as no surprise there are added risks associated with purchasing a property not yet in existence.
What should you take into consideration if you are looking at buying off the plan?
If you have found a development you believe suits your requirements, be it as your principal place of residence or an investment, we do not recommend proceeding any further until you can check the following three things off your list.
- Do your due diligence on the area the property is set to be located in. We recommend you research the growth of the area over recent years, consider its forecasted growth for the future and compare recent sales of similar styled properties.
- Research the developer! The importance of researching the developer cannot be overstated. If you need further convincing – see our recent blog on the collapse of the Ralan Group. Where possible, you should inspect the developers previous projects.
- Lastly – get the right legal advice! Legal advice from a lawyer who is familiar with off the plan contracts before you sign the Contract is the key to avoiding trouble down the track.
Why should you get advice before signing the Contract?
Off the plan contracts are generally bulky and complicated documents full of hidden clauses. These clauses are often not adequately explained to Buyers by agents or developers. An impartial review of the documents will ensure you know what to expect and there are no nasty surprises along the way.
An example of a common clause in an off the plan Contract we often find which surprises people is that developers generally reserve their rights to change the area, layout, finishes and fittings, location of car parks and storage areas, exclusive use locations and common property.
Other aspects of the Contract your lawyer should give you advice on:
- Is the property adequately described? This should include ensuring the Contract includes a detailed schedule of finishes, inclusions, interior plans and appliances.
- Is there an obligation for the developer to schedule constructions within a specific amount of time?
- Is there an obligation on the developer to use proper materials and ensure the finishes are to a high standard?
- Are there provisions in the Contract compelling the developer to rectify defects which may arise?
- How long does the developer have to complete the Building? There is usually a sunset date in the Contract to allow the developer to finish the Development. This date will vary however it is important to be aware of the date – as it can be anywhere from two to five years from the date you sign the Contract. This is a risk as it means that by the time the property is complete, the value of the property may have decreased. If the value of the property has decreased it may pose a problem if you are obtaining finance.
- Where is the car park located? Is it double or tandem and how far is it located from access stairs or lifts?
- What are the proposed body corporate levies? The proposed body corporate levies are just that, “proposed”. In many cases, the body corporate levies are increased after the first year because the “proposed” levies are not enough to cover the outgoings and maintenance of the building and common property.
- Are there proposed by-laws?
Get legal advice before you purchase an off the plan property
Call us today to get the best legal advice to protect your investment: 1800 621 071.