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What you need to know about buying a property off-the-plan – Conveyancing



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The pros and cons of buying off-the-plan.

Australians have a rollercoaster relationship with off-the-plan
property purchases.

Some homeowners swear by it, while others steer well clear.

With a bit of diligence and support from an experienced property lawyer, you can purchase your
property, pop champagne at handover and avoid the sour taste of a
purchase that falls short of expectations.

If you are considering buying off-the-plan, keep reading to find out
how to avoid the pitfalls and property perils that lead to messy
off-the-plan litigation.

The benefits and risks of buying off-the-plan

Buying off-the-plan means purchasing a property before it has
been built, usually in a subdivided lot, new estate, or apartment
building.

Like every property investment strategy, the off-the-plan
approach has pros and cons.

The benefits of buying off the plan

  • More time to save

  • Buyers often pay a deposit when signing the contract. The
    balance is then due when the property is completed and handed over.
    This gives you more time to save for furniture, move-in costs and
    lump sum mortgage repayments.

  • Potential value increase

  • With the current volatility in the property market, there is
    every chance that buying off-the-plan means your property is worth
    more by the time it’s finished. For investors especially, this
    gamble can pay significant dividends.

  • b>Benefits and grants

  • In some states and territories, buying off-the-plan comes with
    perks like the First Home Owner’s Grant or tax benefits for
    property investors. Check with your bank, broker, or accountant to
    find out if you are eligible for concessions or tax benefits when
    buying off-the-plan.

  • Land Transfer (Stamp) duty savings

  • Like tax benefits, off-the-plan property can sometimes come with
    a stamp duty waiver. Ask your Melbourne property conveyancer for the latest
    advice, as stamp duty concessions can save you thousands of
    dollars.

The potential risks

  • The property falls short of expectations

  • One of the most significant risks of buying off-the-plan is that
    the finished property fails to live up to your expectations.
    Perhaps the builder cut corners or the glossy brochure oversold the
    lifestyle benefits. Without being able to walk through the property
    before it is finished, there is no way to ‘get a feel’ for
    the finished home. You can mitigate this risk by checking the
    quality of the builders and/or developers other projects they have
    built.

  • Construction delays

  • If your builder encounters delays or financial trouble, it may
    extend the waiting period for your new home. At best, this is
    frustrating. At worst, you could experience financial hardship from
    prolonged rental obligations or loan repayments.

  • Your situation might change

  • Construction can take months or years. In that time, your
    financial situation can change significantly, meaning the deal you
    agreed to no longer suits your lifestyle or investment goals.

What you should consider when buying off-the-plan

When buying off-the-plan goes wrong, you might end up asking
yourself how you can get out of an off-the-plan contract?

To avoid frustration and find a solution to your property
perils, it is worth engaging an experienced property solicitor like
PCL Lawyers to advise you. They will check the contract and look
for ways to end the off-the-plan contract. There are many different
options that we can help advise you on if you can no longer
complete the purchase.

In particular, purchasers considering buying off-the-plan should
be aware of Section 9AC of the Sale of Land Act 1962 (Vic),
which outlines the seller’s responsibility if the agreement
materially changes.

Section 9AC sets out purchasers rights when the developer
changes the apartment.

In Section 9AC it says that developers must inform buyers if the
subdivision plans materially change between entering into a
contract and the developer registering subdivision plans.

Developers must notify buyers of material changes within 14
days. These include changes to the property such as:

  • Lot size changes

  • Variations in lot liability or common property entitlement

  • Removal of a storage cage

  • Changes to common property

Buyers have a short time to respond to the notification if they
have an issue. If the change is unsatisfactory the buyer may be
able end the contract – that is, walk away and get your deposit back.

How a Melbourne property lawyer can help navigate Section 9AC
and avoid off-the-plan risks

Section 9AC prevents nasty off-the-plan disputes and litigation down the
track. It does not prevent developers from trying to amend
properties it just gives you rights if they do. It is important if
you are buying off the plan to get advice if there is a change to
the plan at all.

Not all changes are material, so you can ask an experienced
off-the-plan property lawyer for help understanding your rights and
the vendor’s obligations.

It may give you opportunity to get out of your off-the-plan
contract, which may suit some buyers if their circumstances
change.

The experienced property and litigation lawyers at PCL Lawyers
have seen the benefits and pitfalls of buying off-the-plan many
times over.

Our experience is your advantage.

If you are considering an off-the-plan purchase, to find out how we can help you smooth the road
from signing your contract to settlement day.

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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