Buying a Unit Off the Plan –the Contract – Part 3

Buying a Unit Off the Plan –the Contract – Part 3

Our last blog focused on the Seller’s right to terminate (often at any point), along with the fact they may not even currently own the land under which your unit may be built on. We further highlighted the intricacies of material prejudice. This article further outlines the terms you should be aware of before signing any contract when buying a unit off the plan.

Before you sign an off the plan contract, it is strongly urged that you obtain legal advice which is tailored towards your particular circumstances. Andrew Pine solicitor is a lawyer who is experienced in off the plan developments and can advise you on a particular contract with regard to your individual situation.

 No Building and Pest defect period?

A usual REIQ contract for a house that already exists will give you the right to have a build investigate the property to ensure there are no problems with it. If there are, you are usually able to terminate on reasonable grounds or negotiate a reduction if the Seller is obliging. But what about a property that is not yet in existence? How can a builder determine whether the roof has been installed properly or whether there are issues with the eaves? The answer – not very easily. It is therefore common for an off the plan contract to not be conditional upon you receiving a building report which is reasonably satisfactory.

What protections does a buyer therefore receive if their contract is not conditional on building and pest? Most off the plan contracts give the Buyer a pre-settlement inspection, a ‘defect period’ or both.

A pre-settlement inspection is where you have the right to walk through the unit with a Seller or the Seller’s Agent (usually the real estate agent) and point out all of the things that are wrong with the unit. You and the Seller / Agent then sign a document agreeing on a timeline by which all works will be completed by the Seller at its expense.  Not all off the plan contracts contain a pre-settlement inspection clause.

A defect period is a certain period of time after settlement whereby you can bring any issue with the property to the Seller’s attention. There is no set rule for how long this period of time will extend until and some contracts do not even have a defect period at all. The implications of not having a defect period can be significant. It can be difficult to spot all problems with a property when you are conducting a quick pre-settlement inspection (if you are even entitled to one). It is therefore essential that you be provided with some period of time after Settlement to uncover problems with your unit. Building is not a uniform process and builders are people who can make mistakes. You should therefore be protected from a developer’s building making errors which impact negatively on you.

Andrew Pine solicitor is experienced in advising you on your rights and obligations for pre-settlement inspections and defects. This is an important part of the process that you should engage a solicitor for. It is essential that you receive advice that is tailored to both your individual circumstances and also the property you are purchasing. Andrew Pine lawyer will ensure you are protected as best possible.

No warranty as to construction commencement or completion

When you are sitting in an Agent’s showroom looking at the glossy pictures of the unit you are considering buying, Agents often neglect to tell you that the Seller has not even commenced constructing the building and that the Seller is not obliged to give you a date by which they will start or complete this process.

There is a practical reason for this. If the Seller is borrowing money from a financier, a frequent term of their agreement is that the developer must achieve a certain number of unconditional contracts (contracts where the buyer cannot pull out) before the bank will lend money to build the building. As the Seller is not able to concretely state when this number of contracts will be reached, it cannot promise to you when construction will commence nor when construction will be completed. But where does this leave you?

This process leaves you in the unfortunate position of having handed over a significant sum of money (deposit) with no guarantee of when construction will commence, nor when you will receive your completed product. To make matters worse, it is likely your contract is unconditional so you are unable to change your mind and pull out. You could be stuck in a contract for up to five and a half years without any ability to use those deposit funds for any other purpose.

It is therefore essential that you instruct your solicitor to obtain information from a Seller as to whether they have commenced construction prior to you signing the contract. If the developer has not commenced construction, your solicitor should then make the necessary enquiries to see how close they are to obtaining the requisite number of sales in order to obtain funding from their bank to commence construction.

The above paragraphs outline one of the many reasons it is essential to engage a solicitor prior to executing an off the plan contract. Andrew Pine solicitor is a lawyer who can advise you on what rights the proposed contract gives you in regard to a date for construction completion.

In our next article we will look forward to settlement of your new unit.

Disclaimer: Andrew Pine solicitor is a property lawyer practising in Queensland. Andrew is not qualified to give accounting or financial advice. This article is written solely as an opinion of the writer. This article should not be relied upon for legal, accounting or financial advice. You should always seek advice which is tailored to your individual circumstances.

Related reads:

  1. Buying a Unit off the Plan? Contracts Explained.
  2. Auction Buyers Tips
  3. Tips for Queensland First Home Buyers – Part 2


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