With the huge number of new unit projects coming on line in the past couple of years, and more following, there have been many significant off the plan management rights transactions coming across our desks. We are though starting to see demand wane a little and buyers being able to negotiate more favourable terms and conditions.
Whilst we have an extensive checklist we use when advising potential off the plan management rights buyers and negotiating contracts, it has until recently not been uncommon for developers, swamped with offers in a very hot market, to reject many of the safeguards we like to put in place for our clients.
Where we and our clients have been able to incorporate some of the usual safeguards, our clients have reaped the benefits. One of the most important points is to ensure that you only pay for appointments from unit buyers who have actually completed their unit purchase. As defaulting unit buyers become more and more common this is an important protection for the off the plan management rights buyer.
It can be equally important to insist on there being a minimum number of appointments in place at settlement and if not have a right terminate. In one particular matter in which we were involved, the developer took little interest in assisting our client to procure letting appointments from buyers, many of whom were overseas residents. Come settlement time, despite our client’s best efforts, our client had been able to secure less than half of the anticipated number of letting appointments. The contract allowed our client to terminate if there were not a specified minimum number of appointments at settlement (about half the anticipated number). Our client was able to trigger the termination clause and terminate the contract despite the developer’s protestations.
These are just a couple of the examples of the safeguards we try and negotiate when acting for off the plan management rights purchasers. We like to spend time with our clients when negotiating an off the plan purchase so that we can take them through our extensive checklist and make sure they turn their minds to the myriad of matters they need to consider to protect themselves. We have also had to assist other buyers who had initially used other lawyers to negotiate their purchase only to find that many of our standard safeguards were missing and come to us to sort out the problems. It is much better if we can get involved at the outset and achieve as many of those safeguards as we possibly can.