In larger Cities it is not unusual for a property developer to sell an apartment or house ‘off the plan’. This article outlines what the term ‘off the plan’ means.
The term ‘off the plan’ refers to purchasing a property that does not have a separate title or is not built yet. Common examples are the purchase of a block of land that is part of a subdivision, or a house or unit to be built for sale on land that does not have a separate title.
There are risks for buying property ‘off the plan’ and a purchaser should take care when entering into such a contract.
When houses or units are sold ‘off the plan’ normally the house or unit is not fully built. Construction may not start until after the contract is signed. The concern with this is that the progress of the building and the standard of the building work may be different to what the buyer contemplated. You cannot see the finished house or unit when you buy ‘off the plan’ as construction will start after the contract is signed.
Accordingly, it is essential that you check the details of features, fixtures and fittings (such as the paint colour, door handles, stove, range hood, dishwasher etc) and ensure that the quality of all finishes is clearly specified in a schedule to the Contract.
“Off the plan” contracts should include the following clauses:
1. Outlining the time frame for the owner to complete the subdivision or the building to be constructed on the land. The contract should state that settlement is to occur within a number of days following completion of the building and the issue of a separate title for the property being purchased.
2. A ‘sunset clause’ that provides a period within which the contract must be completed. For example within 24 months of the date of the contract. This means that settlement can be anytime in that 24 month period after the signing of contracts. If the date passes the parties can then terminate the contract.
Changes in the market
When thinking about buying off the plan it is important to remember that market conditions change from time to time and with long-term building projects the value of the unit may change prior to completion of the building. The price in the contract will remain the same regardless of any change to the market price of the property.
Whilst you may have the best choice of land or home by getting in early by purchasing a property ‘off the plan’ this strategy is not without risk. The issues outlined above are just a few of the many factors to consider before entering into an ‘off the plan’ contract.
Whilst we recommend obtaining legal advice before signing any contract, it is especially important to obtain advice if you are considering purchasing a property 'off the plan'.
The above information is general information from Cormiston Legal and you can contact us on 03 6332 9353 or use our contact us form at - https://www.cormistonlegal.com.au/contact-us if you require our assistance.