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Pitfalls Of Purchasing Off The Plan Property
Whilst off the plan property purchasing has its benefits, a variety of pitfalls can eventuate. Some likely pitfalls you should be aware of are highlighted below.
1. The contracts can be cancelled if the subdivision is not registered by a certain date or if permission is not granted for the project to go ahead. In such cases the purchaser will not get the property they intended to own. The cancellation might come several months after signing the contract and the purchaser will be left with no option but to seek other property. This may end up costing more in a rising property market.
2. The buyer has very few options with regard to cancelling the contract. Therefore even if the property is not ready for occupation by a given date as promised by the developer, the buyer is not entitled to cancel the contract. Cancellation due to delays is only allowed if the subdivision is not registered by the stipulated sunset date for example 18 months. A pre contract promise for earlier settlement or occupation is therefore not binding.
3. A buyer cannot rescind the contract in case the developer enters into liquidation or is declared bankrupt. The liquidator or Bankruptcy Trustee has the right to appoint a builder to finish the project. This may mean that the completed project is not what you agreed upon with your former developer.
4. The quality of the workmanship is not guaranteed in an off the plan property. The finished project may not be built to your expectations. But if this is not considered a defect as per the contract, a buyer does not have the right to require rectification or rescind the contract.
5. Changes to dimensions, furnishings, fixings or simply not liking the end product are potential pitfalls of off the plan property purchasing. Most contracts give room for minor changes and thus prevent cancellation of the contract because of minor changes. But what may appear minor to the developer may be a major change by the purchaser.
6. Home Warranty Insurance does not cover buildings higher than 3 levels.
It is also useful to establish in writing what is included in the price at the time of signing the contract. Do not assume that the appliances, blinds or carpets you see in the display are included in the price. They may be optional extras.
In summary, you need to consider several factors before going for an off the plan property deal. It is important to understand that despite the seeming benefits, complications and hitches are very possible. Even more importantly, you should seek advice from a lawyer experienced in dealing with off the plan purchases. Greg Eliades is able to assist you with all stages of the purchase.
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Giles Payne & Co.
506 Bunnerong Road
Matraville NSW 2036
02 9661 6044