There are various ways of buying property, including off a plan of subdivision pending construction and/or registration of the property. This is known as buying “off the plan”.
Buyers of off the plan properties enter into a binding contract for an agreed price pending the completion and registration of the property.
There are pros and cons to off the plan purchases with associated risks and benefits.
The attraction is price certainty, considerable time before settlement to increase savings, potential government incentives including first home owners’ grants and stamp duty concessions, tax concessions for investors, and lengthy builder’s warranty insurance.
Risks include loan uncertainty to complete the purchase after an extended period pending construction and registration especially if there is an unanticipated drop in property prices; reduced flexibility as to contract negotiation compared to registered properties; potential construction delays; the developer’s ability in NSW to rescind the contract with court approval after the prescribed sunset period contained in the contract to register the property; potential insolvency of the developer which constitutes a risk to the deposit paid; and uncertainty as to the finished build that varies from the buyer’s expectations provided for in the contract. In short, off the plan contracts contain numerous ifs, buts and maybes.
Extensive and meticulous legal advice is crucial to enable the buyer to clearly understand the uncertainties associated with off the plan purchases. Generally, the earlier the purchase is made, the greater the uncertainty as to aspects of finished construction and registration.
We trust you have enjoyed this year’s columns, and with the festive season upon us we wish readers of The Post and their loved ones a safe and happy holiday period.
