Beware when buying property off the plan
The term “buying off the plan” usually refers to purchasing a property that is not yet registered as a separate lot with the government department responsible for land title registrations, or not yet built.
Buying off the plan can refer to the purchase of a block of vacant land that is part of a subdivision, or a house or unit being built for sale where the land on which it stands is not yet registered as a separate title.
Selling property “off the plan” allows a land owner to develop the land in a less-expensive way, as the developer can negotiate lending rates with its Bank at a lower rate if some of the land, houses or units are already sold to buyers.
This is an advantage to the land developer and can also be attractive to a prospective purchaser who buys into an “off the plan” property in the early stages of the development.
There are however risks for the buyer of property “off the plan” and a diligent purchaser should take care when entering into this type of purchase contract.
A contract for the purchase of property “off the plan” is a contract that does not have a precise completion or settlement date due to the incomplete nature of the building project and the subsequent separate registration process for the title to the land or new building.
“Off the plan” contracts generally include several clauses that are different to those in a standard contract for a registered lot. The major difference is the timeframe for the owner to complete the subdivision or the building on the land.
You should keep in mind that like the economy, property market conditions fluctuate and with long-term building projects such as luxury high-rise units, the value of the units may change prior to completion of the building and your contract. The price you agreed to pay stays the same regardless.
Your deposit could be tied up for some time between signing the contract and settlement. Paying a deposit by way of a Deposit Bond (not always available in all states) or bank guarantee may be a better choice than a cash deposit when buying “off the plan”. If you terminate the contract your bond or guarantee can be cancelled, and you do not need to take steps to recover your cash deposit.
Tim Hayter, Principal, Mid West Lawyers
This information is general in nature and should not be relied upon as legal advice. Formal legal advice should be sought for your particular circumstances.
