Complicated contracts, confusing state laws and cut-price conveyancing is creating a legal minefield for off the plan (OTP) property buyers according to a new report.
Griffith University researchers reviewed OTP sales contracts of property yet to be developed or constructed and the role of information disclosure in protecting buyers for the Consumer Policy Research Centre.
Research lead Associate Professor Sacha Reid from Griffith Business School says the report confirms the need for information disclosure, but its execution has to be improved.
“Everyone interviewed sees disclosure as an essential component. But there were also many concerns about effectiveness, complexity and bias towards protecting developers.”
She said the consumers and experts they interviewed found OTP contracts too long and complex, highlighting the need for a summary document.
“Information disclosures need to be tailored with important information a consumer needs to make an informed decision. We’ve recommended categories to be included, as state laws and regulations are complex areas and rules vary across jurisdictions.
“While the level of consumer financial and contract literacy is a concern, their comprehension of OTP sales contracts is made more difficult by industry norms and the way these legal documents are structured.”
Dr Reid said buyers were also opting for low-cost conveyancing and not seeking comprehensive legal advice for what is a specialised area of property law.
Co-researcher Dr Savindi Caldera from Cities Research Institute says consumers don’t often realise that OTP property development carries inherent risks.
“When they’re looking through the glossy brochures promising a certain lifestyle, they’re overlooking the multitude of risks from planning, finance and construction that influence these development projects.”
She said the research data shows ordinary Australians and not sophisticated investors, are the majority of buyers of OTP property.
“We’re seeing demand for multi-owned property outstrip single dwelling housing stock and the market has been valued at close to $1 trillion dollars.”
“Ordinary buyers see these properties as a lower cost of entry into home ownership.”
“But buying residential property is one of the biggest financial decisions many Australians will make. We’re not saying information disclosure will mitigate every single risk, but if they are highlighted, buyers can be properly informed in their decision-making which is meant to be the goal.”
The full Information Disclosure & Residential ‘Off the Plan’ Sales Contracts report is available online.