 |
Bendigo
Real Estate |
|
 SEARCH
HERE NOW!
Buying,
Renting, Leasing.
|
 |
Browse
Agent Listings |
|
|
The type of contract you sign when purchasing a house and land package or an off-the-plan apartment is completely different to the sort you use when you employ a builder to construct a house on your own land.
 Building vs off-the-plan contracts
A building contract is a complex and confusing beast, involving a specific schedule of work, provisional sums and prime cost items, plans, permits and all sorts of other tricky business.
Payments are made at certain stages throughout construction, pending inspections by the bank that determine the work has been completed to the value pre-determined in your contract.
Off-the-plan contracts are also difficult, but not for the same reason. As the agreement is between you and the developer, you are less involved in the building process and avoid some associated issues, such as permits, inspections and drawdown payments. But there are other complex legal issues to which you must pay particular attention.
The differences between an off-the-plan contract for a house and land package and an apartment are generally not major. For instance, you might have more say over your schedule of finishes if you buy a house and land package, as the developer is not building a huge amount of dwellings at the same time. However, there is no hard and fast rule.
Deposit
You pay an initial deposit, usually 10 per cent, to secure the dwelling. The developer cannot use this money until the construction is complete. It may be held in a trust account by the solicitor or agent, or the parties may authorise the deposit to be invested. Usually in long term contracts the money is invested, as trust accounts do not return dividends. Interest or dividends are usually shared equally between the parties, although this can change according to the terms of the contract.
There are no progress payments a lump sum settlement is due within a defined period after the project is complete.
Variations
Almost all off-the-plan contracts have provisions regarding minor variations. For instance, if the size of the completed building is slightly smaller than what was indicated in the plans, the purchaser can't get out of the contract, and is obligated to pay the full price. Provisions protect the developer from unrealistic expectations. However, you should check them to make sure they are reasonable.
Schedule of finishes
The contract should also contain a schedule of finishes. This includes a list of appliances (including your wall over, stove top, dishwasher, etc) that will be installed in your home or apartment. The contract will quote a model number if that model is no longer available at the time the apartment is completed, the contractor is obligated to supply an appliance as close as possible to equal value. However, they are not obligated to provide that exact model.
Ensure that the contract states that the developer is responsible for installing basic services, such as telephone lines. If you are moving into an apartment block, make certain you are satisfied with the Body Corporate regulations stipulated.
Sunset Clauses
Be aware of sunset clauses, particularly if you are buying an apartment. This is a very tricky area. If you are entering into an off-the-plan contract it must come to an end at some specified time. The sunset clause stipulates the date this occurs. If settlement can't occur at the time the sunset clause expires, either party has the right to terminate the contract and any deposit moneys (plus interest) will be returned.
This is not a straightforward process, and many court cases result from sunset clauses. In some cases the vendor has the right to terminate a contract, but at other times this is not the case; the same thing goes for the purchaser. If a dispute arises, the outcome is determined by the exact wording of the clauses and the specific circumstances surrounding the case.
Because of sunset clauses and other related issues, you would be ill-advised to sign an off-the-plan contract without first consulting a lawyer, who can step you through any difficult issues, help you to understand your obligations and point out any traps.
Pre-purchase inspections
A pre-purchase inspection is essential to ensure work has been completed to the expected standard. Most contracts contain a defects liability clause, which means the builder has to rectify both major and minor defects within a reasonable period of time after completion. A pre-purchase inspection is the best way to ensure any problems are recognised and resolved.
Insurance
In most states builder's insurance is required. This protects you if the builder defaults, goes bankrupt or disappears. If there is a defect in your apartment that the builder refuses to fix, first attempt to come to some kind of arrangement. If a compromise cannot be reached, you can either contact your state's fair trading body or go directly to the insurer and make a claim. |
|
