Anytime you are involved in an off the plan property transaction, you will probably have questions about the settlement. The settlement describes the moment of a property transaction during which all parties come together to exchange the documents and cheques necessary to complete the transaction. In other words, it’s a vital event in the course of your property purchase, so you need to be as informed about it as possible.
The problem is that in most off the plan transactions, the settlement date is not set. That’s because even though a contract is signed as soon as the transaction initiates, the settlement doesn’t actually occur until the property is complete. This variable can be difficult to manage, especially if you are buying a property before its completion for the first time.
Fortunately, informing yourself about the process and the variables involved can get you on the same page with the vendor and any third party representative. As a result, you will feel more confident about going into the meeting to achieve a successful off the plan settlement for your new property.
1) What Do I Need to Know About the Date?
When you first sign your off the plan contract, it’s important to highlight that the settlement date is not final. It’s typically set at the end of a desired completion time frame for construction. But, as anyone involved with construction projects knows, timelines can shift significantly.
There is one, variable, however, that’s important to recognise. Most off the plan contracts will include a clause alongside the tentative settlement date that states something along the lines of or 14 days after registration of the plan of subdivision, whichever is the later. In some cases, the timeline is actually shrunk to seven instead of 14 days.
The plan of subdivision describes a map of an area of land that is divided into several plots. At registration, each lot will be assigned a number and needs its own property title. Another variable to keep in mind when it comes to your settlement is the certificate of occupancy, which will also have to be issued before the settlement in some cases.
2) The Details of Potential Settlement Delays
Sometimes, delays in the above variables (plan of subdivision and certificate of occupancy can result in significant delays in the settlement. Naturally, that’s an undesirable proposition; no home buyer wants to wait weeks and sometimes months longer than initially anticipated.
Construction delays are typically to blame. Try to keep yourself updated about the progress of the construction, so you can plan accordingly.
At the same time, it’s also important to note that the vendor cannot intentionally or infinitely delay the property settlement. Some parties try to get contracts to expire or cancel through this practice, particularly if property prices have risen and they can get a better deal than the contract you signed. When that happens, it might make sense to consider legal action.
3) What Happens if the Property Finishes Before the Settlement?
On the other end of the equation, what happens if the property is actually complete and you are able to move in before you have officially settled your off the plan contract? It’s an unlikely scenario, but one that may nonetheless apply to your situation.
In that case, as long you have a certificate of occupancy in hand, you are able to negotiate potentially moving in with the property seller. There is no obligation on the vendor’s behalf to do so, but some are amenable to it when asked and negotiated with in good faith.
Vendors in this situation tend to insist on license agreements that treat the property as a rental until the transaction is settled on a more final basis. As soon as the possibility arises, talk to your vendor about expectations and potential next steps.
4) The Steps Needed to Prepare for Settlement
Say that your future property is neither delayed nor scheduled to finish ahead of time, and you are moving along nicely toward the settlement date. What preparations can you take to make sure that when that date comes, you have everything you need and know what to do?
One important step is to get a home or building inspection done as soon as the construction is complete. You need to make sure that the building you move into actually holds its promise, and fulfills everything you asked for in the initial contract.
In addition, now is also the time to get your finances in order. At the time of settlement, you need to make sure that you know every variable that could potentially be involved, from your deposit to your mortgage and potential taxes. The earlier you inform yourself and complete the paperwork, the better.
5) The Importance of Representation at Off the Plan Settlement
Finally, you should take the steps needed to make sure that the settlement itself goes smoothly. In most cases, that means working with your conveyancer leading up to and throughout the meeting.
Buying a property off the plan comes with significant benefits, but also a number of risks. Because the settlement is the final moment of truth in the transaction, you need to know what to expect. Speak to us today about getting matched to a local and licensed conveyancer that can assist you with your next off-the-plan property purchase.