Points to consider when buying off plan

Points to consider when buying off plan

Private Property South Africa
Home Front

With the plethora of new housing developments springing up it has become increasingly common for home owners to buy off plan.

The advantages of buying off plan include being able to select a house design ideally suited to your family circumstance as well as being able to choose your own fittings. If you get in at the building stage you also will pay far less for your home compared to buying in an established complex.

There are however some points to bear in mind when buying off plan. Firstly look at the builder contracted by the developer. Is the builder registered as a closed corporation, a sole proprietor or a limited company? It is important to know this in terms of any warranties provided by the builder.

In other words should something go wrong, what legal recourse do these warranties afford you? Do you have to enforce them against the builder personally or his company or CC?

Also question what other developments the builder has done. This will allow you to gauge the quality of work done. You should also chat to current residents of those developments to find out their experience of working with the builder in question. For example how did he deal with any defects or the inevitable snags?

When buying from a developer it makes sense to look at how to structure your purchase in light of the transfer duty relief afforded to you when buying from a developer, who is liable to pay VAT on the purchase price. Considerations such as marital status, business interests and estate planning should be considered. One option would be to structure the property into an entity (company or trust), but it is best to have your financial advisor or attorney give you guidance in this area.

You need to be very clear what is included in the purchase price. Read the small print! Most buyers only look to see what external features such as

fittings are included. However you must remember that you are building from scratch so check whether things like your NHBRC levy and water and sewerage connection fees are included in the purchase price.

You should also ensure that all the appropriate soil and geological tests have been completed and that you are satisfied with the results. This will avoid later surprises and unplanned financial costs of extra reinforcements of foundations for example.

Attention must be paid to the time limits for commencement, completion and delays in the building process. Penalties for late completion by builder should be clearly established upfront. Everyone who has ever built has a horror story so make sure you know what will happen in the event of a dispute between yourself and the builder.

Ensure that you secure warranties on structural and workmanship issues. Also have a procedure in place whereby you can generate snag lists and a time frame for these to be seen to.

Lastly remember that when buying off plan most contracts will be biased towards the developer. You may only build a house once in a lifetime however developers do it every day. Don’t allow yourself to get steamrolled. You are perfectly entitled to get a second opinion on the offer to purchase and we strongly advise you get the contract checked by a professional who has your best interests in mind.

Written by Allister Long and reproduced with permission from Home Front, November 2004


Found this content useful?

Get the best of Private Property's latest news and advice delivered straight to your inbox each week

Related Articles

Questions every first-time homebuyer should ask before purchasing a property
Questions to ask for making your first home purchase less daunting, more rewarding.
What it means to buy a property in distress
Everything you need to know about the process of purchasing a distressed property.
Your new home: What happens between the offer and the transfer
Learn how to navigate the time period between sending your offer to purchase and transferring the property.