Buying into an off-the-plan unit is very risky. You are agreeing to buy a unit that doesn’t actually exist yet, which could be years away. Many of these contracts also don’t have a finance date, which means that if you can’t get a bank to finance the property, you will not be able to terminate the contract. This means you will be bound to pay. This is difficult to determine if you can pay for the unit, say, two years from signing. If that happens, you might need to find someone else to take your place as the buyer, but the seller will usually require that you can only do so with their consent and if done in a specific way.
The important documents that you should receive include a disclosure statement. This should include the proposed lot and plan, what contributions will be payable to the body corporate, if there are any service contracts or letting authorisations and the cost of them, any body corporate assets, the proposed community management statement and the regulation module to apply.
The disclosure statement might be updated and this must be sent to you by the seller. You cannot object or terminate the contract unless it’s a material change, such as a large decrease in the area of your lot or proposed exclusive use area. You should always determine what has been changed and consider whether this materially affects your purchase of the lot.
What is often overlooked is a power of attorney you are required to give to the seller. A seller will usually require a power of attorney for 12 months from you and this will enable the seller to exercise your vote at a general meeting. However, the seller can only use your vote on the exact issues disclosed within that power of attorney.
For example, it may allow the seller to vote to register a new CMS, such as to fix certain issues – but it might not allow them to dispose of common property such as incorporating common property into a lot. When you enter into the off-the-plan contract you need to know exactly what you are giving away in that power of attorney as it will only become effective when the body corporate is established, which could be years from when you first signed the contract.
This article is intended as general information only and should not be relied upon as legal advice. For specific legal advice please contact us here.
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