The interest in “off-the-plan” properties is ever increasing and is becoming more popular for buyers. An off-the-plan purchase is one where the Buyer enters into a contract to purchase a property that has not yet been constructed.
Due to the prolonged settlement period for an off-the-plan purchase it is imperative for buyers and sellers to understand their obligations and entitlements. A Contract for an off-the-plan purchase will include far more complex and intricate Special Conditions than a Contract for an established property. Ensuring you obtain sound legal advice prior to entering into these transactions is imperative.
Important provisions in off-the-plan Contracts
(a) Deposit
As a consequence of the longer settlement period, developers will usually arrange for the deposit to be invested in an interest bearing account. The interest earned on the deposit is intended to be apportioned between the buyer and the seller on settlement.
There are sometimes strict requirements placed on a buyer which they must comply with before they share in the interest earned on the deposit.
(b) Dates
There may be dates that the developer is required to meet, such as an approvals date and estimated completion date. Similarly, a buyer is required to meet the settlement date expressed in the Contract, which can be within 14 days of notification by the seller.
It is important to understand any trigger dates and if there is any recourse available when a party fails to satisfy its obligations under the Contract.
(c) Variations
There are many matters that may arise during the construction phase of a property which are unknown at the time of entering into the Contract. Developers may be permitted to vary the location of car park spaces, the size of the property and the brands initially specified in the inclusions list.
Contracts will generally have a provision specifying the types of variations a developer can make to the property should they be so required. As this is something that is provided for in the Contract, there may be restrictions on the types of variations the developer may make.
Benefits for purchasing off-the-plan
The First Home Owner Grant is available to first home owners who satisfy particular criteria. As of 1 September 2013 the ACT Government increased the First Home Owner Grant to $12,500 for purchases of new and substantially renovated property.
Another incentive for buyers is the Home Buyer Concession Scheme. Under this Scheme eligible off-the-plan buyers purchasing an off-the-plan property for $425,000 or less will have their stamp duty liability reduced from as much as $13,725 to $20.
For more information on off-the-plan Contracts for Sale please contact Conveyancing Clerk Kelly Bush.