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What are the risks for buying off-the-plan?

Conveyancing and property law

What are the risks for buying off-the-plan?

Buying a property off-the-plan means entering a contract to buy a home or apartment that hasn’t been built yet.

The purchase requires a deposit, and is based on developer’s plans, and drawings of how the property might look once it’s built.

There are several benefits to buying off-the-plan, including more time to prepare for settlement, the potential for the property to increase in value during construction, and government grants for first homeowners.

However, there are also several risks involved with the process. These include:

  • The potential for a loss – sure, the property could increase in value before it’s built, but it could go the other way too, especially if there’s a market downturn.
  • Issues with the developer – the developer could have financial problems, meaning your property could be delayed, or in the worst-case scenario, not built at all.
  • Finance conditions – most lenders won’t offer unconditional financial approvals until the property is finished. If the market takes a dip, your conditional financial approval could be denied.
  • Variations – most off-the-plan contracts have room for variations, which could be anything from carpark spaces, to finishes, to even the size and location of the property.
  • Construction delays – you could be waiting years, not months, to get into your property.
  • Sunset clauses – this is a provision in the contract that allows either the developer or the buyer to terminate the agreement if a specific event, like construction does not occur by a set date. However, while sunset clauses are beneficial for buyers in some instances, they can also be used as a weapon against buyers in ‘off the plan’ contracts. Some developers have deliberately drawn-out construction past the sunset date and then terminated the contract

It’s important to spend time researching the developer involved in any off-the-plan construction, as well as the builder and architects. 

Make sure you look at every detail of construction, right down to the fixtures and fittings. 

You will need an experienced solicitor to go through the contract with you, and check for any unexpected costs or conditions.

The property experts at GLG Legal Springfield can help you with every aspect of buying a property off-the-plan.

Make an appointment by calling us on: (07) 3288 3511 or emailing: info@springfieldlegals.com.au