By - 15 Jul 2019
When buying off the plans, there are a number of extra
terms and conditions which need considering before signing an
agreement. We discuss a few of these below.
Deposit
If the title to the property has not issued and the construction
of the apartment or dwelling has not been completed, then it is
important that your deposit is protected. If the deposit is paid to
the developer, who then becomes insolvent, the funds may be
impossible to recover. It is essential therefore that the deposit
is held by a third party until all vendor and purchaser conditions
are satisfied and ideally until the settlement date.
Sunset Date
Once the agreement has been signed by both parties and all
purchaser conditions are confirmed, there are limited rights to
cancel the agreement. A sunset date is a date on which you may
cancel the agreement if the vendor has not satisfied all of their
conditions and completed the development.
Although there are implied rights to cancel under the Resource
Management Act 1991 in certain situations, without a sunset
date, there is no obligation on the vendor to complete the
subdivision within any set period of time. You may be bound
indefinitely with limited or no right to cancel or receive a refund
of your deposit.
Final Measurement and Specifications
The area of the section or body corporate unit provided on the
agreement is only an indicative figure of what the final area will
be. It is important that the agreement deals with the situation
where the final measured area of the section or property does not
match those of the agreement. This is often by way of a variation
to purchase price, or the right to cancel the agreement.
Finance
On the settlement date, you will be required to pay the balance
of the purchase price plus any apportionments made for rates or
other outgoings. You will need to ensure that you have your finance
organised well in advance of title issuing to ensure no delays on
settlement. You should check how long the time period is for your
bank's pre-approval and whether this aligns with when the vendor
expects the development to be finished.
If you are intending to withdraw your KiwiSaver funds, or apply
for a HomeStart Grant, it can take up to 20 working days for these
funds to become available. Note that KiwiSaver and HomeStart Grants
must be used to settle the purchase of the section and cannot be
withdrawn at a later stage as a contribution towards any
construction costs. If you are wishing to use KiwiSaver or
HomeStart grant for your deposit, then there are further clauses
which need to be added to an agreement in order to comply with the
KiwiSaver or HomeStart provider's requirements.
Body Corporate / Home Owners Association
It is becoming common for developers to establish a body
corporate or home owners association to manage private roads,
easements and restrictive building covenants. You need to ensure
that you have a clear indication of whether a management body will
be in place, what the rules will be and how much you are going to
be expected to pay by way of levies each year.
This is far from an exhaustive list of things to consider in an
agreement. If you are planning to buy off the plans, come and see a
member of our property
team before signing up.