1. Buying off the plan: Know what you are signing

2. Background James – property valuer and property consultant Mark – building inspector and building consultant

3. Buying off the plan – What’s the difference? When you enter into a contract to buy off the plan, it is very different to buying an existing property The contract, not only conveys the land, but also sets out performance in terms of construction timing, what will be built, etc.

4. Buying off the plan – What’s the difference? There are a number of key areas you should specifically ask your solicitor about: – Sunset clauses – What happens in relation to delays – Defects, faults and building warranties – How flexible is the schedule of finishes

5. Buying off the plan – What’s the difference? There are also various considerations for finance that need to be made when buying off the plan: – Does your lender know exactly what the finished product will be like? – Unit areas – they aren’t as fixed as you’d think – Vendor finance and associated issues

6. Building Defects What protection do you have ? If your building is 3 storeys or less then you are covered by Home Warranty Insurance. If your building is 4 storeys or more then you are not covered by Home Warranty Insurance.

7. What Cover does Home Warranty give you ? 2 years warranty for “Non-Structural” defects 6 years warranty for a “Structural” defects 6 year statutory warranties change from “Structural Defect” to a 2 Element Test “Major Defect” in a “Major Element” Note: NCAT is mandated to offer the builder the opportunity to rectify & all sides must have their expert witness information before they commence. Must sue builder first … only ever of value if the builder goes bust or disappears

8. Proposed Changes from July The Strata Scheme Management Bill and Strata Scheme Development Bill All 4 storey+ buildings : Developers will have to lodge a bond of 2% of the contracted price of the building to cover defects

9. Developers will be required to engage an independent building inspector to carry out a defect interim report between 15 to 18 months after completion of the building. If defects are found, a final report will be required between 21 to 24 months after completion of the building. In the event that defects are not rectified by the developer, the building bond will be utilised. If defects are rectified or there are no defects found, the building bond will be returned. … So wait until you can buy a unit in a building that has a 2% fund in place.

10. Common Building Defects Extracted from Easthope, H., Randolph, B., & Judd, S. (2012) Governing the Compact City: The role and effectiveness of strata management. Sydney: City Futures Research Centre”

11. The first AGM… Go to it! This often sets the tone for the building. Key decisions are made here: – Amounts of contributions (admin and sinking funds) – Appointment of strata managing agent – Forming of executive committee – Determine arrangements for 3 rd party agreements (cleaning, gardens, etc.) – What by laws are to be made, amended or revoked – What accounting records should be kept – What insurance should be carried

12. The first AGM… Go to it! Developers will be represented at the first AGM if they have retained a number of units. Their influence is reduced by the relevant strata laws. They will likely have a divergent view from new home buyers / investors Understand unit entitlements

13. Finance and borrowing Borrowing against an off the plan purchase is very different to borrowing for an existing property Many assumptions are made and may prove incorrect: – Building areas – Finishes – Market movement – What do you actually own (exclusive use by-laws, strata lots, etc.)

14. Vendor Finance If you are going to use vendor finance, get your own advice There is a myriad of potential issues

15. Example of a contract In groups, read through this contract and identify: – Any issues within the contract that you should seek legal advice about before signing – Group discussion

16. Questions www.poansw.com.au