Off-plan Property-A Must Know Before Investing
Buying a property is a very emotional activity and it comes with a lot of challenges especially if it’s an Off-plan property. To prevent you from the heart ache that comes with not doing your own due diligence apart from the usual document verification, we have outlined the following checklist that must be ticked before investing in an Off-plan property. Even if the document verification comes out fine, these check list must be ticked.
A Clear Understanding Of The Property Type.
Some investors go into investing in an Off-plan property without having a clear understanding of the type of house or property on offer. As an investor items like the property type, the property layout or floor plan should be in your check list. Also information such as the management of the property on completion (serviced or self-serviced) should be gotten.
This is a must have on your check list, even if you are in the diaspora ensure to get a proxy who can do this inspection for you in order to ensure that the location you have in mind is the same location where the property is to be located. Handbills can be deceitful at times when it comes to property location.
A flier can say the property is located in lekki only for you to find out that it’s at the outskirt of Lekki or even Ajah.
On inspection, if you notice that there is an existing structure on the site please try as much as possible to find out the reason why there is an existing structure on the land. Probably the land was bought with the structure on it with the aim of being brought down during the construction of the new property. Also, the neighborhood matters a lot. Confirm to yourself that it’s a neighborhood you will want to live or have an investment property in the near future.
Another thing is the pricing of the property. What is the payment plan and milestones attached to it and how competitive is the price when compared to in class projects within the same area? Some developers usually have the option of a discount for an outright payment (Confirm if such exist for the Off-plan property). In order to show a high level of reliability, some developers go an extra mile by opening a trust account where all payment with respect to the Off-plan project will be paid into. With this in place, investors are sure that their funds are going to be used strictly for the project in question.
The Expected Delivery Date
Despite the fact that some project gets delayed due to reasons beyond the developers control its paramount that the expected delivery date is communicated to the investor. Also, the backup plan for such delays needs to be communicated. Part of the reasons why investors invest in Off-plan properties is the opportunity to make some adjustment or customization during the project stage. As such, the investor should have information with regards to the project stage when he can request for some modification or customization of his or her unit. The type of customization done are mainly interior customization. Weekly or bi weekly project status report will go a long way in keeping the investor up to date as regards the project status.
Background Check On The Developer
Endeavor to find out who the developer is as well as their track record. How many projects have they successfully completed based on timeline in the past. Do they have a good track record? If they have an ongoing project apart from the one you intend investing in, go to the project site and see if work is ongoing or placed on hold. You can also confirm if the company is a duly registered business via CAC verification.
Title Type On Part Payment
What type of document is associated to the property you are investing in? If the seller has a CofO or a Governors Consent then you should at least get a Contract of Sale. Followed by a Deed of Assignment or Deed of Sublease to be executed by the respective parties upon completion.
In making the initial payment for the Off Plan property, it is useful to note how the payment is described in the Contract of Sale i.e. as a “deposit” or as “part-payment”. Although used interchangeably, both terms however have different implications in law. A deposit is some token payment made by a buyer which is non-refundable in the event of default by the buyer. On the other hand, a part payment is a portion of the purchase price agreed between the parties and set out in a contract of sale, the balance of which is subsequently paid by the buyer.
Due Diligence/Document Verification
Conduct a due diligence check on the property root tittle to find out the history of the property as well as to confirm if the seller has a good tittle to the property.
Furthermore, in dealing with a developer who is not the owner of the property, it will be wise to clarify the relationship between the developer and the land owner and request for a perusal of the contract between the developer and the land owner.
This will enable the investor to confirm that indeed an agreement to develop the property does exist between the parties. It should also spell out the scope of powers of the developer to deal with prospective buyers and the developer’s entitlement out of the completed buildings. From experience, whilst some developers may have a power of attorney to develop and sell the property, the scope of powers of other developers are restricted solely to the development of the property.
Builder’s Guarantee For Defects
To avoid unwarranted expenses on problems you could have avoided as a result of defects discovered on completion of the building. You have to get the builder’s guarantee to cover construction defects the property might have upon completion.
Confirm Your Ability Transfer Your Interest in the Property At Project Stage
You may decide to flip the Off-plan property even before completion. Depending on how prime the location of the Off-plan property is. There is a possibility of finding a buyer looking for a home to live in that neighborhood or an investor willing to pay you for the right to buy the off plan property from you. It is important for the contract of sale executed by both parties to have a clause in it that allows the buyer to flip the property at the construction stage.
In conclusion, this check points should all be ticked for a hitch free Off-plan property transaction or investment. Also working with a reputable real estate broker and a lawyer will go a long way in making your navigation through the process stress free.