risks of off-the-plan property purchases

Purchasing a property off-the-plan is an exciting venture, offering a brand new and modern home. There are a number of pitfalls and risks which purchasers need to be aware of BEFORE entering into Contracts for Sale.

Finished Building does not meet their initial expectations

There is emotional and financial stress for purchasers when they expect high-quality however the finished product differs.

Workmanship and quality is often a concern and risk for purchasers entering into these contracts. The reason for this is because off-the-plan contracts are based on perceived plans, drawings and a schedule of finishes. Typically you cannot see or touch the property at the time you are entering into the Contract.

We recommend inspecting the developer or builder’s prior projects in order to familiarise yourself with their quality and style. We recommend researching past projects and reading reviews. Conducting your due diligence prior to entering into these contracts is key.

Project will take longer than anticipated

Construction delays are not uncommon in the property development industry. For off-the-plan buyers, these delays can lead to financial strain due to prolonged waiting periods.

Off-the-Plan contracts will typically have a sunset date, being a deadline that would usually allow a purchaser to rescind a contract and reclaim their deposit if the development has not been completed. The Sunset Date allows for protection for the Purchaser.

Settlement typically cannot occur until a number of pre-conditions have occurred first. This includes:

• Construction of the Building

• Subdivision of the development land and registration of the strata plan (if applicable)

• Issuing of the Final Occupation Certificate

  Finance considerations

  Typically a long-time pasts after exchange of contracts and settlement, and finance considerations must be taken into account.

  Purchasers run the risk that the property valuation will be less than the Contract price and they may require additional funds at settlement to complete.

  When purchasing an off-the-plan property, appropriate legal advice allows for protection. Due Diligence is key.