Buying off-plan has its negatives

Paragon Lending Solutions has recently heard of offplan property development buyers who’ve been taken by surprise by delays.

Unintended issues relating to municipal delays or even funding challenges can sometimes result in unforeseen delays.

Typically, off-plan contracts do not stipulate a completion date, defining the occupation date as: the first day of the month following the month in which the architect certifies that the unit is ready for occupation. This leaves the buyer with no enforceable occupation date.

Buyers may have already sold their existing property and could incur occupational rent fees, or need to find another place to stay while waiting. Extended delays could also impact on finances for the development as lenders would want to capitalise their loan as soon as possible.

Note that some contracts have clauses which allow the developer to increase the unit’s sale price if the construction commencement date is significantly delayed, which could result in a nasty surprise for unsuspecting buyers.

Developers and buyers may also reach a mutual agreement for the developer to access the buyer’s deposit in return for a more favourable price. The developer will then further bond the property to capitalise development costs. This can leave the buyer and developer at risk should there be delays or unexpected cost increases.

Carefully reading sale contracts is imperative.

Wilhelm Jonker is a business developer at Paragon Lending Solutions