The most risky aspect of purchasing off the plan property is that you will be buying an unseen property. Further, off the plan contracts cannot be cancelled just because the purchaser changes his mind. The contract becomes binding and enforceable once both parties have signed it.
The purchaser will have to rely on the information disclosed by the vendor and the contract itself.
Below are some the more important risks you have to consider when buying off the plan.
Variations in the contract
Most off the plan contracts have a condition which prevents the purchaser from rescinding the contract based on minor variations. Minor variations are those which are deemed necessary because of state regulations, unforeseen contingencies and product unavailability.
After contract date and during construction, certain specified brands or models of fixture may become unavailable or discontinued by the manufacturer, the developer will have no choice but to substitute a similar product.
Either party is not entitled to introduce changes in the contract once it is signed unless they both agree to do so. The purchaser should be extremely careful in examining the contract down to the very details.
Developer may rescind
If the purchaser is entitled to rescind before the settlement date based on some conditions, so is the developer. After the contract date, construction may become unviable, development may become impossible in some instances or sometimes, or there is just not enough sales to proceed with the project.
It may also be possible the city council will refuse to register the sub-division plan. The rule of thumb is if the contract does not provide a time for cancellation of the contract, either party may cancel within 18 months from the contract date if the sub-division plan is not registered. Of course the purchaser is entitled to a return of his deposit.
Another risk is delays. Delays can occur in construction, in project completion as well as delays in settlement. One peculiarity in off the plan contracts is that the purchaser is prevented from cancelling the contract despite long delays so long as the subdivision plan is registered within the specified period, usually 18 months to 3 1/2 years after the contract date. Even if the date of settlement is delayed, the purchaser is compelled to purchase once the plan is registered.
Because you are buying the property unseen, it is possible that you might not like the finished property upon turn over, although it conforms to the specifications in the contract. It may be possible upon occupation that an adjacent residential building will be under construction and that it creates too much noise.
Another example might be unforeseen traffic congestion you did not anticipate a few months before. It may also be possible you might not like the color schemes once you see what the finished property looks like. The purchaser must be willing to compromise.
However, there is a maintenance period or maintenance clause in off the plan purchases where the developer will attend to small repairs like sticking doors and wall cracks. He or she may also resort to legal action in some cases.