When off the plan apartments go wrong

Off-the-Plan or Off the Rails? What happens when things go wrong.

With home buyers (particularly first timers) becoming increasingly price conscious in recent years, off-the-plan developments have really taken off. Buying off the plan presents an opportunity to save money and buy a beautiful new home or investment property. But like any type of investment, it also carries some risks.

What’s important is how you, as a buyer, mitigate those risks and ensure you’re working with a developer that has your best interests at heart and will deliver a quality product that matches the promise you’re essentially paying for in the first instance.

So how do you really know what you’re paying for? How can you ensure you don’t buy a lemon? We talked to Independent Property Group’s Managing Director of Strata Management Erik Adriaanse and Executive Director of Project Marketing, Wayne Harriden to get their insights on what to watch out for, the issues surrounding off-the-plan development, problems with the industry and how to ensure you get what you pay for.

The Problem at Hand

The headlines have been coming in thick and fast recently—‘Asbestos Discovered at WA Hospital’, ‘QLD Asbestos Scare Prompts Union Alert’, ‘Asbestos Tests Halt Chinese Products’… the list goes on, but the question remains: Why is this happening?


The Issue of Enforcement

It turns out that the main problem doesn’t have anything to do with inadequate legislation—rather, the issue is with compliance (or lack thereof, in some cases). “Enforcement of the law is the first step”, says Mr Adriaanse.

It’s also important for developers to have their own processes in place to ensure they’re remaining vigilant and to reject the use of suspect or cheap materials. In this case, the old adage often proves true that if it seems too good to be true, it probably is.

So What’s Being Done to Enforce the Law?

Our borders are the best place to start, since this is where the materials arrive in Australia in the first instance. Recently, a shipment from multinational manufacturer Yuanda was seized at the border after asbestos was detected in some of the materials the company had supplied to Australian construction projects.

Yuanda was reported as saying it was paying “great attention” to the issue, and has now pledged to have all its materials independently tested in Australia by a third party to avoid further problems. Which brings us nicely to our next point. What are developers doing to avoid problems? The good news is, they’re actually doing a lot.

A Conscientious Approach

Developers don’t use substandard building materials on purpose, but the fact is that issues can happen sometimes. But what’s important—and what shows the integrity of a developer—is how they respond when problems arise.

Mr Harriden says there was one instance where he was contacted by a lady on Christmas Eve who was frantically trying to find someone to rectify a leakage problem in her daughter’s apartment. Mr Harriden only had to make one call to the builder (who was lying on the beach at the time), and the builder had someone attend the property and fix the problem on the spot.

Mr Harriden recalls the lady’s reaction: “She just said she couldn’t believe I managed to get the problem fixed on Christmas Eve”, he says. “I just told her it wasn’t me, it was the builder!”

Careful Sourcing of Materials

When it comes to something like this, developers will generally take a ‘once bitten, twice shy’ approach to suppliers. If they’ve had issues in the past, it’s unlikely they will use the same one again. They’ll also ensure they’re working with reputable and quality suppliers at all times.

Mr Adriaanse also suggests using Australian made. This means materials will be compliant with Australian standards and laws, and there’s also a pecuniary benefit. “Australian property is suffering from the widespread use of dangerous, non-compliant building materials, and their elimination would lead to more local jobs and economic growth”, he says.

But whether the materials are sourced at home or abroad, both the developer and the builder have a responsibility to ensure the source is thoroughly scrutinised. Looking at other areas where the same materials have been used can also give developers a clue as to the quality.

Maintenance Periods

All properties sold by Independent Property Group feature a maintenance period of at least 90 days, although some maintenance periods are up to 12 months. During this period, urgent issues will be fixed immediately, and non-urgent ones will be fixed on a pre-determined day when all tradespeople will be on site.

“Maintenance clauses are in the contract between the buyer and the vendor, but if something goes wrong we will do all in our power to assist the communication and process and do our best to ensure the issue is addressed. We work with reputable developers under the expectation they will honour their contractual obligations. Our processes should give buyers a lot of comfort”, says Mr Harriden.

For one owner, the issue was constant condensation on his windows, which turned out to be a building leak. Strata Management referred the issue onto Harriden who investigated fully before contacting the developer.

“The building fault was fixed and the developers offered the owner a choice between compensation for the resulting floorboard damage or replacement of the floorboards throughout the entire apartment.”

For Tom and Jacqui at the Astin, the faults were not urgent, but they niggled. “They were little things—glue on the bathroom mirror, a few chips in the paint work, grouting not done properly in the shower. We contacted the developer directly within the maintenance period. Because they weren’t urgent fixes it took some time for them all to get fixed, about 18 months, but every issue I mentioned got sorted.”

Who’s Responsible for What?

For some owners, there’s confusion about who is responsible for what when something goes wrong in a new apartment. Mr Adriaanse breaks it down for us.

During the initial maintenance period the builders are responsible for any structural issues or finishes/fittings they install (such as air conditioning) and you should contact the builder’s representative.

Anything that goes wrong in the common areas is an issue for your strata and it’s best to get in contact with them. This includes the lifts, hallways, foyer, garages, outdoor areas, common recreational facilities etc. Your balcony is also the responsibility of strata. If they cannot resolve the issue they will contact the builder’s representative.

If discovery of a fault occurs relatively soon after the expiry of the maintenance period the builder will often rectify the problem irrespective of the maintenance period for the sake of their reputation.

Outside of this period, your executive committee is appointed to ensure all common areas of the building are maintained. Your strata fees cover most repairs and maintenance although there may be occasions where special levies will be raised for major renovations or special projects, such as repainting the building.

The owner is responsible for anything that goes wrong inside the apartment, including windows, after the initial maintenance period. For this reason it’s a good idea to check all your appliances when you first get the keys—pump the heater even if it’s the middle of summer, cook a roast in the oven even if you know you’ll live on take out from all the nearby restaurants. Some internal issues will need approval from the executive committee first, such as changing the location of the kitchen bench, particularly if there are engineering/architectural design aspects to consider.

So when it all boils down, buyers can avoid problems by simply doing their research. Choose a developer with a good reputation and chat to them about what does happen if something goes wrong before you sign anything. If you’d like some advice on the best off-the-plan property for you, you can contact your local Independent Property Group office.

Happy home hunting!

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