Overseas Real Estate Blog

Part 2 of Legal Due Diligence series...

Top Tip No. 5: Penalty Clauses:

There should be a penalty clause if developments are late by a certain period. This may be 6months, 12 months or there may be no period at all. If not you should advise lawyer to negotiate one.

The builder has a dilemma on this matter. Should they add months to the timescale to give them some flex, or should they simply replicate the period he has contractually agreed with his sub contractors?

The buyer also needs to be cautious, as too harsh a penalty for late completion could mean that the finishing is rushed.

Then there is the matter of you as the buyer late payment. Check this penalty is reasonable.

Typically there will be clauses excluding certain events as countable to penalty delays. These may be specified - temperatures below a certain level, for example. Or they may be wrapped up in a "Force Majeure" clause.

Top Tip No.6: Notification of Payment Clause:

By what means will you be notified for payment of your instalments for off plan property - email, post, telephone? Or is there any onus on the developer to contact you at all? How much notice do you require?

Be careful here there will be late payment provisions in the contract and it may take a week to transmit foreign currency.

Be sure to get a receipt for payment.

See if you can make payments through a UK based lawyer's escrow account.


Top Tip No. 7: Contractual definition of Completion:

Be careful to understand what is meant by completion and if referring to a statutory inspection protocol what this inspection means. If in doubt ask your lawyer for a definition.

Check what provisions there a re for snagging. How about a surveyors report who can check your property for snagging, the building in general if an apartment and utility connections, also follow up for you to check work that has been completed.

Final Tips next week in part 3....