6 TIPS FOR BUYING ‘OFF-THE-PLAN’ PROPERTY
Buying ‘off the plan’ property can be an exciting time for prospective buyers, but care must be taken to navigate the special considerations that come with buying ‘off the plan’. These tips will help you focus on what’s important when making the decision to buy ‘off the plan’.
WE’VE SUMMARIZED 6 IMPORTANT TIPS WHEN CONSIDERING BUYING ‘OFF THE PLAN’
1. The contract is king
What you are buying does not yet exist and so all ‘off the plan’ purchases run the risk of turning out quite different from expectations. It is very important that the contract of sale is carefully reviewed so that it properly reflects, in writing, all the developer’s promises regarding the property that you are buying. Make sure the contract includes a clear schedule of all fixtures, fittings and finishes.
The best way to think about an ‘off the plan’ purchase is to think about what you would expect to see from the finished property. The words of the contract should match your understanding. The best way to do this is to review all the material provided by the developer and their agent and then to ensure that the contract reflects this before you exchange contracts.
2. Know your developer / builder
Do your research. What kind of reputation does your developer have in the industry? Try to find out what other projects they have successful completed in the past. Whilst past performance is no guarantee for future conduct, it will obviously be of comfort to know that the particular developer was successful in delivering other projects.
Also, if the developer is not the builder (they usually are separate) then you should also try to find out about the builder. What reputation do they have in the industry? What comparable developments have they constructed? Once again, whilst past performance is no guarantee for future conduct, it will obviously be of comfort to know that the particular builder has successfully constructed other projects.
3. Don’t pay too much
There is no guarantee that the price at which you buy the property will reflect the market value of the property at the time of settlement. This will be particularly important if you need finance to assist you to purchase the property. Bottom line; don’t pay too much just because you have time before you need to settle on the purchase. As everyone should know, the price of property can go up as well as down. Research the area you are buying into and find out what similar properties are selling for and the current rent. Also try to look ahead as much as possible to find out where trends are heading. Most importantly, get financial and property investment advice from appropriately qualified advisers!
4. Know your rights
In off the plan sales, it will usually be a while between exchange of contracts and settlement. A lot can change in this time. Make careful note of the conditions for withdrawing early from the contract; what happens to your deposit if the building doesn’t proceed and the developer rescinds the contract? What your rights are if construction is delayed?
5. Set a date for completion
Don’t get trapped in a development contract that never quite completes because of protracted delays. Whilst delays can occur, make sure the contract contains a realistic sunset date for completion of the property with a clearly defined mechanism for the developer to extend it (within reason). Let’s face it, delays can occur and this is neither uncommon nor unreasonable but it is important to get a handle on how the contract works.
Whilst you will be bound by the contract, most off the plan contracts are conditional and allow the developer to rescind the contract if certain events occur (e.g. construction does not proceed, insufficient sales etc). In these circumstances, the deposit should be returned to you in full. But this could be quite a few years after you first paid the deposit. You need to think about what else you could have done with your money over this period and the fact that whilst the contract is in place, you are committed to the purchase the property and might not necessarily be able to commit yourself to another purchase while you are waiting.
6. Deposit options
You do have some options concerning the payment of a deposit. Given the length of time between exchange and settlement, try to negotiate a minimum deposit and/or consider alternatives to cash deposits such as deposit bonds or bank guarantees.
DECIDED TO BUY?
At Chamos Legal, we can assist you with your purchase to make sure that you have done all that you can on your part to ensure a smooth and stress free transaction.