Off the Plan Purchases
Off the Plan Purchases
An off the plan purchase refers to an agreement to purchase a building, unit or townhouse that does not yet exist.
Off the plan purchases can often be more affordable and flexible for both owners and property investors. Off the plan purchases however present their own unique challenges which makes it absolutely essential that you seek advice from a good lawyer so that you can decide whether contracting to buy off the plan is right for you.
There are two primary risks of buying off the plan. First, you do not know what it is exactly that you are getting. Second, you do not know when you are going to get it.
Despite these risks, there can be significant advantages to be gained from buying off the plan. You do however need to decide whether buying off the plan is right for you.
Off the plan developments are frequently offered for sale even before any of the building work is started. Sometimes even before the developer has purchased the land. As such, it can sometimes take several years from the date of exchanging contracts until the transaction is completed and you can move in.
Because of the potentially significant variations in the timeframe from exchange to completion, it is extremely important that you talk with a good lawyer to ensure you fully understand the length of time you may need to wait before being able to move in.
The sunset clause is perhaps the most important clause in a contract for an off the plan purchase.
The sunset clause sets out the maximum period of time a developer can take before having to complete the building work and complete the contract.
Sunset clauses are rarely simple however and frequently enable the developer to unilaterally extend the time they have to complete the build and contract. As such, you need to seek advice from a good lawyer to ensure the sunset clause is both present and reasonable.
Deposits in property purchases are always 10% of the purchase price.
In off the plan purchases however, the deposit is frequently paid in instalments.
When you pay instalments on the deposit, they will be held on trust by the stakeholder for the duration of the contract. Usually, if you provide your tax file number, you will be entitled to a share of the interest earned on the deposit up until completion.
Off the plan contracts typically allow the developer to vary:
- The size and location of any storage unit
- The size and location of any car space
- The size and layout of the apartment
- The inclusions