Legal Articles

Property buyers have several options available to them when purchasing certain developments in South Africa.

Traditionally, buyers had the option to purchase either a plot or a plot-and-plan but recently, another option known as a turnkey sale was introduced into the property market.

In this article, we explain the difference between plot-and-plan and turnkey sale agreements.

Plot-And-Plan

Simply put, a plot-and-plan purchase means that a buyer would purchase an empty plot, employ an architect to draw up plans, obtain a building quote from their chosen contractor, and submit all these to the bank for finance.

Once the bank has approved finance, the plot is transferred into the buyer’s name and enters into the building contract with their chosen builder.

The builder is paid out in stages by drawing either directly from the bank or from the buyer until the property is completed.

Benefits of Plot-and-Plan

The following are benefits of plot-and-plan:

• You save on transfer duty which is a tax not charged on newly built homes
• You can claim depreciation on taxes
• You’ll save on maintenance costs
• You can have the home built to your exact specifications. You and your builder will agree on these before hand
• The home can be built with sustainable methods as well as modern energy and water-saving features in place

Despite these benefits, there are some cons to consider. These include:

• The buyer must carry the cost of paying their bond while the property is under construction
• The buyer must deal directly with the builder which includes:
  • Dealing directly with the builder
  • Handling all the payments
  • Dealing with any issues that arise
  • Carrying the risk of delivery (time delays, unexpected costs, etc.)

Turnkey Sale Agreements

Turnkey properties consist of a range of pre-designed homes with plans that have already been approved by the municipality. Having plans approved is one of the most technical parts of building a new home.

The buyer chooses the property they want to purchase and signs a contract to buy a completed home. The buyer still has the option to choose all the finishes for the home, from a range provided by the developer.

However, no changes to the plans can be made. In other words, the buyer agrees to purchase the property as is.

Benefits of Turnkey Properties

The following are benefits of a turnkey property:

• The developer funds the entire project from start to finish
• The builder deals with all building issues that may arise
• The buyer only pays for the property once it is completed
• The buyer does not take on any risk related to delivery
• The builder delivers a completed product to the purchaser

Additionally, banks are generally happy to finance a turnkey home in the same way that they would for a completed, secondhand property.

The biggest benefit of turnkey properties is that the buyer does not have to deal with any of the stresses involved with building a brand-new home.

Van Deventer & Van Deventer Incorporated – Property Attorneys South Africa

Building a home is one of the biggest milestones for anyone to reach but understanding what it entails is crucial.

For assistance with understanding the legalities around plot-and-plan versus turnkey properties, feel free to contact our attorneys.

We specialize in property law and can guide you through the process.