In this competitive market, an increasing number of people are buying units, townhouses or apartments off the plans as part of a development.

These developments are often located in CBD areas and are generally low-maintenance, making them popular among first home buyers and investors. The idea of buying a ready-to-move-into home can be attractive – there are no immediate renovation costs, there is ample time to arrange finance and all appliances and fixtures are brand new. That being said, it is important for purchasers to know exactly what they are buying.

This article outlines a few general considerations when buying off the plans.

(1)   The reputation of the Developer

There are many developers involved in projects around New Zealand, and it is important that you purchase from a quality developer who has experience. A property lawyer or real estate agent may be able to provide you with information about a developer’s past projects which can provide some insight. Things to consider are the quality of the building, the location, and the contractors engaged by the developer.  

(2)   Plans and Specifications

It is important to carefully inspect the plans and specifications attached to an agreement for sale and purchase, and take expert legal advice to ensure that they are sufficiently detailed and meet your expectations. The plans and specifications may differ from the advertising materials that have been provided to you. In fact, some advertising materials may just be artistic impressions, and not actual renderings of the building (often, the materials shown for cladding, interior stairwells or balconies may not yet be confirmed).  

Other considerations relate to sound-proofing (in terrace housing, or apartments) and car parking. In some agreements, the developer may be entitled to change plans and specifications as they carry out the build. It is important to check that you are aware of any flexibility the developer may have and that it is reasonably limited.

While most agreements will allow you to request changes, this can be an expensive exercise. It is often best to ensure that everything is as you expect from the beginning.

(3)   Size of the Unit, Townhouse or Apartment

If the size of the unit, townhouse or apartment is important to you, you should check that there are provisions allowing you to cancel the agreement if the dwelling turns out to be considerably smaller than its original size. Alternatively, you could agree upon a method of reducing the purchase price if this changes.

(4)   Checking the Contract

Often the agreement to purchase is a standard form which has been pre-approved by the developer’s bank. This can mean purchasers have less room to negotiate on certain terms, as they will need to be consistent across the development. However, your property lawyer can advise you on this and talk with you about possible areas of negotiation such as the settlement date, types of appliances or minor changes to the layout.

Another thing to check is the deposit. You need to know when to pay the deposit for the build, who will hold this as a stakeholder, and when you might be able to reclaim it.

We generally also recommend that the contract contains a sunset date for the build, which is a time limit on the development. Although developers usually complete within the expected timeframe, there can be situations where the build has come to a grinding halt. A sunset date can give you options to reclaim your deposit and cancel the agreement.

To allow time for your property lawyer to check the agreement thoroughly, we recommend ensuring there is a purchaser solicitor’s approval clause. Often you can request that one be inserted on signing.

(5)   Body Corporate 

Where applicable, it is important to closely review the body corporate rules for development. These rules outline the obligations and restrictions on owners in the development and can impose various restrictions with regards to things like pets, noise, use of shared spaces etc. You need to know that these rules are neither unreasonably strict nor too vague.

For more information

Buying a property, particularly one that doesn’t exist yet can be stressful and full of pitfalls you want to avoid. Keeping a close eye on all contracts along with seeking expert legal advice can help you avoid problems down the line.

While this article gives you an overview of factors to consider when looking to buy off the plans, it is important that you get specific and expert legal advice to best protect yourself and your investment. 

If you have any questions about these matters or would like advice tailored to your property or investment goals, please contact our Wellington property lawyer Murray Harden on or (04) 495 8907. 

Buying off the Plans | Property Law