Developments are popping up everywhere in West Auckland in the form of apartments and townhouses. Some are on a fee simple title while others are unit title estates and involve a body corporate. These developments 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 for so many reasons including time to arrange finance and the building, appliances and fixtures are all brand new. However with “off the plan” purchases, you should know exactly what you are getting into before signing an agreement. Downsides can be many but include: vendor favourable sunset clauses, which have gained publicity recently as some developers activate a sunset clause to cancel the agreement, to sell at a higher price, sometimes genuinely due to increasing material and build costs, sometimes not. Buyer beware.
What else should purchasers consider before signing?
Not all developers are of the same calibre, and therefore it is important that you purchase from a quality developer who has experience with building and a great reputation from other satisfied purchasers. Purchasers should always seek information from agents or the developer about the developer’s past projects. Things to consider are: the quality of the building and materials used, the location, and the contractors/tradesmen engaged by the developer. If they are independent of the developer, you can also research their past work too.
Plans and specifications should always be attached to an agreement and carefully inspected before signing. They should be sufficiently detailed that they meet your expectations. Plans and specs may differ from the advertising material which sometimes are only artistic impressions and not actual renderings of the building. Sometimes the materials shown for cladding or balconies (for example) aren’t confirmed. Purchasers should examine sound-proofing (especially in terrace housing/apartments)and car parking. Some agreements entitle the developer to even change plans and specs while under construction. Purchasers must be aware of the flexibility awarded to the developer and it should be reasonably limited.
If the size of the 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.
Often the agreement to purchase has been pre-approved by the developer’s bank which means purchasers may not be able to negotiate terms, as the terms must be consistent across the entire development. Possible areas of negotiation can be settlement date, types of appliances or minor changes to the layout. Deposits are extremely important to check including if it is to be held by someone independent of the developer (a stakeholder), and when/if you might be able to reclaim it. A sunset date for the build is recommended and puts a time limit on the development in case the build comes to a grinding halt. A properly worded sunset date can give purchasers options to reclaim your deposit and cancel the agreement. Always ensure there is a properly drafted purchaser’s solicitors approval clause.
Where the estate is a unit title, the body corporate rules for development must be closely reviewed even if in draft form. These rules outline the obligations and restrictions on owners in the development and can impose various restrictions with things like pets, noise, use of shared spaces etc.
This article was written by Gina Jansen, Managing Director of Gina Jansen Lawyers Ltd, and was reproduced in the West Auckland publication “Window on Swanson” in December 2021. Disclaimer: the content is not to be reprinted without the express permission of the author, nor is it intended to be relied upon or quoted as legal advice. Contact Gina Jansen Lawyers for legal advice.
Gina Jansen Lawyers are based at 9C Moselle Ave, Henderson, West Auckland but provide nationwide legal services with offices by appointment in Raglan and Ngaruawahia in the Waikato. Gina Jansen is an Accredited Specialist of the Property Law Section of the New Zealand Law Society. The above article is not legal and/or financial advice and is intended as a guide only and cannot be relied upon as legal advice. Legal advice specific to your circumstances should always be obtained. Our legal services include: property, conveyancing, trusts, estate administration, wills and enduring powers of attorney, relationship property settlements, divorce, Inland Revenue tax debts and disputes, bankruptcy, liquidation, commercial and business law. We welcome enquiries by phone or email. We can provide referrals to a highly recommended group of chartered accountants, insurance brokers, financial advisers, mortgage brokers. Contact us for details by phone on 09 8695820, 0800 544508, or refer to our website https://www.ginajansen.co.nz.