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Buying property off the plan: buyer beware


It is widely perceived that to invest in property is an excellent financial planning strategy. Well, not always! The option of buying property off the plan has many advantages. You get a new house with a contemporary design. You avoid the stress and effort of going to auctions besides you can be confident of the amount of money you need to organise for the property. If it sounds too good to be true, then you are not wrong because many issues may make your experience of buying off the plan a nightmare.

1. Plans are plans only till they are finalised – do not assume that the plans you are presented with are going to be the final product. They can be changed by the designer, Construction Company or even the local council. The plans and specifications the developer shows you are what the developer intends the house to look like. How the final dwelling will look like will depend on factors such as a change in council laws and legislation to budget restraints. According to section 9AC of Sale of Land Act 1962, the purchaser has to be made aware within 14 days of requested amendments. In a situation where you are not informed of an amendment, you are only allowed to cancel your contract if the change ‘materially affects the lot to which the contract relates.’

2. Property prices fluctuate – Remember a few years ago, there were newspaper reports about buyers of apartments in Docklands wanted to withdraw from their contracts because the prices of the apartments had fallen much below than what they had agreed to pay the developer. Take note that if you are buying the property as an investment, there will be a time lag between when you enter into a contract and start paying stage instalments and when the dwellings are finished and ready for occupancy. Many things can change in the interim. Check the default provision of your loan just in case you cannot rent your investment property and service the loan.

3. Unknown finish date – there is no guaranteed date for when your new property will be built. Any builder worth his/her salt will only give you only an estimated date of completion. If the development does not go ahead, you or the developer can terminate the contract of sale. The saving grace is that you will get your deposit back, but the downside is that you will potentially end up wasting a lot of time on an investment that never materialises.

4. Position of the dwelling – you will get the detailed outline of exactly where your new property will be situated. Unlike an established property, you have no idea of the aesthetics or noise pollution in that specific area. If you only have a choice of a couple of the remaining few, there could be a reason why other buyers avoided it before.

5. Facilities within or near the proposed site – investors have found to their dismay that there are no schools in the Docklands or Fisherman’s Bend development. A report predicts that Melbourne's outer growth corridors will house more than half the new students. Wyndham, Cardinia, Melton, Whittlesea, Hume and Casey each need at least ten new schools to absorb more than 10,000 new students within a decade. Think carefully before signing on the dotted lines, if you have young children or planning to start a family. These are some practical considerations which you should cast your mind to, in addition to the legal issues involved.

6. Off the plan exemptions and concessions – it is alluring for buyers to buy a property where one can get relief for duties and taxes. The laws and eligibility requirements have changed significantly after 1 July 2017. Check the conditions you need to satisfy before you can claim tax concessions.

7. Contract conditions – Read the terms and conditions of your contract carefully. You should not be surprised to read that the developer holds the right to change the finishes and materials of the dwelling. This is one of the ways they seek to increase their profit without you even knowing it. With the result, you may end up with a home that is not made to the same standards you initially had in mind.

In the past, many unscrupulous developers used to cancel the contract if the subdivision of land was not registered by a specific date. The government has mitigated the problem by introducing the Sale of Land Amendment Bill 2019 whereby the sunset clause can only be enforced by the developer with the written consent of the buyer; or by order of the Supreme Court of Victoria to prevent the developers from gaining should the land prices go up.

Disclaimer: The information contained in this article is not legal advice. It is not intended to be comprehensive nor does it constitute legal advice. We attempt to ensure that the Content is current, but we do not guarantee its currency. You should seek legal or other professional advice before acting or relying on any of the Content.



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