Greenleaf Property Developers

Those buying a plot-and-plan basis must be careful of weaknesses and possible pitfalls in the developer's sale agreement.

"In my experience, most Cape property developers are jealous of their reputations and are ethical and professional - but there have been, and there always will be, a few exceptions to the rule," says Lanice Steward, managing director of the real estate agency Anne Porter Knight Frank (APKF).

"Anyone buying a home on a plot-and-plan basis therefore has to be exceptionally diligent, particularly in checking what rights or special conditions the developer has inserted into what appears to be a standard contract.

"A developer can, for example, reserve the right to alter the plans. We had a case recently where bay windows, an expensive item, shown on the plans were not in the final product. A developer can also reserve the right to alter (usually by downgrading) certain finishes or he may avoid specifying finishes altogether.

"This can lead to the buyer being very disappointed when he takes over the property. A good developer will almost invariably show the buyer the specified finishes at his showroom and allow him to make his decision upfront.

"Many developers will also avoid being tied to a fixed handover date and this can be extremely awkward for someone who has agreed to vacate their current home by a specified date.

"A more serious problem is that inexperienced developers may fudge the date by which they agreed to confirm that the project is in fact going ahead. Their bank financiers will usually have insisted on a certain level of presales or prelets being achieved before they will make their loan available and will ask for guarantees to cover the loan.

"When these conditions are not met the project may well be aborted - and in most cases deposits then should be immediately repaid, with interest.

"Regrettably not only will some developers delay informing their clients about the cancellation of the scheme, but some will also hold onto their deposits for as long as possible.

"It is wise, therefore, to insert in the sales agreement in writing that a start on the building – and the handover – have to be achieved by certain dates and that clear notice of cancellation is given by some other date. It is also wise to agree upfront, again in writing, the interest that you will be earning on your deposit."

Steward says residential investors are sometimes slack about attending handovers of their properties, drawing up snag lists and inspecting the condition of their units. They often leave this to the tenant, expecting him to relay any dissatisfaction or complaints to them via the agent.

Frequently, this is not done and minor problems then grow into major problems that can be very costly to repair. These can crop up out of the guarantee time or the time allowed by the developer to report snags.

"Leaving the notification about complaints to the tenant, should very definitely be avoided because there is no particular incentive for a tenant to spend time on this. Furthermore, if repairs are supervised by the agent they are sometimes carelessly carried out. In general, therefore, the landlord must keep an eye on his investment, even when he has a thoroughly trustworthy agent operating on his behalf."

For more information contact Lanice Steward on 021 671 9120