For the majority of overseas buyers, they can only buy the property under construction or new houses, and cannot buy second-hand houses in Australia. In China, the news of unfinished buildings often happens. Then, when buying a house under construction in Australia, is it possible to encounter an unfinished building?
The answer is no. Because of the mature system of Australian real estate market and complete legal system, the properties are favored by buyers from all over the world. In Australia, there is no such thing as an unfinished building. It is almost unheard of unfinished buildings to be half-built in China.
Development application
Although Australia will not have an unfinished building as in China, people still need to ask whether the development application of the project has been approved while buying the properties under construction.
Before the project starts construction, the developer must first submit a detailed Development Application (DA) to the local government, which will contain various aspects of the project, such as the house type, how many floors can be built, appearance, green area, and the facilities planning within the project……
Developers can only start construction after the DA is approved. However, the law in many Australian states does not stipulate that developers must obtain the approval of the DA before they can start selling.
In order to prevent risks, banks generally require the pre-sale volume of projects to reach a certain proportion before they actually approve loans to developers. Therefore, some developers will take the strategy of waiting for the DA while selling in order to get the bank's loan as soon as possible.
However, as a buyer, if you buy the house before the DA of the project has not been approved, then in the next step, once the government finally has not approved the DA of the project, or the DA of the project has been significantly changed, it will have an influence on the buyer who has placed the deposit.
Developers often mark "Subject to DA" on the purchase contract when the DA has not yet been approved. After the buyer signs such a contract, if the DA is not finally approved, the buyer can terminate the contract and the deposit can be returned in full.
If the DA has been greatly changed and the specific type of house purchased by the buyer has been affected, then the buyer can negotiate with the developer to solve the problem, or the contract can be terminated and all the deposit can be returned.
Sunset clause
In addition, there is a Clause in the contract to buy the house in Australia, called Sunset Clause.
In Australia, when the house is purchased, there is generally no specific time for the house to be delivered in the contract, but the contract would specify a sunset date. If the house cannot be delivered after exceeding the time, the buyer and seller both can terminate the contract.
With this provision, if the developer cannot make house delivery at the latest time because of the capital, process of construction and other reasons, the buyer can get back the down payment which is already paid to avoid the situation of indefinite waiting for house delivery.
While buyers can get all the down payments back, prices are likely to have risen sharply during the construction period, making it impossible to buy a similar home on the market at the same price. If the contract is terminated under the sunset clause, the real damage will be on the buyers, and the developer can put the house back on the market at a higher price.
To avoid this, here are some suggestions:
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whether the developer has obtained all necessary approvals for construction, and if not, what approvals are required.
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whether developers need to secure the minimum amount or part of unconditional contracts before they can secure funds to keep the project going, and if so, how many contracts have been secured.
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the progress of the development project so far (while checking progress, the buyer can ask their lawyer, the developer or the representative of the developer whether the project node meets the requirements of the contractual limited time).
It is also worth noting that if the development project exceeds the time limit specified in the sunset clause, and the developer and the buyer still accept the previously agreed price and terms, then they can draw up another contract.