What Happens If My Property Doesn't Get Built? Learn How You're Protected When Buying Off-The-Plan

Buying off-the-plan is a great way to make money early, but you need to know how you're protected when buying off-the-plan.

Buying off-the-plan is a concept that, for some, it's hard to get their head around. You’re essentially purchasing a promise, a future home or investment that exists only on paper.

While the idea of locking in today’s price on tomorrow’s property can be compelling, the elephant in the room for many buyers is this:

• What happens if the property never gets built?

  
  

• How am I protected when buying off-the-plan?

Let’s break down what protections you have in place, how to spot red flags, and why off-the-plan isn’t as risky as it might seem, if you know what you’re doing.

First, How Common Is It for a Development to Fall Through?

In New Zealand, most reputable developers deliver on their promises. Failed developments are the exception, not the rule, especially when dealing with well-established names in the industry. However, it can happen.

Developers may hit roadblocks like:

• Failure to meet pre-sale targets
  

• Rising construction costs that make the project uneconomical
  

• Difficulty securing funding or consents
  

• Supply chain disruptions or labour shortages
  

So while rare, it’s not unheard of. The good news? If you’ve got a solid Sale and Purchase Agreement (S&P) and good legal advice, you’ve got safeguards in place.

The Biggest Fear: Will I Lose My Deposit?

Short answer: No, not if the deal collapses due to non-completion by the developer.

Most off-the-plan purchases in NZ require a 10% deposit, held in a trust account by a solicitor. It doesn’t go directly to the developer, and can’t be touched until settlement, unless certain conditions (like a price increase) allow either party to terminate.

If the development fails to proceed, your deposit is typically refunded in full.

That’s why using a reputable lawyer is essential; they’ll ensure your contract contains the right clauses to protect you.

Why Sunset Clauses Matter

A sunset clause is one of the most important protections for off-the-plan buyers. This clause sets a final date by which the development must be completed. If it's not, you can walk away and get your deposit back.

For example, if your contract says the development must be completed by December 2026, and it drags into 2027 with no sign of completion, you’re not stuck waiting forever.

Be sure to ask:

• Is the sunset clause mutual (i.e. can the developer also cancel?)

  
  

• Is the date reasonable?
  

• Are there any provisions for extending it?
  

Without a sunset clause, you could be tied to a project that never finishes, with no automatic out.

What About Price Escalations?

Let’s address another common concern: what if the developer raises the price partway through the project?

This is known as a price escalation clause, and while it’s not common in today’s more regulated environment, it can still appear in contracts, particularly in a volatile building market.

Here’s the good news:

• You’re not obligated to accept a price increase
  

• If the contract allows for escalation, you typically have the right to cancel if the revised price exceeds your comfort zone
  

Pro tip: Look for developments that advertise fixed pricing or price guarantees. Many large group home builders now offer these up front to reduce buyer hesitation and encourage confidence.

What Guarantees Should I Look For?

Many top developers now include a suite of buyer protections in their contracts to address these common concerns, such as:

• Fixed-price guarantees
  

• Completion guarantees
  

• 10-year structural warranties (often backed by insurers)
  

• Deposit guarantees or refund policies
  

These features help first home buyers and first-time investors breathe easier, especially when trusting a developer with a yet-to-be-built asset.

Key Clauses to Include in Your S&P Agreement

Here’s a checklist of must-have clauses to discuss with your solicitor before signing:

• Sunset clause (gives you an exit if delays occur)
  

• Price escalation protection (fixed pricing or cap on increases)
  

• Deposit protection (held in trust, not paid to the developer)
  

• Finance condition (lets you back out if lending isn’t approved)
  

• Specifications schedule (so the finished build matches the promise)

To make sure you're fully protected, make sure you engage a lawyer during the due diligence process for full legal advice.

Final Word

Buying off-the-plan can produce huge benefits to investors, but it's important that the right protections are in place.

The key is to protect yourself on paper before problems arise. The right legal structure can turn what feels like a gamble into a calculated, strategic investment.

Don’t be afraid to ask hard questions. A good developer will have nothing to hide.

And always get independent legal advice before you sign anything. You’re not just buying a property. You’re entering into a legal agreement that needs to be airtight.

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