Buying a property off the plans can be quite daunting for a lot of first-time investors so it's important to understand what tools they have at their disposal when entering into a sales and purchase agreement with a property developer.
Once the contract is signed, the investors can do their homework to make sure the property stacks up - our team will help guide you on this.
Within most off-the-plan contracts is a due diligence clause.
A due diligence clause allows you to put a property 'under contract' without locking you into the purchase. It is essentially a 'get out of jail free card' because (depending on how the clause is written), you can withdraw from the contract at any point during the due diligence timeframe without giving a reason.
For most newbuild properties, a 10-working day due diligence clause is used which allows the purchaser up to two weeks to conduct their research into the property they're considering purchasing. These can often be found in the 'Further Terms' section of the contract.
Here's an example of a typical due diligence clause that would be in an off-the-plan contract:
Investors can take a lot of confidence when they see a due diligence clause such as the one above because it means they can sign the sales & purchase agreement without being obliged to purchase the property. In essence, it is an option to buy the property based on your due diligence.
During the due diligence process, a lot can happen. Often, your lawyers will negotiate with the vendor's lawyers to make small changes to the agreement but even larger changes can be made, such as cashback, rental guarantees, etc. which can be negotiated and added to the agreement during the due diligence period.
Your lawyer has an important role to play during the purchasing process especially if you're buying from a lesser-known developer so it's important to work with people who are well versed in (sometimes complicated) off-the-plan contracts. A normal residential transaction is much simpler than an off-the-plan contract and it is easy to think your family lawyer who helped you with your home purchase will be proficient, but this is often not the case.
We have several very experienced off-the-plan lawyers who we recommend when buying off-the-plans. To hear more about who they are and how they can help, speak with one of our team.
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