If you’re thinking of buying a property off the plan there are a few extra considerations you need to take into account before you sign.

An off-the-plan purchase is when you buy a property that is intended to be lived in but is not yet constructed or doesn’t have an individual title. All you can see is the plan for what the property will look like when completed.

There are a few added risks and different things to take into account compared to purchasing an established property or new home. As long as you know what they are and have a solid sales contract that gives you the flexibility to get out of the contract if things don't work out as advertised.

Buying off the plan? Be aware of the risks

Buying off the plan is a speculative venture. You won’t really know the property or land value because it doesn't exist yet, so the current market conditions used to measure value and fair price become blurred. This creates a gap between what you buy and what the finished product is. 

How big that gap is will remain a mystery until the building is completed and may even remain so until you or another off-the-plan investor in your building sells the property sometime in the future. 

It can be a bitter pill to swallow if you discover your rental returns or capital gains weren't what you expected.

The other things that can change significantly between when you buy and when you have ownership are lending criteria as well as your personal circumstances.

It’s important that you have solid budgets in place and that you trust your ability to make repayments will stay steady, or increase. Penalties apply if you can’t settle the property debt at the appointed time.

Get what you are buying written into the Contract

What we hate seeing as conveyances is tiny floor plans without details that are jammed in along with all the other property details. It’s not clear what you are buying or what you are entitled to. Instead, you need to insist that an architectural floor plan is stapled to the Contract separately. Make sure it comes complete with measurements and all the inclusions printed on an A4 or larger page. If need be you can use the floorplans provided on the agent’s glossy marketing brochures as they are usually large clear and even printed in colour.

Ideally, you want the floor plan to show details including:

• Ceiling heights
• Room dimensions
• Smoke alarms
• Intercoms
• Heating and cooling vents
• Powerpoints
• Windows and door locations and sizes

If you’ve negotiated any changes these need to be clearly noted in writing on both the contract and on the floor plan. 

Just before settlement, you’ll get to walk through the property for your pre-settlement inspection. This is the time to compare notes with the contract. If anything is in error you have time to address it in his small window. If you don't capture the measurements and exact details of what you were buying in the contract, you won't have any evidence that the real-life outcome isn't what you paid for.

Understand your registration period (sunset date)

To prevent developers from taking too long to get work completed (or started) most contracts offer what is known as a sunset date. The standard timeframe is 36 months from signing. This gives you a cut-off when the Plan of Subdivision must be registered and the certificate of occupancy has occurred. This basically gives you a guaranteed move-in date. 

The sunset period will be stated in the contract and you are bound by all the legal obligations with the contract until this date.

If the Plan of Subdivision has not been registered in time you are able to exit the contract without penalty on the basis that the delays are too extreme.

Just note that the vendor is able to exit the contract at this time too, even if you wanted to press forward around the extended completion dates.

You can request a change to the contracted sunset time frames if you disagree with them but this must be done before you sign and put n writing. The easiest way to make the request is simply to cross out the proposed registration period and write in the one you want. Do not sign the contract until the other party has agreed to the change.

It’s really important to take the contract as the binding, legal document it is. If the selling agent tells you not to worry, the build competition will happen well before the written date, you can’t take that as genuine. They can’t factor in any of the unforeseen events that may cause delays and might not have authority from the builder to make the claims they are making. The contract you sign is the legal and expected completion date, you cannot bank on your build being completed at any time before this, regardless of what you might have been promised verbally.

Know that risk is part of the package

An off the plan purchase isn’t for everyone. You need to be sure you are okay to take on the extra risks and keep an open mind and show some flexibility for the build to be completed. It's important to research the builders and know you are buying from someone genuine with strong backing. After that though there is little you can do to speed things along or make it stay on schedule, the same goes for the developer. Now more than ever materials, delivery and skill labour is tricky to predict and delays and misfortunes can be pretty much expected. 

Some changes to plans and materials might be necessary to keep the project moving.

Changes may need to be made in order to get around sold out materials - which can also increase the costs. There might need to be changes in order to comply with government regulations or if there was a change in the number of titles, your apartment location or property size overall.

In most cases buyers and vendors are both legally obligated to continue with the contract even after changes are necessary. Digging your heels in will only delay matters and cause you stress.  

The vendor is putting in effort, risk and their finances too. They are going to do everything they can to see the build completed on time to get their investment back. Impatience, lack of understanding and poor communication on the buyer’s part is going to do nothing but agitate matters. Knowing that you are taking a risk and being okay with some leeway is important to help reduce stress and get a positive overall result.

The Off the Plan Benefits

While off the plan property purchases aren't for everyone, those that are ready and well-suited to this type of buy can get amazing benefits. It’s important to do your research here as well and make sure it’s going to pay off in the long run.

You’ll get a brand-new building packed with features and new designs that are perfect for upgrading your lifestyle or renting at high prices. There can also be significant stamp duty savings that make it a great property investment choice. There are a lot of conditions that need to be met to qualify for the stamp duty considerations so be sure to do your research here and don't expect it to be automatic.

Make sure your off the plan property has a:

• Reputable builder
• Sought after location
• Access to parking
• Clear terms and conditions
• A suitable sunset date

One thing to keep in mind is that every off the plan property is different. They are incredibly unique depending on location, builder, architect and price.

Even if you have purchased off the plan before, always do your research and check everything for the next property as there can be variations that might not be to your liking. The contracts for off the plan purchases are usually long and more complex than those for established home purchases. Look for a conveyancer who has experience with off the plan contracts.

Before you sign your off the plan property contract make sure you contact your conveyancer in NSW to check over the terms and conditions and any amendments to make sure they are legitimate and legally binding. They can make sure there are no nasty surprises that will lock you in and leave you without room to contest if the completed build or time frames don’t meet expectations.