Off-the-plan purchases enable homebuyers and investors to secure property at an agreed price without waiting for construction to start or complete. It has become an increasingly popular trend, particularly in London where its steady performance of property market coupled with deposit guarantees have made this method of sale the norm.
Developers may offer incentives such as financial discounts to buyers of off-the-plan properties. Or they might include a “sunset clause” in their contract that allows them to end it early without providing valid reasons; otherwise, the NSW Supreme Court could nullify it.
An inherent risk in buying off-plan is that construction work may not meet the standards set out in your Home Building Compensation Scheme home warranty scheme (also referred to as HBCSG). Therefore, it’s vital that you understand how your contract of sale operates as well as seek legal and other advice before signing anything.
Note that all deposits or instalment payments made during an off-the-plan contract will be held in trust or controlled money accounts by their stakeholder (usually real estate agent), until settlement occurs and cannot be released to the vendor until then. This protects these monies from being released back to a builder if their financial problems escalate.
Lastly, when purchasing off-the-plan property it is important to remember that you still have the same rights to cancel as with an already built property – with 10 business day cooling off period and asking to shorten or waive contract costs accruing 0.25 per cent of value forfeiture applied respectively.