Buying an off the plan apartment could a good way to get into the property market, especially in a heated market. However we have highlighted numerous times the risks and issues associated with buying off the plan. We think it is absolutely important to seek professional advice. Make sure the contract and all documentation is reviewed and explained by a professional before anything is signed. Seek personalised professional advice and always caveat emptor! These issue are usually independent from known strata issues.
Dodgy off the plan contracts have been reported
It has been reported that some developers are using off the plan contracts in order to shift a large chunk of building costs to unsuspected property buyers. In this instance, instead of the developer installing the necessary infrastructure at their own costs, they shift this cost to unsuspected buyers.
We believe developers need to pay for installation of basic infrastructure such as phone and internet cabling, stormwater drainage and so on. A complex web of clauses in the contract could be the difference between paying $2,000 per annum for such services in normal circumstances, which could increase to $6,000 if property buyers are not careful.
First off the plan strata Annual General Meeting (AGM)
It is also reported that developers use AGMs as a way to offload these extra costs associated with the off the pan apartment. Investors should be careful when attending the first general meeting associated with new apartments. But there are reports that this is happening more and more frequently across Sydney as the property market softens. If the investor are not careful they could agree to charges and ongoing costs that could be the difference between having a profitable property investment and a dud one.
Be careful to what you agree on AGM
The AGM could, unknowingly to the property investors agree to the transfer of an expense from a developer to an owner. If the contracts are not reviewed carefully investors could be taking on a responsibility that is not correctly or adequately disclosed. Once they agree to it they are usually stuck with it for the duration of the investment, unless additional out of pocket expenses are incurred to rectify the situation.
Always seek independent legal and financial advice before signing any contracts, especially when it relates to such a large outlay and long term commitment as property investment.