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Don’t underestimate the risks in off-the-plan buying

sales contractBuyers are at no risk if the projects they invest in do not start off at all, observes Michael Laurence in an article for the Property Observer. The 10% security deposit made by a buyer is completely refundable. This is if the project fails to take off owing to some constraint from the developer’s end.

 

Michael also puts in some advice in regards to the sales contract. Off the plan properties or pre-construction stage properties are no turnkey solutions. They take some time to be ready. It is not easy to envisage every small detail well in advance and this is why what is promised and what is delivered are not exactly the same in many cases. This makes it even more crucial for a buyer to read the contract clause and perform Due Diligence.

From your end, you should finalize these attributes:

  • Color themes to be used
  • Floor coverings
  • Kitchen appliances
  • Interior décor
  • Electrical fittings

Sales contract often leave a lot to be desired

There is something not quite right with the contract if it is too thin. Another important aspect for off-the-plan buying is the time proposed by the developer to hand over the key; there is a very little chance of meeting the exact deadline though. After all, there are various emergencies that might come in the way. For all you know, the weather can start playing truant just as well. Getting advice from a conveyancer should be on the top of your mind says Laurence.

It is heartening for the buyers to know that civil suits can be used as recourse in case of a developers’ default. There are already many cases when a buyer has benefited this way. This makes it even more important for a purchaser to pre-evaluate what he is paying for.

A Victorian law that has come into reckoning last year clearly states three features:

  • The security deposit cannot exceed 10% at any rate.
  • There has to be a sizable time difference between signing a contract and handing over the key.
  • Property cost is subject to changes in between the time of sign-up and the final possession by buyer

Buyers must have a strong legal recourse

I feel that every pre-construction stage (off the plan) buyer must have a strong legal backing.  While it is good to know about a few cases they have won in the court of law, there is so much that still takes place behind the sheets. A buyer-centric legal clause prepared along with the sales contract can do a purchaser’s morale a world of good. Also, what’s true for Victoria needs to be true for entire Australia. Talking for developers, I feel that the 10% security deposit should be made non-negotiable. After all, it is a small upfront percentage, made even tinier by the increasing liquidity of an average buyer.

Do you think that the clause “there has to be a substantial time gap between sign up and key-handover” makes any sense?