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Strataman gesturing to STOP

"STOP! Some people buy strata units 'off-the-plan' - that is, they buy them from the architect's plan before they're even built. There are a number of special points you should be aware of in relation to buying this way as it's not as straight forward as it appears. Here's a brief guide on what to look out for plus a few links to some other information resources that may assist if you plan to head down this sometimes 'bumpy' road."

BUYING STRATA OFF-THE-PLAN

When purchasing a strata property 'off-the-plan' (that is, you buy it before the building has been completed) there are a number of things you need to find out before "leaping off the bridge".

Here's a list of the main ones:

Find out, from the real estate marketing company (or the developer if possible), about the estimated completion date and if that date is still realistic

Obtain as much information as you can regarding specific details of included fixtures & fittings in the unit and those in any recreation areas such as the gym room, sauna, etc.

Carefully inspect the display unit taking particular note (and even photos) of the level of quality and inclusions

Carefully examine the floor plan making special note of whether it has suitable living areas, balcony areas and room location.

If you plan to live in the property, does the layout suit your lifestyle?

Again, if you plan to live in the property, will your furniture fit appropriately in the style of the property?

If the property is for investment, will the layout be attractive to prospective tenants?
Generally speaking, if YOU would be happy living in it then most tenants would too.

What are the proposed levies? Do they seem to low? or too high?

Is it anticipated the levies will increase by the time the building is completed? and by how much?
To be on the safe side it might be wise to budget for an increase no matter what the answer.

How much variation in the size of the unit (as shown on the plan compared to the final size) has the vendor nominated in the Contract for Sale? (e.g. The floor plan may show a total unit area of 110^m2 but the final size is only 98^m2)

Is any such variation acceptable to you?

Are there any proposed restrictions on the use of any proposed facilities?

Are there any other special conditions planned for inclusion in the by-laws of the scheme?

Please understand that this is, in no way, a comprehensive list of the 'traps' you need to look out for. There are many, many more - but you have to dig them out. And the best way, I have found, to uncover all the 'pros and cons' is to do some detailed research. It's amazing the wealth of knowledge out there in the marketplace - you just have to find it - which is why I am around.

To save you a bit of time I've done some of that research and the variety of articles, reports and websites listed below should give you a broad spectrum of opinions from both sides of the fence. Always keep in mind the famous saying: "Caveat Emptor - let the buyer beware".

PROPOSED LEVIES: Under the latest (and current) Strata legislation (which came into force on Nov 30th, 2016), there's much more of an obligation on the developer to provide realistic levies to prospective owners via the Initial Maintenance Schedule. The legislation (Section 115 and Section 89 of the SSMA 2015 and Regulation 29 of the SSMR 2016) provides owners the ability to seek compensation via the Tribunal which can rule that the developer has to compensate owners for the difference between what was represented to them and the ACTUAL levies. This is good news and hopefully it will help keep everybody a lot more honest.

Old Faithful

Don't forget to have a look at our 'old faithful' - NSW Fair Trading (FT). As usual there's a terrific summary guide covering a lot of topics to get you over the line from a knowledge perspective - Buying off-the-plan

And, it might pay for you to have a quick look at an article from NSW Land Registry Services (LRS) that covers the whole area of legal protection for off-the-plan purchases under the latest legislation. Follow this link to check it out: Legal protections for off-the-plan purchases

Comprehensive 'generic' information

If there's anything that could give meaning to the word 'generic' then the information webpage from Lawyers Conveyancing, Victoria on 'Off-the-plan purchases' would have to be it. There are a few references to some specific Victorian legislation and terms but, overall, it gives a terrific 'generic' overview and explanation of buying off-the-plan and along with some of the twists and turns one might come across. This is worth a bit of your time....especially if this IS an area of interest.

Some Taxation Issues

As always, Taxation rears its ugly head in everything we do - and Off-The-Plan sales are no different. The best way to determine what needs to be done is to "get it straight from the horse's mouth". So, here's the official ATO section covering this area - Property and Construction Industry Partnership - issues register - section 12 : off-the-plan sales

Tip - If you're planning to use this new property as an investment - and especially if you intend to negative gear it - make sure you seek advice from an accountant to ensure you get everything you're entitled to. It's also very important that you structure the investment the right way from the very beginning and the accountant is the perfect person to help here.

More Information

Here's a 'few' other information sources on this topic that may prove helpful. I know there's quite a lot - but they contain some really great information and you ARE making an important purchase. So grab yourself a coffee or a tea and settle in for a 'quiet' read.

By the way - with the latest legislation (that came into effect on Nov 30th, 2016), some of the 'finer' details may have become a little 'grey' but, generally, the overall concepts and ideas will still apply. Just be prepared to get some extra 'updated' advice if you decide to go down this path and all 'strata' solicitors should be across any recent changes to the laws pertaining to Off-the-Plan purchases&conditions.. FINAL NOTE: As newer articles appear I will replace the older ones.

8 common questions when buying off-the-plan (by realestate.com.au)

6 good reasons to buy off-the-plan (by RealEstate.com.au)

What Are Some of the Risks & Benefits of Buying 'Off-the- Plan' Properties (by Canstar)

How to minimise the risks of off-the-plan apartments and get the best price (by Domain)

Top 12 pitfalls in buying property 'off the plan' (by Stacks/The Law Firm via Mondaq)

What you MUST know before buying off-the-plan (by Finder.com.au)

The trick to buying off the plan (by Your Investment Property magazine)

Seven Traps for Unweary Off-The-Plan Buyers (by Property Observer)

Things to consider when buying Off-the-Plan (by RealEstateView)

Peace of mind before you sign (by the Sydney Morning Herald from 2011 BUT still solid concepts)

the Perils of Buying Off-the-Plan (from 2016) (by Switzer.com.au)

An Important TIP - Detailed specialist 'strata' advice should ALWAYS be obtained from your solicitor before proceeding with any property purchase.

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Strata Title Terms and Jargon

If you need to know the meaning of one or more of the common terms mentioned above then have a look at the Strata Terms and Jargon Information page.

DISCLAIMER: All information on this website is of a general nature and is intended as a guide only. Readers should check all information obtained from this website for accuracy from other sources and seek professional legal advice before taking any action based on any information obtained from this website. Information on this website should not be substituted for proper legal advice. The owners of this website will not be held responsible for any action taken as a consequence of same.

EXTERNAL SOURCES: The owners of this website do not make any warranty or representations regarding the information, products, services provided by or qualifications of any external sources listed on this website. Readers should make their own appropriate enquiries regarding accuracy, qualifications, licences, etc. The owners of this website will not be responsible or liable in any way for any representations made by any external sources listed on this website.

IMPORTANT NOTE: This website deals with strata matters in NSW, Australia only. Legislation varies in different states and territories and in other countries. For information pertaining to places outside of NSW, Australia please refer to the appropriate legislation for your region.

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