News & Insights

Caveat emptor – Tips for buyers in off the plan property purchases

Posted on Tuesday, November 28, 2017 by Bruce Lum, Executive Lawyer

Purchasing a property is a daunting experience for most people. With the large amount of development going on in and around Sydney at the moment, more properties are being sold off the plan adding a further layer of complexity to the transaction.

From 1 July 2017 investors in off the plan properties will need to pay stamp duty within 3 months of the date of the contract. People purchasing an off the plan property with the intention of using it as their principal place of residence will have 15 months from the date of the contract to pay stamp duty. When buying your property off the plan, there are some key things to look out for in the contract including:

  • The extent that the developer can change the lot. Some contracts allow the developer to change the size of the lot, the quality of the finishes or the number of lots in the development. As the buyer, find out if you are able to get out of the contract if any of these changes means you no longer want to buy the property.
  • The sunset date. When will the development be completed and what happens if the development is not completed by the sunset date? Find out if it is possible for the sunset date to be extended? Also, it is important to know if either party can get out of the contract if the property is not completed by the sunset date.
  • Check the proposed strata by-laws. Do they place any onerous conditions on your ability to live in the building? Do they allow the keeping of pets?
  • Proposed strata levies. How much are the strata levies going to be?
  • Property defects. If there are any defects in the property, find out how long you have to notify the developer of the defects. And, how long does the developer have to rectify these?

Another important consideration for buyers is finance. You need to be sure that if required, you will be able to obtain finance to complete your purchase. It is possible that interest rates may go up or banks may change their lending criteria between the date of the contract and the date of the build completion, making finance unaffordable or unobtainable. This may result in the loss of your deposit and you being liable for any loss suffered by the developer as a result of being unable to complete your purchase. So think carefully about how you are going to finance your off the plan property purchase, once you have made the initial deposit.

If you need advice on, or conveyancing assistance with, an off the plan property purchase, please contact Bruce Lum on (02) 9233 6233 or by email at bruce.lum@demestre.com.au