Brisbane real estate: Pitfalls for off-the-plan unit buyers

ONE of Brisbane’s top real estate law experts has warned that off-the-plan unit buyers have very little protection – and to get a lawyer – if their builder goes bust.

Tim O’Dwyer said there was already an inherent financial risk in buying-off-the-plan because of the glut of new units stifling price growth in southeast Queensland.

Over the past 12 months there have been more than 23,000 multi-unit construction approvals, according to the Queensland branch of Master Builders Association (MBA).

On top of Mr O’Dwyer’s financial concerns, a number of apartment building projects have stalled or fallen over in Queensland in recent years because builders or developers have gone into liquidation.

Among the companies to hit hard times have been Trac Construction, which had two developments containing more than a 110 apartments in Chermside, and two long-established Queensland companies Gary Deane Constructions and DJ Builders & Son.

At Christmas, the Cullen group, which was behind two tower resort-style units at Robina and was registered as a $30-60 million company with at least eight major projects underway from Brisbane to northern New South Wales, collapsed.

Mr O’Dwyer, who will soon release his book Real Estate Escapes, said it’s nigh impossible to wriggle out of a contract and buyers had to endure an uneasy ride to see out their investment.

“Buyers haven’t got a lot of cover at all, unfortunately,” Mr O’Dwyer told The Courier Mail.

“If their builder goes into liquidation they should find themselves a solicitor real fast, but usually a builder going into liquidation is not an excuse to get out of a deal.”

One major headache for an off-the-plan buyer is finding accommodation while waiting for a developer to hunt down another builder to complete the project.

One elderly couple, who did not wish to be named, forked out 18 months more in rent than they had budgeted for after their builder went into liquidation.

“The developer contacted us and said the builder went bankrupt,” they said.

“It’s highly advisable to pay the money to get a reputable lawyer to go through the contract. In our case it didn’t cause a great deal of heartburn because we adjusted well but some people would be really pissed off because they might have sold their house and thought they may be able to move in and then they have to move into a rental property which they weren’t expecting.

“Be very wary of buying off the plan. I wouldn’t advise anyone to buy off the plan.”

Mr O’Dwyer said it’s best be patient and do your homework on whether a prospective purchase is a sound investment.

He said there had been cases where the value of a unit has decreased considerably between sign-on and completion and the bank had then refused to lend the full amount of money.

“When people are buying off the plan, they should really pause and not rush in and not get pressured,” he said.

“The scary thing about Brisbane at the moment is that with all these off–the-plan developments happening that values may drop because of a glut of units.

“It’s happened on more than a few occasions where people have agreed to pay a million dollars and because of a glut of buildings, the bank says ‘it’s now only worth $800,000 so we are not going to lend you the $900,000 you wanted’.”

Mr O’Dwyer said unless you can prove the developer is at fault you have to wear any additional costs while waiting for the project to be completed.

MBA construction policy director Corlia Roos said unit construction was at historically high levels and anyone considering purchasing a unit should research the developer’s reputation and track-record.

He said money paid towards the purchase of any “off the plan” property, including options to purchase and expressions of interest, should be deposited directly into a trust account of either a law practice or real estate agent.

“This is a legislative measure designed to protect buyers in the event that a seller becomes insolvent,” Mr Roos said.

“Buyers of units should always obtain legal advice on the contract with the developer and ensure that they fully understand the circumstances under which they or the developer may terminate the contract.”