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Buying off the plans (without going off the rails)

Tom Willis

September 2014 . . . If you are buying “off the plan” – an increasingly popular option for house and apartment buyers – you will often be signing up to an agreement that favours the developer/vendor, and is very different from a standard sale and purchase agreement. 

You need to make sure that you do your due diligence and understand the risks.

We have listed some of the key points to look out for below.  However, there are many others - the bottom line is that you should never sign an agreement without first having the agreement reviewed by a solicitor.

Key points

Are the exact plans and specifications recorded in the agreement?

Plans and specifications will often be outlined in marketing material. It is crucial that the exact plans and specifications (including the fixtures and fittings and the fencing and landscaping responsibilities) are recorded in the agreement. The agreement should mirror your understanding of what you are buying. You should be wary of the vendor’s ability to vary plans and specifications

Is the developer/vendor an entity of substance?

It is common for developers to create a ‘shell company’ (with limited liability) solely for the purpose of one development or project. If things go wrong you may find yourself suing a worthless entity.

You should investigate the track record of the parties involved (get googling!).  Is the builder a Registered Master Builder? Are there any complaints over their workmanship lodged with building licensing authorities or similar registers?  What other projects has the developer been involved in, and how did they turn out?

Is the deposit held by a third party stakeholder until settlement?

If the vendor is liquidated during the course of construction the agreement should allow you to cancel the agreement and recover your deposit.  The vendor may not agree to this, but at the very least the deposit should be held by a third party until the agreement is unconditional.

A deposit of 5-10% of the purchase price is standard practice. You should not pay more than this.

Does the agreement contain a sunset clause?

A sunset clause enables you to cancel the agreement and recover the deposit in the event that the vendor has not completed construction by a certain date. It can be a costly and stressful experience if an agreement does not contain one.

Does the agreement contain a builder’s warranty or maintenance period?

Make sure that you have a builder’s warranty or maintenance period of between 30-90 days from the possession date for you to give notice of defects arising from faulty workmanship or materials. The scope and extent of a maintenance period can indicate the integrity and workmanship of the builder.

Are Body Corporate rules clear and acceptable?

Where you are buying a unit title (e.g. an apartment) you should make sure you are clear about the building’s Body Corporate rules. For example, is there a building manager? Are pets allowed to be kept at the building? Can the vendor change the rules without your consent?

We deal with these issues all the time - if you are looking to buy off the plans, feel free to come in and have a talk to us first. 



The material in this article is provided for general information purposes only and not as legal advice. If you have any questions on the issues covered please contact us.