With the increase in medium level density housing in Australia, buying off the plan is becoming an increasingly popular way of purchasing property. When you buy 'off the plan', you are buying a property that has not been built.
There are often significant advantages for purchasers buying a property 'off the plan', however, there are also important issues you need to be aware of.
In today's competitive property market, it is not uncommon for a purchaser to find that their property is worth considerably more than the agreed original purchase price by the time the property is completed. However, remember to research price trends in the same location as it is possible that the price you contract to pay is higher than the market at the time of settlement. A further advantage is that there is often a considerable delay between the exchange of contracts and settlement whilst the building is built, providing the purchaser with more time to save.
Foreign investors may also find that purchasing 'off the plan' is to their advantage with the Foreign Investment Review Board generally favouring the purchase by foreign individuals and companies of new constructions compared with existing improvements.
There are some draw-backs to purchasing 'off the plan'. Construction problems may cause delays in delivery and because there is no contractual relationship between the builder and the purchaser, the purchaser will not be in a position to monitor the builder's progress.
Another draw-back is that the seller may be able to pull-out of the contract if the property is not completed by a fixed date as set out in the contract,leaving the purchaser 'high and dry'.
Selling a property 'off the plan' also has its advantages. A seller may be able to market a proposed development and attract a level of interest in the property that it would not otherwise achieve before the property goes to market,and marketing may be more cost effective as it can commence whilst the building itself is being completed, thereby reducing the developer's holding costs.
Selling 'off the plan' may also be of benefit when seeking finance as lenders tend to look favourably on developers with funding proposals that include contractually binding commitments for a proportion of the project.
So, what should you watch out for when considering buying or selling 'off the plan'? As the plans in the contract will be the only tangible proof of what you agreed to purchase or sell, sellers and purchasers alike should pay close attention to any changes in the plans, and a reasonable amount of time should be allowed between registration of the plan and the proposed settlement date. A reasonable defects liability period should also be allowed in the contract.
This Information Outline is provided courtesy of Matthews Folbigg who are experienced in this area of law. They are located at Level 7 The Barrington, 10-14 Smith Street, Parramatta NSW 2124 or call them on (02) 9635-7966 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.
MatthewsFolbigg is a large commercial law firm based in Parramatta, New South Wales. The firm has Accredited Specialists in Business Law, Property,Immigration, Family Law and Personal Injury. MatthewsFolbigg has specialist groups advising clients in corporate structures, intellectual property, and information technology plus franchising, estate planning and insolvency work.