News and Insights
1 February 2021
Published in the JEP's Homelife supplement - February 2021 issue
We have all been there: a property advert catches your eye or perhaps you spot the perfect new 'work from home' pad. With Covid still prevalent, many are reluctant to visit properties- making buying off-plan a tempting proposition. When the development is finished Covid should (fingers crossed) be a fading memory.
What does buying 'off-plan' mean?
Basically, it is a purchase based on drawings, simulations, or projections. The actual property may be a building site or not even have foundations yet. The term applies to both newbuilds and refurbishment projects.
A purchaser puts down a reservation fee/deposit and signs a contract with the seller who promises to finish the property in accordance with the plans and by a certain date. In return, the purchaser agrees to buy the property within a certain time of the seller's 'notice to complete'. Penalties apply if either party pulls out or are unable to comply with the agreement.
What are the benefits?
Not only is there the appeal of a 'never lived in' home and brand-new appliances (from the oven to the ever-costly boiler), buying off-plan is also an opportunity to:
- 'Lock-in' a price in a soaring market;
- Walk into a property finished to a high standard, both because ofrising regulatory standards and what buyers now expect;
- Choose amongst similar properties, from a ground floor flat to penthouse;
- Take advantage of developer discounts or perks, such as a gym or the use of an electric car
What are the potential risks?
There are risks with every purchase, and many of these apply whether you are buying off plan, or free hold:
- Once tied into a purchase it is costly to pull out, even if not by choice (e.g. mortgage issues or job loss), as you may lose your deposit and/or incur penalties;
- The finished property may not be what you envisaged or be built to the standard you expected;
- Your moving-in date may be delayed;
- Property prices may fall;
- The developer could get into financial difficulty
(although no cases of this happening, in Jersey, within the last ten years spring to mind).
Once the seller issues the completion notice, the purchase needs to complete quickly. It is therefore important to have your finances ready early.
Most mortgage offers expire after three-to-six months meaning you may have to re-apply once the property is completed and your purchase can go through.
We recommend keeping your mortgage provider in the loop and re-starting the process two or three months before your target purchase date. Set a reminder in your calendar as there will be plenty to organise and you may be penalised if you cannot complete on the target date if your mortgage is not ready.
Further points to consider
- Will your financial or personal situation change before the property is ready? This could impact both your requirements (extra bedroom?) and your mortgage offer.
- Can you choose appliances, type of flooring, or colour-schemes?
- Survey: do not skip thinking a newbuild will be fine.
- How is your deposit protected? Is it held in escrow or is there an insurance policy should the development 'go South'?
- Is there a snagging warranty period?
- Are there planning applications or likely changes in the neighbourhood?
- Stamp duty may increase before you come to purchase.
- If you are among the first to buy, you may be living near or on a building site,
- How large are the communal areas and is there a garden, private road or driveway? You will be responsible for your share of their upkeep.
While questions need undoubtedly to be asked about your purchase, many developers in Jersey are now producing first-class properties for current living trends.
They are using innovative designs and modern technologies and products. It is likely that you will be delighted with your purchase.
For expert advice on purchasing off-plan and negotiating the terms of your agreement, contact Viberts Property team who have extensive experience of supporting clients through the process.