The topic of real estate has become increasingly relevant, and in recent months, our team of lawyers and legal experts has received numerous inquiries related to property purchases and sales. To assist more people, within our new Info Week initiative, our real estate lawyers have been answering your questions free of charge.
In the October edition of Info Week, we invited you to submit your real estate-related questions. One of the most discussed topics, as expected, was the purchase of a property “off-plan.” We are sharing one of the more interesting cases we received – concerning the purchase of a residential property under an investment program. The question raised issues such as the risks associated with higher initial payments and the clauses in preliminary contracts.
Here is what our team of real estate lawyers advises:
What to Keep in Mind When Buying “Off-Plan”
When purchasing an off-plan property, investors usually sign preliminary contracts with future sellers for units that are under construction or yet to be built. The actual sale and transfer of ownership of these units typically occur either upon reaching the “shell and core” stage or after the building is commissioned. Less commonly, ideal parts of the land on which the building is constructed are transferred, or the right to build is assigned directly.
When buying an off-plan property, it’s important to remember that higher initial payments usually serve to finance the developer’s construction activities. Throughout the construction process, certain risks may arise, which should be carefully addressed in the contract.
These include:
- Conditions for terminating the contract;
- Penalties and deadlines for completion;
- Warranty periods for the construction work;
- Deadlines for building completion and commissioning;
- Clauses concerning price or timeline changes.
Inaccurate or unbalanced clauses drafted by the developer often lead to difficulties if issues arise during construction.
Financing and Developer Due Diligence
The method of financing the purchase is also significant – whether it will be through a bank loan or personal funds. If using a bank loan, it is advisable to consult with your bank regarding the required documentation and payment stages, as banks typically release funds only after a mortgage in their favor has been registered.
Before signing a contract, it’s also wise to research the developer – their previous projects, completion timelines, reputation, and reliability. This can provide a realistic view of their integrity and trustworthiness.
Verification of Property Ownership
It is highly recommended to verify the ownership of the land on which the building is to be constructed, including checks for:
- Property encumbrances;
- Pending legal disputes;
- Foreclosures or other restrictions
that may impede subsequent transactions with the property.
If you require additional assistance or legal advice, our experienced team of lawyers remains at your disposal and will gladly assist you. Contact us.
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