Off plan is a term used to refer to property which is sold before construction is completed. It is often an attractive option for first-time buyers or investors looking to buy at lower prices. However, it also carries higher risks than conventional property purchases.
Having a solicitor on board usually ensures that you are adequately advised on the risks of your purchase and the purchase itself. However, unfortunately things can still go wrong, and you may feel your solicitor has been negligent. Common failures usually include:
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Developer insolvency
One of the most serious and increasingly common risks is the developer going bust before completing the project. If this happens, you could lose your deposit, become an unsecured creditor or be left with an unfinished property.
Ensuring the developer is financially stable and has a strong track record can reduce this risk. Your solicitors should be able to advise you on the history of the developer, and whether any associated companies have been insolvent prior to purchasing.
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How your deposit is held
It is extremely important that you enquire about how your deposit is held under the contract. There are two methods of holding deposits:
- Held as an agent – meaning your solicitor can release to the developer as soon as the deposit is paid by you.
- Held as a stakeholder – meaning your solicitor can only release the deposit to developer once the transaction has completed.
Stakeholder provides you with greater protection in knowing that your deposit will not be released until construction has been completed, but many developers insist on release of the deposit to fund construction of the development itself. Once it is released to the developer, it will likely be irrecoverable if the developer goes bust.
It’s important to note that your solicitor must advise you how your deposit is held and the risks associated prior to you purchasing.
Your solicitor should also independently confirm whether the deposit is protected under the NHBC Buildmark or any other new-build warranty providers.
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Delays in completion
Off-plan developments often face delays due to planning complications or financial problems. Contracts will usually include a long-stop date which is the latest date the developer must complete the property, but buyers should be prepared to wait much longer than expected.
Some contracts also allow developers to extend deadlines for completion, with limited recourse for buyers.
Your solicitor should independently confirm the development has planning permission and advise you of any unfair or onerous terms in the contract which may impact you later on.
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Changes to the final property
Developers often include clauses in contracts allowing them to make modifications. This means that what you eventually purchase may not match what was originally marketed.
Your solicitor should scrutinise the contract to understand the extent of modifications and whether you can withdraw if the property significantly differs from what was agreed.
Contact us
If you believe your solicitor has been negligent during your off-plan purchase, you may have grounds for a professional negligence claim.
To begin the process of making a professional negligence claim, you can make an enquiry or call us on 0300 303 3629.
Alternatively, if you’d like to learn more about professional negligence, you can read more of our blogs below:
- Recovering a Client’s Deposit After Solicitor Negligence in Residential Property Purchase
- How Long Will My Professional Negligence Claim Take?
- What happens during a financial advisor negligence case?
Written by Eren Kara
