During the last few years in Perth as the population swelled and the economy grew strongly, many developers took the opportunity to start clearing land and building apartments and townhouses using the off-the-plan sales method to raise capital for their projects.
Off-the-plan sales simply refers to property purchases that take place before the Certificate of Title has been issued. It means buying on trust, albeit with a legal contract in place.
This type of sale can have its advantages and many people have benefited from this method of purchase. However, it's very important that buyers read the fine print in these contracts to know exactly what they're buying and what their rights and responsibilities are. It's different to buying an existing house.
In particular, off-the-plan buyers need to be very clear about when the settlement period is and the consequences of not meeting it. Settlement refers to the legal handover and usually involves the final payment.
If you fail to meet settlement, then under some circumstances the sellers have the right to cancel the contract with you and to re-list the property for sale. This will be at a higher price than you first agreed to if the market has moved on during the several months that have passed between the offer and the settlement date.
This might seem like an unlikely scenario, however sometimes delays in settlement are beyond the control of the buyer. If you require a loan to purchase the property the banks may not be able to offer finance with such a long settlement period. At a time closer to settlement you would have to reapply for finance which may not be offered.
Even if you have paid the stamp duty on the land, had the contract stamped and sold another property to move into your dream home, it might come unstuck at an overdue settlement which isn't directly your fault.
At this point the sellers and developers could cancel the contract and re-list the property for sale.
For anyone thinking of buying land or an apartment from an off-the-plan development, it's wise to enquire about any sunset clauses in the contract.
Does it contain any circumstances that could give rise to the seller's contractual right to withdraw and terminate the contract, and what are they?
In other words, are there any special conditions in the contract that you as the buyer should know about before signing anything?
Off-the–plan sales can be a great opportunity to help people buy into an exclusive block or subdivision, particularly if it looks like it's going to be popular. Even so, it's important to take time to read and understand the contract to ensure you make an informed decision and a confident purchase.
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