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New laws governing the purchase of off-the-plan apartments will provide greater consumer protections for buyers and increase the onus on sellers and developers to be more transparent in their dealings.
These new laws, which came into effect in NSW earlier this month, and other disclosure obligations, are a win for the property industry and a win for new home buyers.
This is what you need to know and how you can ensure you have done all your homework when buying off-the-plan.
New requirements for buying off the plan
Changes to off-the-plan contract laws were introduced on December 1, that impact upon all buyers and potential buyers. The laws were introduced to reduce the uncertainties involved in the purchasing process.
As a result, these key changes to the Conveyancing Act for off-the-plan apartment purchases include:
- Providing buyers with more information about the development: the proposed plans, proposed by-laws and a schedule of finishes, before contracts are signed
- Vendors to advise of material changes to what was disclosed
- Buyers can end a contract or claim compensation in certain instances if they are impacted by the changes
- Vendors to provide a copy of the final plan 21 days before settlement
- Greater provisions for damages to be awarded to the buyer when the vendor terminates under a sunset clause
- Extending the cooling off period to 10 business days, with the deposit to be put in a controlled account until settlement
New laws regarding off-the-plan purchases aim to take away buyer uncertainty.
“Buying off-the-plan is a popular option, particularly for first home buyers, but there can be risks and uncertainties involved,” the NSW Minister for Customer Service Victor Dominello said of the changes.
Issues surrounding buying off the plan have been brought to a head following highly publicised problems with apartment blocks Opal Towers and Mascot Towers.
“There are issues with developers out there,” says Nerida Conisbee, chief economist at realestate.com.au.
“But they are the exception rather than the rule. The large majority of apartment blocks are well constructed and don’t have any of those issues.”
Advantages to buying off the plan
When we talk about buying off the plan, we are referring to an apartment that is in the planning or construction phase and has not yet been built.
The deposit needed to secure an apartment off the plan is usually around 10 percent. The balance is due at settlement when the apartment is finished.
The time between putting down the deposit and settlement can be advantageous for buyers as it allows you more time to save money for your new apartment.
Finishes can give you a good indication of the quality of an apartment build.
Do your research as a buyer
One crucial way to understand what to expect from a new apartment building where you want to buy, is to check the developer’s track record. Do they have a history of quality builds?
“If they have significant experience and have rolled out a number of projects, use their last completed building as a case study,” McGrath Projects General Manager Adam Sparkes told Domain.
Engage a professional such as a solicitor or conveyancer, who have experience with off-the-plan purchases to look over the contract for further peace of mind.
Looking closely and investigating fully the finishes used at a display suite will also give you a good idea as to whether the apartment will be made to the quality standard you expect.
And remember, you have 21 days prior to settlement to identify material changes made during the development process.
To view our latest projects at Toplace, click here, or contact us today.