When property purchases go off plan

July 22, 2019

in Property

Buying a brand new home/apartment “off the plan” can seem exciting and very appealing.  It can be hard to resist the marketing and glossy advertising material promoting an idyllic lock and leave lifestyle.

What could be better than buying a brand new property at a fixed purchase price and built to the latest building specifications?  Tenants also love a new build so as an investment it would seem to be win/win.

However, before signing on the dotted line you should note that, as with any property purchase, buying off the plan has both pros and cons and buyers should enter into these contracts with an open mind.

Pros:

  • You can often obtain the property of your choice rather than having to pick from what is left which may not meet your specific requirements.
  • Being one of the first buyers in the development enables buying at a lower price, as prices often rise as the development nears completion.
  • If the market remains buoyant then there could potentially be an increase in the value of the property.

Cons:

  • The developer may be able to change the layout without notice.  You may have an expectation of location of carparks and/or storage lockers only to find that they have been moved or are not where they were originally proposed.
  • The build may take longer than expected and there is a risk during that time of interest rates going up and lending criteria changing.  There is also risk of the developer going into receivership and the development being on-sold to another company.
  • Off plan contracts often contain clauses that favour the developer.  Common clauses include exclusion of warranties in respect to promotional brochures that may have been provided, provisions that enable the developer to make alterations to the units and change the materials that are to be utilised in the development, and loosely worded clauses to enable the developer to justify an increase in price in the event of monetary or economic developments and cancel the contract if the purchaser does not agree with the price increase.

An off plan contract requires a higher level of review than a standard agreement for sale and purchase of a single residential/unit dwelling. If you are considering purchasing a home/apartment off the plan it would be advantageous to discuss your plans with a lawyer before signing any agreement. We are experienced in all aspects of property conveyancing and unit title ownership.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Erin Maher
emaher@farry.co.nz
09 379 0055 or 03 477 8870

The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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