22/06/2002 Published in NST-PROP A Buyer Watch Article by
National House Buyers Association
The House Buyers' Association offers some pointers on buying properties off-the-plan
You may have received the well-intentioned advice that buying a property is all about location, location,
This however, is only true for completed properties with all the amenities and infrastructure in place. Buying off-the-plan
involves lots of homework. The situation is trickier with limited documents and no structure to inspect. But here are some
pointers to guide you in your purchase.
The progress payment concept
The practice of paying for the construction of the building as it progresses (developers call it the ‘sell-then-build’ concept)
has been around for the past two decades.
The general perception is that buyers will be getting a good bargain in view of the anticipated capital appreciation as
For some, buying property this way, is the only way to secure a unit in some of the more popular developments. And many have this
fear that if they wait till a project has been completed, they will only find the least attractive or the more expensive units
The flip side of this are the risks involved. In the first place, buyers commit a large sum of money on the basis of marketing
materials, a concept and a promise to deliver a home some 24 or 36 months later. If a project fails, buyers are still bound by the
sale and loan agreements.
If this concept is not for you, look into ready-built-with-CF projects. Though higher-priced, the property and surroundings are
there for you to inspect.
Developer goes belly up
In the grand scheme of things, financiers as secured creditors that have granted loans to the developers are the first to get
their money back. House buyers on the other hand are usually the unsecured creditors. What you have paid so far is secured by
nothing more than the sale and purchase agreement (SPA).
Read the small print
Know whom you are signing your SPA with. It is not uncommon to find well-known companies advertising developments but buyers sign
their agreements with separate private limited companies that are either subsidiaries or associates of the parent company.
Businesses of all types typically set up private limited companies to shield their owners from liability. Developers increasingly
have been creating separate ones for every development rather than exposing the parent company’s entire assets to legal
entanglements over a single venture. The developer is certainly aware of not putting all their eggs into one basket.
What most buyers do not realise until it is too late is that the agreement they signed is with a separate legal entity although it
may be owned by, or affiliated to the brand name parent company. If things go wrong, buyers will find it hard to recover any
claims from the company because it has no money and they cannot collect from the parent company because it was not a party to the
Another warning is to read the fine print. A typical endorsement on an advertising leaflet will have this printed - The
information contained is subject to change and cannot form part of an offer or contract. All measurements are
approximate…developer cannot be held responsible for inaccuracies.
Your next question is: who is responsible for the inaccuracies then? It seems that no one is. Your best protection here is to seek
a copy of the contract to see what is included or not.
For buyers of homes or plots of land with the promise that the owners will be able to enjoy recreational facilities and such other
amenities, be extra careful. Check how these amenities are included in the agreement. We have received numerous complaints of
amenities not built even after the owners have moved in for years. It is difficult to compel the developers to finish building
these amenities if they have moved on to another project or if they are in financial trouble.
Be warned that developers are not required by law to complete all proposed phases in mixed developments. Here are some matters
that buyers need to seek clarification to protect their rights:
If all phases are completed, how many units will
eventually be added to the housing project and what impact will they have
on the use of the common facilities?
If the recreational facilities are planned for one of
the first few phases, what will your maintenance charges be if later
phases are not built?
In what phases are the recreational facilities to be
built if the recreational facilities are to come at a later stage?