Buying off the plan on again?

A headline in Sydney’s major broadsheet newspaper today succinctly declares “Off-the-plan unit sales run hot”.

If you’re considering taking advantage of buying a property “off the plan, It’s probably timely to take a deep breath, not get caught up in any hype, and just recall some of the pitfalls that can and do occur.

One claimed benefit of buying off the plan is that some consider it a good opportunity to purchase at a price that is more likely to be considered a bargain when the property is eventually developed and the purchase completed.  The time from contract date to completion often won’t take place for several months, if not a year, or two, or three!

So what are what are some potential issues?

The completion date – how does the contract define it.  More importantly, what obligations, if any, are on the developer to comply, and how can it be extended.  What rights does the buyer have to get of a deal that keeps getting delayed?  Can you as buyer get stuck with a deal that’s gone sour and delayed by years?

Do you know exactly what you’re getting? Really, do you?  Is the quality of appliances comparable to those in the brochure or display unit?  What about dimensions?  What scope is there for variations between the dimensions in the contract and what ends up built?  Can you end up being stuck buying a butter box rather than the penthouse you expected?  Are the tennis courts and swimming pool part of a later stage, one that may take years to develop, if ever?

Don’t forget your deposit bond.  These have expiry dates.  A buyer can unintentionally be in breach if the bond expires, because of continued delays.

Then, of course, there are building defects - how are these defined; what obligations are on the developer and the buyer?

Lots of questions, but few answers I’m afraid.  These are all real issues that do arise, and often in off the plan purchases.  Sure, they can arise in any property purchase, but buying off the plan is something akin to buying vapourware.

Just make sure you’re not rushed into signing anything, seek legal advice on the contract, and keep a cool head.  Yes, there can be advantages and savings, but just know there are risks to balance too.

Forcing strata owners to sell

There has been discussion in some circles for a while now about forcing minority owners of strata property to sell their units if, for example, three quarters of the owners in the particular strata plan want to do so. Here's an article by Paul Bibby in yesterday's Sydney Morning Herald that gives a good summary of the issue and at least the point of view of developers.

The example cited in the article is fairly typical "...one of the 16 owners - an 80-year-old woman who is refusing to leave because she has convinced herself that she'll die if she does - is refusing to sell, everyone is stuck there while the whole block gradually falls to the ground...".

Most of the points of view I've seen so far are from the perspective of developers and majority owners. I can quite understand their views; I know of an owner of a small shop in a small commercial strata complex. who just cannot sell his small strata shop to a very willing developer. There's about 7 or 8 owners. The site's old, the individual shops are tired looking though still all trading, but its crying out for development (read "bulldozed"!). There have been a number of approaches by developers in recent years but all proposals stalled due to the refusal of one shop owner who's very happy with his business and how things are.

Whilst at first glance the proposals appear reasonable, I haven't yet seen arguments from the minority point of view.

Take the example cited about the elderly woman. She has her home, presumably she fully owns it and is happy to remain there, and she has some fears if she's forced to move. No doubt she's also built up a network of friends, services and care professionals she relies upon in her day to day living. Perhaps she's not happy with offers made too. Why should she be forced to yield to the other owners and developers? If forced to sell, even if she gets a fair price, what's to say she can afford to purchase or move into another comparable property. The Property Council proposes measures to safeguard the rights of owners like her, but what about her right to stay put?

I guess another way of asking this is, how is the position of the unyielding strata owner different from the position of a home owner who refuses to sell their house on a suburban block to a major developer notwithstanding pressure from all their neighbours? As far as I'm aware, except in the case of a compulsory property acquisition by a public authority, there's no way to force a law abiding property owner to sell their property to a developer.

I'm not advocating no change, but it's only fair that all views are considered and fairly considered and dealt with.

It may not affect many of us but if the proposals succeed, what's to stop developers sometime in future moving legislate for the forced sale of your home or farm?

Liverpool - in Sydney's south-west - again tops first home grants

The latest NSW Office of State Revenue data shows that again, the area (by postcode) receiving the most first home benefits in NSW (both in terms of total grants and total value of the grants) are made to buyers in Liverpool, in Sydney's south-west.

In the 12 month period to 30 November 2009, there were 1,345 first home grants received in the Liverpool area totalling over $19.9m. There were slightly more recipients of benefits under the NSW First Home Plus scheme, which includes stamp duty exemptions in addition to the grants. When the First Home Plus benefits are included, the total value of benefits to first home buyers in NSW totalled over $33.9m for the same period.

From when the grant scheme commenced on 1 July 2000 to 30 November 2009, Liverpool also tops the list, with 8,097 grants. This is significantly more than the area with the next highest recipients, Wentworthville, with 5,603.

I understand the national figures published by the ABS are scheduled to be published this month.