Property developments can get delayed for a number of reasons, such as a lack of finances, rise in material costs and disruptions to supply chains and work forces. This can present challenges that lead to developments not being built on time – or at all.
If you’re considering buying an off-plan property, it’s important to be aware of what you can do if the property development doesn’t get built on time. Here we’ll discuss what a force majeure clause and long stop date is and provide a checklist if you’re considering an off-plan purchase.
What is a force majeure clause?
Sometimes things happen beyond the control of a property developer, and this is where a force majeure clause comes in. A force majeure clause is a contractual clause which alters parties’ liabilities and/or obligations under a contract when an extraordinary circumstance or event beyond their control happens and prevents one or all of the parties from fulfilling their obligations.
Many buyers have been asking if a force majeure clause will excuse property developers from performing their obligations on time due to COVID-19 or allow buyers to get their deposit back. The answer depends on the specific circumstances and the contract that is in place. Start by checking your contract to see if there is a force majeure clause, and seek out advice from a legal professional.
What is a long stop date?
The long-stop date is the agreed date for the property to be completed by. In lieu of a long-stop date, some developers use a termination date instead. After that date, buyers who still have not been able to move into their new-build properties may be entitled to rescind the contract if they wish, and you could be able to get your deposit back. You’ll likely need to seek expert legal advice on the best way to get your deposit back.
You can also extend the long stop date too if you wish. You may choose to stick with the developer if the property is nearly complete, as you may have still seen capital appreciation during the build. If you are using a mortgage to help pay for an off-plan property, the long stop date is typically the date used for the mortgage offer to expire.
Note: Long stop dates will be written in the small print of the contract. And if you don’t see it, ideally, you’d want to get a date agreed before contracts are exchanged. If you have any questions, enlist the help of a legal professional.
Checklist for off-plan purchases
There are a number of due diligence steps to take when it comes to off-plan purchases. Here’s a checklist to get you started.
Find out how the development is funded.
When buying an off-plan property, it’s important to know how the development is being funded. Is the developer relying on deposits to be able to complete the build, or do they have strong financial backing? Do they have experience bringing forward completed developments?
Check if the contractor in place has a solid track record.
Research the contractor the property developer is using. See if they have a track record of building quality properties on time. If there are properties that have been built out, visit the developments. It can even be helpful asking residents what they think of their property.
Look into the track record of the team behind the development.
Check that the team behind the development has a solid track record. Do you know who the developer is? Go check out their completed developments. And find out whether you’re buying directly through the property developer or via an agent. Make sure you look into the background and experience of everyone involved in the development.
Why buy with Salboy?
Salboy has a solid track record for delivery property developments on time. The north-west based property developer has brought forward more than 2,400 homes across the UK. And despite the challenging year, Salboy completed six projects, which provided a total of 1,330 townhouses and apartments.
The developer’s construction arm, DOMIS Construction, allows Salboy to control and manage the entire construction process of their developments from beginning to end. This ensures everything is completed to the highest standard and offers more certainty to the build process.
On top of that, Salboy’s developments are forward-funded with strong financial backing. This means we don’t need deposits in order to be able to progress on site. We also have protected deposits from our founders, so if there are any issues, you’ll get your deposit back, providing more security and peace of mind.
Buying an off-plan property through a reputable property developer is crucial to ensure the purchase and building of the development runs as smoothly as possible.
Check out the thousands of new homes Salboy has created and developed. If you are interested in buying an off-plan property in Manchester or Salford, give us a call on +44(0) 161 884 3183 or send us a message.