With a large supply of new developments being built, now it a good time to review the risks of buying off the plan and what you can do to mitigate the risks.
Problem: The developer/builder goes bankrupt
Solution: Make sure your deposit funds sit in the solicitors trust account. This means the builder is not using these funds specifically to build the development. Then if the developer doesn’t finish by the time you get to the sunset date (a predetermined date in the contract) you can get your funds back. There is an opportunity and time cost – but you get your deposit back at least.
Problem: The unit is different to what you thought it was
Solution: There is an element of risk that you need to take as you are making your decision based on drawings and contracts. However you can protect yourself by building into the contract terms that give you the option to withdraw – an example of this is if the floor size has more than a 5% variance. You should also get a list of the fixtures and fittings of your property inserted into the contract.
Problem: There is damage in the unit or something is broken
Solution: Make sure you get a building report completed before you move in so the developer can fix up any damage in the unit. There will most likely be areas that need fixing such as lights, scratches and sometimes leaky taps. If there is something more structural, then you should make sure the builder and strata has sufficient insurance.
A good solicitor will make sure you build as much protection into your contract to reduce the risk of buying off the plan.