Buying a property can be daunting, particularly if you have not done it before. When deciding what to buy you may go to auctions, look at private sales or come across the opportunity to buy off the plan. While you can go and see properties that are for sale by auction or private sale, buying off plan is a very different experience that comes with a unique set of benefits and risks.
What does “buying off the plan” mean?
Buying off the plan means that you are purchasing a property that has not been built yet. These are often high rise apartments but could also be a unit, townhouse or villa. Because the property is not yet built, you cannot walk through it like you can with an established property. Instead you may be shown a display room and plans for the development that are meant to give you some idea of what the property should look and feel like when it is completed.
The process of buying off the plan is also a little different. There is still a purchase contract to be signed and a deposit that needs to be paid, but these may also include project plans and specific clauses about what will (and will not be included) in the finished property like curtains, appliances and carpets, for example. As it may be months or years until you are able to see your completed property there are often also special clauses to deal with building defects or what happens if the property is not finished within a reasonable time. These can be quite complicated and may be difficult to understand without legal advice. At MNG Lawyers, we’ve helped a range of clients with buying off the plan, making sense out of complicated legal jargon and ensuring you feel 100% informed and protected from a legal standpoint – for expert advice, contact our team today.
Benefits of buying off the plan
Here are some of the top benefits of buying off the plan:
- May attain a higher valued property paid at a lower price
When you buy off plan, you are usually buying months or years before the property will be finished. During the build, your property could appreciate in value, yet the price you pay would remain fixed. This means that you could end up with a higher valued property built at a lower price. - Smaller upfront deposit
With a deposit of usually 10%, you will also have time to save money and arrange finance to pay for the remainder of the property. - Pay less stamp duty
In Victoria you may also pay less stamp duty to purchase the property. - Can claim depreciation (if any) on property
If you are purchasing the property as an investment you could possibly also claim depreciation on the property. - Flexibility to design your property as you’d like
As the property will be new, you may be able to choose some of the fixtures, fittings and colour schemes yourself so you can put your own stamp on it. In some instances you may even be able to make changes to the internal layout or design of the property. - Builders Guarantee
As the property will be newly built you will also have the benefit of the builders guarantee if there are any issues with the building when it is finished.
Risks of buying off plan
While there are several potential benefits to purchasing off the plan, there are also risks that you should be aware of so you can make an informed decision.
- Pre-approval challenges over long periods of time
Many people like to get a pre-approval for finance before purchasing a property. However, when you buy off the plan there may be a long period of time between signing the contract and being ready to settle. This means that your pre-approval may no longer be valid and you will need to go through the process of arranging approved finance again. If your situation has changed, like if you have lost your job or had a baby, this could affect your ability to get finance. - Expectations may not become reality
Even though you may be able to select some of the fixtures and fittings for your property it may not look the way you expected when it is finished. In some instances it could be smaller, the fittings may be of a lesser quality or the floorplan may be different. You can minimise the risk of this happening by having a solicitor review the purchase contract before you sign and helping you negotiate any changes that you may want to make. - Completion may take longer than anticipated
A common issue with off the plan properties is that they may take longer to complete than you had expected. There are a range of reasons that may cause this like council approvals, weather delays and access to labour. These are often difficult to predict at the outset, but you will need to be prepared for it especially if you are living in and need to sell another property or have to sign a lease agreement. - No completion at all
In some instances the property may not be completed at all. This could be due to the developer losing financing or going bankrupt, for example. In this situation, your contract may be terminated and you may or may not get your deposit back.Generally, a contract to purchase off the plan is weighted in favour of the developer so it is important to go in with your eyes wide open and good advice from your lawyer.
Get legal advice from MNG Lawyers
If you are thinking about buying off the plan our experienced lawyers and conveyancers in Melbourne and Ballarat can help you minimise your risks. We can review the purchase contract and negotiate with the developer on your behalf to make sure you are protected. We can also review your financing agreements and give you advice on any taxation issues.
If you have already signed an agreement to buy off the plan and want to get out of it, we can give you advice on what your rights and options are.
When your property is being built or near completion we can also represent you if you are not happy with it or there is a disagreement with the developer or builder.
Our job is to make sure that your rights are protected, so give us a call today.
