You’ve found your dream home, you’re excited to move straight in, then the agent gives you the bad news… it hasn’t been built yet and you have to buy “off-the-plan”.
Don’t worry they tell you – the slick marketing material is exactly what will be constructed and the developer “only uses the very best builders”. If you just sign right there on the dotted line, your dream home can be yours today (today in [indeterminate number] of years anyway) – don’t even bother reading the contract!
Your parents probably told you that haste makes waste. Here are some tips to ensure your dream home doesn’t turn into a multi-year-long headache.
1. First things first
The big beautiful claims and glossy renders in the pretty marketing material is usually “excluded” from the Contract when you purchase off-the-plan. If there are particular aspects of that material that you expect to receive at settlement, let your solicitor know before you sign so that it is clear that this will be delivered at settlement.
2. Schedule of Finishes
This is not something to brush over. Are you getting carpet or timber? A microwave included? Windows or cling wrap across a hole in the wall? If that particular microwave, hardwood floor or brand of wine fridge really matters to you, make sure to let your solicitor know to explicitly include them in the contract. Really consider whether the finishes in the schedule are what you expect to receive when you step foot into your dream home. Also keep in mind that the Seller maintains a number of rights to alter the plans and that schedule of finishes (though that is a whole other kettle of fish!).
3. Pre-Settlement inspections
When you buy a home already built, you rightfully expect to view the property before you stump up the cash. When it comes to an off-the-plan contract, this shouldn’t be any different and may even be more important. Ensure you are allowed access at least once to inspect your dream home before its finally yours. You don’t want to have workmen coming through, moving your stuff around to fix shoddy painting or skirting – you want it done right from the day you move in. Plus, it will also help your bank make sure their valuation stacks up.
4. Defects Period
You’ve moved in after dutifully inspecting pre-settlement and finding no issues. You’re making breakfast on the first quiet weekend in your dream home, you open the pantry door and it rips straight off its hinges! Breakfast is ruined. Be sure to check that your off-the-plan Contract allows you to report defects in the property to the developer. A defect period of at least 90 days from the Settlement Date is common fare, however there are generally limitations to what the Seller will fix; in particular anything covered under a manufacturer’s warranty won’t be covered so ensure that your Contract requires the Seller to transfer any manufacturers warranties to you upon Settlement.
Like purchasing any home, the buyer and the seller make adjustments in settlement in respect of outgoings such as rates, water and body corporate levies. Although less common, some developers selling to off-the-plan buyers even make adjustments for their land tax! This can be a significant expense and should be taken into account. Outgoings are generally adjusted so that the Seller will pay for anything up to an including the settlement date and the Buyer will pay for anything from settlement. Be sure to double check your off-the-plan contract to confirm when you become liable for the outgoings.
6. Sunset Date
All off-the-plan contracts are subject to a “sunset date”, which is the date by which the contract must be settled. This can be up to 5 and a half years! When purchasing your dream home out of a brochure, you need to think about whether you are comfortable having your deposit tied up for that long waiting to see if the developer ever finishes the build. Keep in mind that sunset dates will often, and must be, longer than the developer expects it to take to finish – this is their contingency for unforeseeable events so they are often unable to reduce a sunset date particularly if construction has not even begun yet.
If you follow these steps, the dream home you get should look a lot more like the dream home on those glossy pages etched into your memory. Now you just have to wait for it to be built!
For more information on purchasing off-the-plan properties, contact a member of our Conveyancing team.
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