Buying ‘off the plans’ – what you need to know…

A couple had been trying for months to find the home of their dreams. Eventually, they found the house they wanted – the only thing was, it had not yet been built!

They started discussions with the developer who was selling ‘off the plans’. They naturally had quite a few questions and decided to talk to their lawyer.

If you are buying a property that is yet to be built, there are many important things to think about. Some of these are:

• When are the payments due for the property? Sometimes agreements may include clauses requiring you to pay the majority of the purchase price on ‘substantial completion’ of the build. A danger with this is that the builder could walk away from the job before settlement or the property is completed because you have already paid them most of the money.
• What happens if the builder has to spend more money to complete it if things do not go to plan? Some contracts are ‘fixed price’, in which case the builder generally takes on the risk of having to spend extra to complete the property. If your contract is not a fixed price one, building costs can commonly climb, which is stressful on a tight budget. Even if your contract is for a ‘fixed price’ build, you should carefully read the contract, and get experienced assistance, to understand if there is any possibility that you could be required to pay extra.
• What happens if you want to make variations to the house? Generally, you will be required to pay for any variations and may also bear the risk involved.
• What happens if the build is delayed for a long time? We usually recommend including a ‘sunset’ clause in building contracts, under which the builder agrees that if the house has not been completed by a certain date, that you will be entitled to cancel the agreement and have the payments you have made refunded.  Otherwise, you can be left hanging for years waiting for the house to be built.  Our couples experienced lawyer pointed out some key risks in their building contract – and the developer was keen to sell and agreed to change these. The build was completed on time, within budget, and the couple is now happily living in their dream home.

If you are thinking about buying a property off the plans, or have already entered into an agreement to buy one, give us a call on (04) 473 6850