Category : Buying a new home

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5 things you need to know before you buy a house off the plan

Buying off the plan involves entering into a contract to purchase a property before construction is complete or has even begun. It can seem like an attractive measure by locking in a price and saving money on stamp duty. However in many cases, purchasers are left disappointed as the finished property does not resemble the one they purchased as it may be smaller, with different finishes and have defects. The end result is that the price you paid may not reflect the finished product, especially as often 10-15% of it is calculated for marketing expenses in order to get the project off the plan. Hence, it is wise to understand these 5 things before purchasing off the plan.

1. Rights to withdraw from contract

Cooling Off Period

It goes without saying that entering into a contract of sale to purchase a property is legally binding. Nonetheless purchasers in private sales have a three day grace period in Victoria to withdraw from the contract and receive a return of all money paid except $100 or 0.2% of the purchase price whichever is the greatest. However, this may be a small relief for off the plan purchasers as any risks to your investment are unlikely to eventuate in such a short period.

Sunset Clauses

Sunset clauses, a date by which if the property is not finished, both the developer and the purchaser can withdraw from the contract and receive a return of the deposit, however, sunset clauses can too often benefit only the developer if it is of such a prolonged period as to deny the purchaser from withdrawing in the event of lengthy delays. Furthermore, recent reports shown sunset clauses may be used by a developer to deliberately withdraw from the contract and then re-sell the property at a higher price causing the purchaser to have to purchase the property at a higher rate should they want to buy again.

It is wise to do your research and understand that the average sunset clause is 18 months but this may change depending on the stage of the development at the time that you entered into the contract. Further it may be practical to incorporate into the clause an option to proceed with the purchase for the original price agreed if the delays are small and the market is still good.

2. Inclusions and warranties

Without a completed dwelling it is hard to know exactly what is included in the sale price such as fixtures and warranties. To understand what warranties are included, you should request further plans where appropriate, always ensure that the project has development and construction certificate approval and that the builder and developer have taken out all relevant levels of insurance.

Unfortunately, when purchasing an apartment in a building more than three stories, home warranty insurance is not included. As yet, there is no perfect solution so be sure to add in additional provisions into your contract prior to executing it so that it includes the right to withdraw should the building contain any major defects or otherwise. Even though this right is available to you via common law, it is always easier to deal with these issues if they have been accounted for in your Contract of Sale.

Furthermore, it is common for sale contracts to permit the developer to change the plans so long as the changes are of equal quality. It is important to discuss in detail exactly the tolerance percentage allowable for changes especially changes such as unit size. Developers typically want a 5% tolerance for variation but this may mean the loss of a laundry or linen cupboard so it is important to agree only to variances you could accept losing.

3. Check viability of property developer/builder

Research into the project and its constituents: builders, architects and the developer is the best way to protect yourself from disappointment. Firstly, check the developer’s website and learn of other projects completed by them. Investigate these properties and learn of any reviews on them to understand how well the developer builds and can produce satisfied clients. Call a lawyer who deals with Building Disputes and ask them about the reputation of the builder.

Secondly, it is vital that you check the builder engaged and insure that they are licensed and haven’t had any proceedings brought against them for defective or delayed work.

Thirdly, it may be wise to investigate prior work done by the architect to understand whether their design techniques are suitable for what you are looking for in the property.

4. Financing the purchase

Financing an off the plan purchase may be difficult due to lenders being reluctant to invest their money in a non-existing product as the property may be sold for more than it is worth. For this reason it is important to understand the purchase price. In order to ensure that the price is reasonable it is wise to research into the price of similar properties in the area and to look at the assets of the property in comparison to others in the area; view, noise, car space, accessibility, location and much more. Most importantly, remember that while assets depreciate in value over time, land increases in value so it is important to try to obtain an adequate land to asset ratio in order to ensure some financial security if you must re-sell. Doing this research may also help convince lenders that the property is a safe investment.

5. Make condition/inspection of property a condition for settlement

If you have done all your research and are satisfied that you are sufficiently protected and have a good interest in the property then the last step is ensuring that the final product makes all the hard work researching worth the trouble. This can be done by ensuring that in the contract for sale a condition to settlement is an inspection of the property be undertaken. It is advisable that you have an expert inspect the property and produce a report prior to settling so that you understand and have proof of the value of the property.

For any further information call Boutique Lawyers on 1300 556 140 for your free 30 minute consult with our experience property, building and planning lawyers or contact us via our website at www.boutiquelawyer.com.au.

5 Reasons why you need a Lawyer to perform your conveyance

  • So you bought a house or thinking of selling?
  • Thinking about doing your own conveyance or engage a conveyancer?
  • You are thinking what’s the difference between having a lawyer do your conveyance rather than a conveyancer?

Before you decide,  you should know that the process of transferring property ownership from vendor to purchaser can be quite complex.
Here are 5 reasons why a lawyer will better protect one of your most expensive transactions during your lifetime.

 1. Specialised knowledge

A conveyance is a legal transaction and, therefore, it would make sense that it should be performed by  a lawyer that has specialised knowledge of the process. This is particularly important because a conveyance creates a legally binding relationship between a vendor and purchaser and gives rise to legally enforceable rights. Once you are bound to a contract it is very hard to get out of it without having to pay some kind of damages.

Further, unlike a conveyancer, a lawyer help you with more than just the property side of the transaction. For example, if you have been appointed executor of an estate and need to sell a property, a lawyer may be able to advise you on your duties as an executor as well as assist you with obtaining a grant of probate so that you can perform the conveyance. A conveyancer cannot do this because don’t have the specialized  knowledge of the law and are not allowed to provide you with any legal advice.

Lawyers also have an obligation to keep up to do date with changes to the law and current matters which is not required of a conveyancer, and so, your conveyance may not be performed correctly.

2. Training

As well as  specialised knowledge, a lawyer will have undertaken practical legal training in property and contract law, tax, equity and deceased estates. This is very handy as one or more of these areas of law may be applicable to your conveyance.

Conversely, a conveyancer will have only undertaken training in conveyancing, and as mentioned, cannot assist you with anything else.

3. Good value for money

Unlike a conveyancer, when you employ a lawyer to perform your conveyance, a full legal service will be provided to you. This means a consultation, sound legal advice, attention to detail and more importantly, peace of mind. While this may cost you slightly more than what you would pay a conveyancer, remember, you are being protected from any exposure to liability.

Another thing worth noting is that lawyers are very good at spotting issues before they happen. This is important because you may find yourself seeking legal advice about an issue that was not picked up by your conveyancer.

As the saying goes, ‘Don’t be penny wise, pound foolish’.

4. You’re protected

If you are thinking about handling your own Conveyancing matter,  perhaps you should reconsider. Again, it may be cheaper, but know that if you make an error, you will be held personally liable and will have to compensate the other party for any loss or damage they have suffered. You may even be forced to go ahead with the purchase when you cannot or don’t want to.

To avoid this, you need to engage a lawyer. A lawyer has professional indemnity insurance that will protect you from any personal claims made against you

5. Results

There are demands, deadlines and long hours involved in conveyancing. A vendor wants to be 100% certain that their property has been sold, while a purchaser wants to be 100% certain that they have acquired ‘good’ title. A lawyer can ensure that this has been done since they are held  to a higher standard of ethics and professionalism than any other professional, rest assured, you will get results.

So make sure you make the right decision and get a lawyer to perform your conveyance.

Call Boutique Lawyers for a free consultation 1300 556 140.