Imagine a world where you could safely assume that a property bought off-the-plan would be worth more at settlement, than when you signed up for it. There’s the lure of an upfront deposit of 5-10%, while you save your pennies for a couple of years in preparation for the final payment. And then, when the big day arrives, there’s a big fat capital gain made in the time between your initial deposit and final settlement.
Snap! Now back to reality.
In the wise words of William Shakespeare, ‘all that glitters is not gold’, and one should be wary before jumping headlong into an off-the-plan agreement without considering the risks. And there are a few!
Here’s one that may surprise you:
The finished product may not resemble the plans.
You’ve just taken the long-awaited real tour of your new property, only to discover that much of what you see does not resemble what you saw in the glossy brochure.
What now? Unless you have entered into a contract that stipulates the features and specifications of the property, in detail, you may not be able to claim compensation from the developer. Time to consult Consumer Protection or your lawyer!
How can I avoid this risk in the first place?
Read the proposed contract. Very carefully.
Make sure that the off-the-plan contract for your chosen property stipulates the required features of the property, including any time-frames for completions of any ‘packaged’ inclusions. A list of helpful contract inclusions can be found here at the Department of Commerce (Consumer Protection) website, under the tab: Specifications and Features. This is where engaging your property lawyer to review your contract before you sign can save you from a potentially costly mistake down the track!
You may ask the seller (developer) to make changes to its standard contract to suit your requirements.
Verbal assurances don’t count. It needs to be in writing!
The developer is under no obligation to make any changes you require to their standard contract. However, it should serve as a red flag if the developer is not prepared to include clauses in your contract that provide assurance that promised features will be delivered or retained, or that goods and services of the standard promised will be provided.
Variations by the developer may need to be made to the contract (without your approval) if there are architectural or engineering adjustments required for Local Government approval.
Variations are not okay when made simply to cut costs!
If you are considering investing in an off-the-plan project, you should carry out extensive research and seek input from legal and financial experts who are not involved in the scheme.
As your independent settlement lawyers, contact us to book a 60-minute consultation ($385) to review your draft contract.
Stay tuned for: Buying off-the-plan: risk #2 – to Rent or Not to Rent