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Buying off-the-plan means that you are buying a property that has not yet been built. In fact, typically you are buying into something much larger than just a single house or unit. You are in fact buying a house, unit or apartment within a large shared complex.

Buying-off-the-plan presents you, as buyers, with an exciting opportunity. Rather than being presented with the usual old, used and tired house, you get to see a beautiful bundle of visually stimulating new plans for a new house with an exciting future.

Usually when buying off-the-plan you are buying one property within a large group of properties, meaning there is more money at stake and more motivation for the developer to sell the dream than there usually would be with a single dwelling.

Unfortunately, often due to financial constraints, the complex resource management requirements, local authority requirements and financial arrangements, that dream is not realized. Or when realized, the final outcome looks more of a mangy cat than the young, fit lion you thought you were buying. In reality, you can end up in the worst case scenario with something you didn’t really want and can feel quite unrewarded, or out of pocket for the time and effort.

So what does this mean for you, the purchaser? Firstly, before signing any agreement to buy a property, and especially when buying off-the-plan you should go through the following steps:

• Engage a lawyer to review the sale and purchase agreement;
• Engage a suitably qualified architect or builder who is capable of reviewing the draft plans which form part of the agreement and are attached;
• Undertake a thorough investigation of the developer, the building company and the architects. You should find out what other developments they have completed and, if they have completed others, you should go and inspect those to get a feel for the quality of work and the finish. Additionally, if you can find someone who owns one of their completed developments, you should ask them about their experience.

Most agreements that have been prepared for the developers are onerous towards purchasers with virtually all of the clauses drafted in the developers’ favour. Inevitably when seeing your lawyer, they will recommend you vary some of the fundamental terms because, as your lawyer will explain, they are likely to be too onerous for you.

Your lawyer will make suggestions, then once these (usually sensible) suggestions are agreed upon, your lawyer will write to the developer’s lawyer on your behalf requesting amendments. The often almost universal response to these requests is: “Sorry the Vendor is not willing to make any amendments to the standard form agreement. There are [90] units and it is too difficult to have different agreements for each unit. Take it or leave it”.

In addition to you receiving the letter from the developers lawyer, the real estate agent will invariably follow you up with the usual response that the units are selling like hot cakes, this is the market, and you will miss out (sometimes even “none of the other buyers have an issue with the terms, only your lawyer").

So, you decide to take the plunge, sign the agreement without amendment and hope for the best. Everything is against you. The agreement protects the vendor and you receive an unwanted invoice from a lawyer for sending a letter that resulted in nothing but delay. So is there anything you can do to stack some of the chips back in your favour? The answer is YES. 

A recent example I saw, showed the purchasers cancel the agreement before settlement because it had become clear that the other stages of the development would not be completed.

The ability to make this decision was not obvious when reading the sale and purchase agreement and would have come as a surprise to the developers. The decision highlights the importance of knowing your rights outside of the terms of the sale and purchase agreement. There are a number of statutory protections given to you which override the express terms of the agreement. In addition, the case highlights the importance of having a thorough check list before settling.

As a purchaser you should never settle without conducting a pre-purchase inspection. The example mentioned above also highlights the importance of keeping yourself informed as to the on-going progress of both the development of your unit but also of the development as a whole. The more information you have throughout the process the better positioned you will be to react in your favour.

It is almost always better to make your claim before settlement, rather than after. Your power to enforce the contract reduces dramatically once settlement takes place.

As a lawyer I know better than anyone how difficult it is for you to spend your hard earned money on legal fees, especially where often it does not feel like you are receiving anything tangible in return. But all investments are a gamble and by having a lawyer at your side through the process, you can improve your odds for getting exactly what you want. This way, you can make the contract work for you by taking steps to reduce risks instead of trying to damage control after something happens.

To get in touch with Edwin phone 021 243 5203 or email edwin@k3.co.nz.