Buying off the plan – 6 things you should know
12 Jun 2019
At Snedden Hall & Gallop, we know from experience that buying ‘off the plan’ can be an overwhelming experience. In this article we highlight 6 things you should be aware of when buying a unit off the plan.
1. Contract for sale
The contract for sale is an essential document in your property transaction. It provides the terms and conditions applying to you when you purchase the property. When buying off the plan, the contract becomes even more crucial as what you are buying has not been built yet. You want to make sure that what you think you are getting is what you are actually going to get.
This is where we, the Property team at Snedden Hall & Gallop, play an important part in your purchase. We’ll ensure that you understand what it is that you are getting and clarify the multiple conditions that have been included by the developer.
2. Date for the registration of the units plan
Registration of the units plan is a significant date in the process. It provides the ‘trigger’ to call for settlement of the purchase as, before a settlement date can be called, the units plan needs to be registered.
The date provided in the contract for ‘Date for registration of the units plan’ is the date that the developer estimates they will be able to complete the construction and lodge all the documents needed to register the units plan. Therefore, the original date may change.
Once the units plan is registered, the seller’s solicitor will issue a notice notifying you, the buyer, that the units plan is registered and that settlement is now due. Our experience is that settlement is usually required to take place 14 days after this notification.
In the ACT most developers will include a clause that allows them to extend the date for registration of the units plan. This will, therefore, limit your getting out of the purchase or, in legal terms, ‘rescind’ the contract.
3. The developer and builder
You should check the credentials of the developer and/or builder. You should also check the history of the developer and/or building.
Looking into the history of a developer is as simple as a Google search and you should be able to find information on all previous and current developments that the developer has completed or is in the process of completing. You are also within your rights to ask to see examples of their work.
4. Other costs
Be aware that there will be added costs to factor in when you are trying to work out if you can afford to purchase the property. These costs include legal fees, stamp duty, rates adjustments, body corporate fees, bank fees and, of course, moving fees.
It doesn’t take long for the bills to quickly add up!
Having your finance organised when you make an offer on an off-the-plan purchase can be difficult as most banks won’t provide an approval at that early stage. Depending on the length of time from when you exchange to when settlement is due, they may even require you to re-apply for approval.
We recommend seeking advice from your lender or broker prior to making any offers or entering into a contract to talk about finance options.
When you buy off the plan you are paying for property that hasn’t been built yet, so you should be aware of the risks.
Risks to consider are:
- Property value drops
- The finished building doesn’t match your expectations
- Your financial circumstances change
- The project doesn’t go ahead.
Understanding these risks prepares you to weigh up the pros and cons of buying off the plan and making that final decision.