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Buying property "off-the-plan"The following is a brief explanation of what is involved in buying land “off the plan” and some of the issues you need to consider as it is very different to buying an established home.
Buying land “off the plan” means that you are buying a lot which is part of a larger piece of land for which the plan of subdivision to create smaller lots has not yet been registered. Until the plan of subdivision is registered, the land you have bought does not have a separate title and until each lot is allocated with a separate title, your purchase of the land cannot be completed and you are usually not obliged under your Contract to pay balance of purchase price. Your Contract will normally provide that the settlement (or final payment of the purchase price) will be due within 14 days of notification of registration of the plan of subdivision and will usually further provide that the Vendor has a period of time in which to register the plan, normally this period will be 6 months but could be longer. The Vendor has many items to attend to in finalizing the development starting with obtaining necessary permits and consents of the local authorities and arranging surveyors to prepare the relevant plans and other documents. Requirements of relevant bodies in relation to land titles will usually differ with each locality but, commonly, the plan of subdivision will not be registered until all the development works or planning requirements have been completed. These works or planning requirements may include provision of water and sewerage services, roads, footpaths and crossovers, electricity, gas and telephone services just to name a few. Usually, the relevant service providers must sign off on the works. Until all of the relevant authorities are satisfied that all services have been provided satisfactorily and any necessary fees have been paid they will not issue their written confirmation. As you can see there are many steps to registration of a plan and many parties involved. No guarantee of settlement/closing date As a result, there can be no set date for settlement and no real indication of when settlement can take place, other than the maximum time set for registration of the plan by the special conditions in the Contract. If the Contract provides for a six month period for registration, then the only real expected date for settlement can be at the end of six months. Obviously, when the plan is registered prior to the maximum time set for registration of the plan, then settlement will take place earlier depending on the terms of the Contract. All of the dealings with respect to registration of a plan of subdivision are in the control of the Vendors lawyers, surveyors and other authorities or parties. Unfortunately, as the Purchaser, you have no control over the registration of the plan and the time it may take for this to be achieved. Accordingly, there is no guarantee of the date on which you will be able to complete your purchase of the land. Is this lot right for me? You will need to carefully consider the time frames imposed by your Contract of Sale and whether this meets your needs. If you wish to commence building immediately, you may need to consider purchase of land for which the plan has already been registered and which can be settled and transferred to you as soon as possible. Alternatively, a longer time for settlement/closing may suit you as you might not be in any hurry to build and can use the time to save more money toward your building costs. Some lots also come with certain restrictions/covenants on the title. These sort of restrictions usually address such issues as building size and construction materials, fencing, outbuildings, and use of the land and are usually directed to maintaining and creating a certain standard of neighbourhood environment. You must ensure that any proposed building will be able to meet the specifications set down by the restrictive covenants as these will be part of your title and must be complied with. Accordingly, it is important to check this with your builder before you sign the land contract. Not all parcels of land come with such restrictions and if these do not suit you, you will need to look for other lots that may be available to suit your needs. You should also visit the local planning office to ensure that the type of building you are considering is permitted to be constructed on the land you are looking at. Financing One final consideration is Given that the settlement/closing date is uncertain, you will need to ensure that your loan application will not expire prior to finalizing the transaction. If this happens you will need to reapply for your loan which can involve extra costs and if you circumstances have changed or loan policies have changed since you first applied for the finance, you may find yourself with a commitment to buy the land but no funds to complete. Accordingly you must ask your lender for details of whether there is a time period after which the loan approval will expire and if so, what can be done to avoid this. Some lender may have different types of loans that might suit this situation. In closing we hope that you find this information helpful as a starting point when considering purchasing land “off-the-plan”. Usually, purchasers consider this option as in some jurisdictions there can be significant duty or cost savings when purchasing “off-the-plan” and so this saving may out weigh any delay involved. Only you can weigh up what is the right property for you. This information has been prepared as a general overview of the process involved and some of the common items to be considered for information only and not as a substitute for legal advice about your particular transaction. Please note: Not all of the comments above will apply in all jurisdictions and you should check your local laws. You should always contact a lawyer relating to your specific transaction before you sign as they can advise you on local laws and requirements and assist you with your purchase. financing. Given that the settlement/closing date is uncertain, you will need to ensure that your loan application will not expire prior to finalizing the transaction. If this happens you will need to reapply for your loan which can involve extra costs and if you circumstances have changed or loan policies have changed since you first applied for the finance, you may find yourself with a commitment to buy the land but no funds to complete. Accordingly you must ask your lender for details of whether there is a time period after which the loan approval will expire and if so, what can be done to avoid this. Some lender may have different types of loans that might suit this situation. In closing we hope that you find this information helpful as a starting point when considering purchasing land “off-the-plan”. Usually, purchasers consider this option as in some jurisdictions there can be significant duty or cost savings when purchasing “off-the-plan” and so this saving may out weigh any delay involved. Only you can weigh up what is the right property for you. This information has been prepared as a general overview of the process involved and some of the common items to be considered for information only and not as a substitute for legal advice about your particular transaction. Please note: Not all of the comments above will apply in all jurisdictions and you should check your local laws. You should always contact a relating to your specific transaction before you sign as they can advise you on local laws and requirements and assist you with your purchase. lawyer
relating to your specific transaction before you sign as they can advise you on local laws and requirements and assist you with your purchase.
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