off-the-plan risks

There are at least 3 categories of risk to consider.

The first is construction risk. Namely, that it is possible the development may never be completed. Do some research on the developer to see if there is a good track record. A purchaser should try and reduce any deposit payable to less than the usual 10% or provide a bond instead of a cash deposit. If a cash deposit is paid, the purchaser should ensure that the agent holds it as stakeholder and should not agree to the deposit being released to the vendor.

The second is economic or financial risk, namely that the property market starts to fall after entering into the contract and continues to do so or does not recover before completion. A purchaser could end up with negative equity at completion of the sale. It is also possible that interest rates could rise meaning the servicing costs are much more than anticipated and if the unit is an investment vehicle and the rental market has gone soft the unit may be vacant for some time.

The third is contractual risk and by this we mean the terms upon which the purchaser buys the property. A purchaser should try and ensure that the unit it ends up with is the same as that it agreed to buy. This may sound a bit unusual, but if a purchaser enters into the typical standard form off-the-plan contract, the vendor has the ability to change finishes and inclusions, possibly colour scheme, and more importantly location and size of the unit. If views are important (and probably reflected in the price), have a look around the neighbourhood regarding developments in progress and check with Council regarding what can be built nearby that could affect views. Take time to fully inspect a display unit or if none exists then take time to inspect the plans and see if there is anything that you feel is important and have it provided for in the contract. The standard form contract provides that a purchaser cannot rely on anything said by the agent or vendor or in brochures etc. The date by which the development must be completed before a right of rescission applies (sunset date) needs to be considered and the developer should have an obligation to use reasonable endeavours  to cause completion of the development in a timely manner. In times gone by where enormous increases in values occurred in very short periods of time, disreputable developers could delay completion so that it did not occur before the sunset date. Lastly a purchaser should consider the defect liability period being the period starting from completion in which defects must be notified and what constitutes a defect.

Call Antunes Lawyers on 02 9964 0499 or contact us to discuss how we can best help you with your legal matter.

The articles on this website comprise legal general information and not legal advice. The general information presented here must not be relied upon without legal advice being sought. In the event that you wish to obtain legal advice on the contents of this general information you may do so by contacting our office or your existing solicitor.