LONDON, April 16, 2013 /PRNewswire/ --
Central London new build apartments are being snapped up at present, many of them by overseas purchasers. According to recent analysis from international real estate adviser Savills, international buyers generated a net £1.4 billion inflow of equity in 2011. However, in many cases what is being purchased isn't an apartment but a developer's legal obligation to build one. This sort of arrangement is better known as an off-plan purchase. The other side of the bargain is an obligation by the purchaser to pay the balance of the purchase price when the apartment has been built - the deposit will have already been paid. While this is very positive news it should not be forgotten that the Central London market represents a small part of the overall property market and in other parts of the market the priority is not investment but damage limitation.
Prior to the crash in 2008 off-plan purchases were generally uncontroversial. However, since then they have given rise to a number of problems both in the UK and overseas. The cause of many of these problems is that since prices were agreed the general market has fallen. In some cases mortgage lenders withdrew their support which led to purchasers defaulting and deposits being lost to developers. In response aggrieved purchasers and their lawyers scrutinised sale contracts to try to identify breaches of contract by the developers. In most cases they failed. The purchasers who just lost their deposits were perhaps more fortunate than the ones who were forced to complete their contracts and pay the balance of the price.
Dewar Hogan, property litigation solicitors, frequently advise in relation to claims and disputes that arise out of these situations: claims for the return of deposits, solicitors' negligence claims, and claims for orders requiring purchasers to complete their contracts. Dewar Hogan comment:
"Purchasers who are new to buying-off plan can learn some useful lessons from what's happened in the recent past. The prospect of buying off-plan in a promising market (and there may be a few) is obviously attractive but it's important that a prospective purchaser understands the risks. There are many, for example: what happens if the developer fails to complete the development or becomes insolvent, what happens if the purchaser's mortgage lender withdraws an offer, and what happens if the value of the property falls below the purchase price. In order to understand the risks before entering into costly commitments it's essential to obtain good legal advice."
If problems arise in relation to an off -plan purchase where the contract was made in England and the property is also in England that's bad enough, but these problems are often compounded where they relate to an overseas contract and property. In fact, the safest bet seems to be an off-plan purchase in Central London but this comes at a price!
SOURCE Dewar Hogan Solicitors