A reader has asked our panel of experts for advice about an off-plan property she had bought that took two years longer to complete than the original date conveyed to her.
The development was meant to be finished in December 2005. The reader sold the property in 2006, but the sale could not go through until she had received transfer.
When the building was finally completed in November 2007, the reader was handed the keys to the property and told she must start paying occupational rent.
She wants to know what her options are and if she has recourse against the developers because of the delay.
Property Poser’s legal experts say that when a person buys property in a new development, the terms of the development contract and specifics relating to the price, date of occupation etc are usually not negotiable.
The contract prepared by the developer’s attorneys will also contain clauses not found in a standard contract, because at the date of signing the development will most likely still stand to be approved and the buildings completed.
A serious developer will want to complete the buildings and give transfer as soon as possible. Delays are often the result of complications that arise along the way.
Development contracts contain clauses that give the developer some flexibility in delivering the final product, while bounding the buyer to the transaction.
Development contracts should, however, also protect the rights of the buyer in circumstances where changes are not minor, for example if the finished unit is much smaller than the size recorded in the contract.
Development contracts should provide a period of time during which the buyer can terminate the contract. The buyer must fully understand the conditions of the contract and the situations or changes that may give him or her grounds to cancel it. It’s a good idea to ask an attorney to explain the provisions before signing.
When property is resold before the completion of the development, additional conditions must be inserted into the resale contract. The transaction may, for example, be subject to the successful transfer of the property to the first buyer.
One option would be to attach a copy of the development contract to the resale contract and to stipulate that the resale is subject to the development contract’s terms. It would be better, however, to ask an attorney to prepare the contract to avoid pitfalls.
Due to the provisions of the Sectional Titles Act, buildings in a new development will always be ready for occupation at least two months before the date of transfer. Buyers will therefore be liable for occupational rent.
The development contract will not give the buyer a choice whether or not to take occupation and failure to accept the keys from the developer will constitute breach of contract.
It is therefore important that the resale contract obliges the new buyer to take occupation as soon as the first buyer is instructed to do so by the developer. The new buyer must also be compelled to pay the same amount of occupational rent as the first buyer, unless the parties agree to another amount.
In the reader’s case, a long time has passed since the anticipated occupation date and there may be a clause in the contract that gives her grounds to cancel the contract or negotiate another occupation date with the developer.
The reader should ask an attorney for an opinion about her rights in terms of the development contract.
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