Purchasing property 'off-the-plan' has become an increasingly popular option for buyers in South Australia.
What is 'buying off-the-plan'?
Off-the-plan contracts are a form of pre-construction agreement that allows buyers to purchase a property before it has been built or developed. The contract will include details of the construction timeline and the expected completion date, as well as the purchase price and any conditions that the buyer must meet in order to secure the purchase.
Off-the-plan contracts are popular for a number of reasons. They allow buyers to secure a property at a lower price than if they were to purchase it on completion and they can also potentially obtain a stamp duty saving. Buyers can also take advantage of any pre-construction discounts that the developer may offer.
What are the risks?
There are some risks and pitfalls associated with buying property in off-the-plan contracts that include the following:
- Delays - Off-the-plan contracts are often subject to delays in completion due to a variety of factors, including construction delays, planning issues, delays in obtaining necessary approvals, or changes in the developer's plans. Buyers should pay attention to the timelines and sunset dates for completion of the development.
- Changes in plans and specifications: The developer's plans and specifications of the property may change between the time of signing the contract and completion of the development, possibly resulting in a property that is different from what was originally agreed upon. Buyers should pay attention to the developer's rights to change the plans and specifications.
- Limited protections: In South Australia, off-the-plan contracts are subject to limited consumer protections. There is no law that prevents a developer from cancelling the contract so that it can re-sell the property at a higher price in a rising market, or gives a buyer a right to cancel the contract because of any material variation to the development which impacts the buyer's purchase of the property.
- Unforeseen defects: Buying property off-the-plan may involve defects that were not initially anticipated, such as structural issues or poor workmanship. Buyers may also not be given access to inspect the defects until settlement has occurred.
- Cancellation: Off-the-plan contracts may be subject to cancellation if certain conditions by the developer are not met, such as development approval, finance approval or construction of the property.
- Limited resale opportunities - Off-the-plan contracts may limit buyers' ability to resell the property prior to completion of the development.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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