Plan to buy house off-plan? Here are important lessons

Last week I received an inquiry from a disgruntled home buyer. He wanted to find out if he had a recourse against a development company from whom he had purchased a house off-plan.

The basic facts were that he bought the house off-plan and the developer did not complete construction of the facilities as promised on the brochure and during sales presentations.

This is a common inquiry I get especially from buyers who purchase houses off-plan. Many times, what is on paper and what is on the ground do not tally.

I want to highlight tips one should take when buying a property off-plan and if there is any recourse when the developer fails to honour his obligations.

To begin with, any recourse would lie in the contract documentation in place such that, the letter of offer, agreement and title documents would determine your rights. It is therefore important to read carefully through these documents before making any commitments.

Ignore the sales rhetoric because sales men can promise you heaven and give you hell. One common gimmick I have observed is that some sales representatives misrepresent the quality of the concept in an almost hyperbolical manner.

The second thing I have observed is that some representatives make sales based on emotional manipulation by, for example, stating that there are “only few units left” and so on.

My advice is you should not make a purchase based on emotional manipulation but take your time to investigate the concept and the documentation.

Usually when making a sale, the sales representatives insist on a deposit and have you sign a letter of offer, which starts the process.

However if you carefully look at most letters of offer, they state that the sale agreement and title document supersede the letter of offer. Therefore if a decision has been made to purchase a particular unit then as you sign the letter of offer, ask to peruse the sale agreement and other documents which would supersede the letter of offer.

When you look at the sale agreement, ensure that the descriptive part of the property captures the material features marketed to you, such that if the salesman said the project would have a swimming pool then the same should be included in the sale agreement.

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I advise buyers to look at the fine print in every sale agreement. Most agreements have disclaimers on representations. They mostly state that the agreement was entered into by the buyer without any representation of material facts such that any representations made by salesmen would not be actionable.

However where no such disclaimer is available then any representations made that would induce the buyer to enter into the sale, may be actionable.

The Trade Descriptions Act is a little known and little used law that may be applied to punish misrepresentations in the ordinary course of trade.

Misleading advertisements fall in this category such that a website containing false information as to the quality may be actionable.

For developers on the other hand, I advise that when marketing a concept be truthful on material facts with the awareness that the Trade Descriptions Act regulates false advertising.