Buying off the plans

For those apartment buyers looking to buy off the plans the benefits seem obvious.  They are getting a new apartment 100%  compliant to the latest building code, with all the mod cons and the price is fixed at the time of purchase.  

Below is a list of  some things to consider before you commit and always seek professional advice before signing on  the dotted line.

Location, location, location
Where the apartment development is critically important.  How close will you be to local amenities, public transport, shops, supermarkets, cafes and restaurants, cinemas, schools and tertiary institutions.  Is it an area where there is lots of development, like other apartments and conveniences?  There's no point in purchasing an apartment if you cannot walk everywhere, or it's not handy to city amenities.

Natural Light
Are you going to get plenty of natural light?  What about sun? Will your apartment be blocked by a future development? What is being built next door? Choose carefully as these things cannot be changed.

Benefits of early purchase
When buying off the plans you can often choose the best one,  well located in the complex for best sun or views.  You also may have more say over the design, colours and finishes to put your personal stamp on  the apartment.   When the market is buoyant, the apartment could increase in value over time. 

Disadvantages of early purchase
However if the market falls while the apartment is being built, you could struggle to sell and recover the initial purchase price.   Other disadvantages are that the apartment may not meet your expectations once built.  The building time could take much longer than the developer initially estimated, or the finish dates may keep being delayed.  Worst case the builder goes out of business midway through the build process.  You need to be careful and check out the developer's and builder's track record and credentials, be satisfied that you can trust them.

Seek independent legal advice
Get good independent legal advice, there is so much that is different in buying a conventional stand alone home.  Make sure there is a solicitor's approval clause in the contract and if not ask for it to be added.  It is essential that your solicitor approve the  Sale and Purchase Agreement. 

Find out what changes, if any, can be made.  Your solicitor will want to know where the deposit will be held, preferably in a trust account, so you earn interest on the deposit.  Also how long is the conditional period? 

If there is a sunset clause (when the development will be finished) and what happens if extra time is needed.  Extra time can go from a time period of two or three years to five and beyond.  Otherwise you can have your full deposit refunded the sunset clause has expired.

The Agreement is specifically written to favour the developer.  Most contracts allow the developer to make changes without your consent, even altering the physical size of the apartment by up to five percent.  Other changes could include changing the layout, the materials used and finishes.

You will also need legal advice concerning the Body Corporate, every apartment building has different arrangements.  There is no one size fits all when assessing each building, all the documentation like Annual General Meeting minutes need to be carefully considered.

The Body Corporate
Thoroughly investigate the Body Corporate and examine the Rules.  Ensure that the annual levies are realistic to cover the ongoing and long term maintenance costs.  What restrictions do the Rules have regarding pets, use of the common areas, policies about noise, safety and security. 

Essentially you need to know: 

• insurance details
• the body corporate’s long term maintenance plan
• the amount of levies 
• whether the body corporate has a fund to pay for maintenance and any developments specified in their long term plan

See my FAQ page on Disclosure Statements, for documentation about Disclosure Statements.