Article by Paul McKenzie
As Sydney’s population grows, especially with new Indian/Subcontinent migrants, the trend of Off-the-Plan purchases grows. The push for higher density is growing, with Sydney’s population growth, rising from 5.0 million to 6.5 million in the next 15-20 years. Off-the-Plan purchasers includes apartments/townhouses under construction, land subdivisions and also home/land packages in release areas.
Off-the-Plan, purchasers are look for something new, something exciting, with expectations in design, features, specifications, finishes/fixtures, with either a new suburb (such as Marsden Park near Blacktown) or a suburb going through transformation (such as Rhodes near Homebush Bay). Existing key suburbs such as Chatswood, Burwood, Strathfield and Wolli Creek are attracting property investors buying Off-the-Plan apartments, to maximise their tax benefits, especially with depreciation allowances in the first few years after purchase.
When purchasing Off-the-Plan properties, your conveyancer or solicitor will do a Contract review that is different from an existing property. Main features in the Off-the-Plan Contract that are unique, is the Vendor right to make alternations to the property/development in draft form off-the-plan, the Sunset clauses and also the defection liability provisions. Conveyancers/solicitors are becoming aware of the “norms” in Off-the Plan Contracts, especially in larger development schemes coming from the larger developer players, such Stockland Trust and Meritons.
In the Contract off-the-plan, the Vendor must ensure to complete the construction of the building and the finishes. The Vendor has a right to make amendments to the draft Strata Plan, documents and instruments, by-laws, including any amendments to the Lot, development scheme details, management statement, easements/encumbrances, leases relating to the development scheme, services, approvals, finishes, unit entitlements, allocation of car spaces etc.
When it comes to the property’s finishes and fixtures, any amendments to finishes must be of the same quality. As the developers keen to keep a good profile and reputation among buyers, the likes of Stockland and Meritons usually have in-house client relations managers, to manage defects works and ensure they are done, to keep purchaser satisfaction and “word of mouth” reputations.
Rights to rescind for a purchaser is usually restricted to any easement that causes serious impediment to the property you are purchasing, or a reduction in size, that is usually in most Contracts, greater than 5%. For example, land subdivisions around in north western Sydney, such as The Ponds, Schofields, Rouse Hill and Kellyville. If there is now, a major easement to go over the land, that is causes serious impediment to the point, the purchaser no longer build the house to normal requirements, then they have legal grounds to rescind.
Settlement usually occurs 2-3 weeks after the Vendor serves notice, that the draft plan (strata plan or land submission plan) has been registered at the NSW Land Registry Services (Land Titles Office). However, for townhouses and apartments Off-the-Plan, settlement, in some cases, depends on the details in the Contract, settlement could be 2-3 weeks after the Vendor serves copy of the occupation certificate. Defects period usually goes for 2-3 months from the successful completion/settlement date of the Contract. Notices to the Vendor in defects must be in writing, limited to the number of notices to be services and the terms/conditions of defects in the Contract. Any disputes, are usually referred to a single expert, or Fair Trading could be involved. Also, also the provision with some strata schemes, for builders without warranty insurance to pay 2% bond to NSW Fair Trading and any disputes to be resolved by Fair Trading or some cases, the NSW Civil and Administrative Tribunal (NCAT).
Most Off-the-Plan have Sunset clauses in Contracts, a maximum time that the Vendor to achieve finance and approvals, such as an 18 months or two year sunset date clause. These provisions may have right for the Vendor extend time, if a reasonable delay occurs, such as registration, weather, civil or union unrest etc. Such provisions provides a reasonable time, whatever the Contract stipulates, before the Purchaser can exercise their right to rescind, as the Vendor is taking too long for registration, finance or any some other approval/qualifying requirement. For example, purchaser bought a residential apartment off-the-plan in a new development in Liverpool. The finance and council approvals was taking too long. Purchaser after fixed time period and fair extensions as per the Contract with sunset clauses provisions, in their legal rights, rescinded the Contract and got their deposit back.
Since November 2015, the sunset clauses laws have changed. Vendor now require written consent from the Purchaser, to rescind the Contract, for fair and equitable reasons – can’t get finance, cannot complete, can’t obtain approval/s etc. The news laws in recent years, prevents Vendors from rescinding on purchasers, unfairly, for example just because they been offered a better price. For further details, go to http://www.fairtrading.nsw.gov.au/sites/ftw/About_us/Have_your_say/Buying_property_off_the_plan.page
Written by Paul McKenzie AAPI – CEO of ABS Conveyancing & Valuations, in Sydney. He is on the management committee for the Australian Institute of Conveyancers NSW and the Sydney CBD Chamber of Commerce. Paul is also a member of the Australian Property Institute and the Australian Indian Business Council / Australian Indian Chamber of Commerce NSW. He is a property writer, guest speak on conveyancing and has made guest appearances on radio.
Copyright 2017 DesiAustralia.Com – all rights reserved.