Off-the-plan: the financial assumptions that quietly shift.

Buying off the plan means agreeing today to purchase a property that may not exist in its completed form for months or years.

The contract price is usually fixed when the contract is signed. Almost every financial assumption surrounding that price, however, can change before settlement.

Your borrowing capacity may fall. A loan pre-approval may expire. The lender’s valuation may be lower than the contract price. Interest rates, duty concessions, owners corporation expenses, rent, personal income and completion dates may all be different by the time the developer calls for settlement.

That does not mean an off-the-plan purchase is necessarily unsuitable. It means the buyer must test the transaction against adverse scenarios before becoming legally bound.

At a glance — position as at 16 July 2026.

• The deposit under a Victorian off-the-plan contract cannot exceed 10% of the purchase price, but a purchaser may negotiate a lower amount.
• A finance pre-approval obtained when the contract is signed will ordinarily expire well before a long-term project settles.
• A lender will reassess the borrower and property close to settlement.
• If the completed property values below the contract price, the buyer may need to contribute substantially more cash.
• Victoria’s temporary off-the-plan duty concession has been extended to contracts entered into before 21 April 2027, subject to its eligibility rules.
• A purchaser may have rights where a plan amendment materially affects the lot or the plan is not registered by the applicable sunset date.
• A developer cannot simply rely on a residential sunset clause to cancel the contract and resell at a higher price.
• Defects identified before settlement do not automatically entitle a purchaser to delay or refuse settlement.
• Victoria’s new developer-bond framework will not protect every project currently being marketed.
• The safest time to review these risks is before signing, not when a short settlement notice arrives.

What is an off-the-plan purchase?

An off-the-plan contract is a contract to buy a lot on a plan of subdivision before that plan has been registered.

The buyer usually receives:

• a proposed plan of subdivision;
• architectural plans and floor plans;
• schedules of finishes;
• proposed owners corporation rules;
• estimated owners corporation budgets;
• planning and building information;
• marketing material; and
• a lengthy developer-drafted contract.

The buyer is not purchasing a finished property that can be fully inspected. The buyer is purchasing contractual rights to receive a future lot if and when the development, plan registration, occupancy requirements and settlement process are completed.

That difference changes the financial risk profile.

A fixed contract price is not a fixed financial outcome

The attraction of an off-the-plan purchase is often described as “locking in today’s price”. That description is only partly accurate.

The nominal contract price may be fixed, but the amount the purchaser ultimately needs, the cost of borrowing it and the value received in return are not fixed.

A sound assessment should separate at least seven different figures:

• the contract price;
• the deposit payable now;
• the loan the buyer expects to obtain;
• the loan the lender is actually willing to provide at settlement;
• the lender’s valuation of the completed property;
• duty and other acquisition costs; and
• the cash buffer available if any assumption changes.

A purchase can remain profitable on paper yet become impossible to settle because the buyer does not have enough cash at the critical time.

The deposit is only the first funding requirement

Victorian law limits the deposit under an off-the-plan contract to no more than 10% of the purchase price. The contract must also tell the purchaser that, subject to that maximum, the deposit amount can be negotiated.

A purchaser should therefore not assume that 10% is mandatory.

Before agreeing to the deposit, consider:

• how much cash must remain available for duty and settlement costs;
• whether the deposit will be paid in cash or through another arrangement accepted by the vendor;
• whether any deposit bond or guarantee expires before the likely settlement date;
• the cost of extending or replacing a deposit bond;
• where the deposit will be held;
• what happens to the deposit if the contract is rescinded; and
• whether the purchaser can still produce the settlement balance if personal circumstances change.

Deposit money paid before registration of the plan is ordinarily required to be held through the vendor’s legal practitioner, conveyancer or licensed estate agent in accordance with the statutory protections.

Those protections reduce the risk of the developer simply using the deposit as ordinary working capital. They do not reimburse the buyer for every financial consequence of a failed or delayed project, such as lost investment opportunities, legal fees, finance costs or increases in the price of replacement property.

Finance approval at signing is not finance at settlement

One of the most dangerous assumptions is that a loan pre-approval obtained before signing will remain available when the development is completed. It usually will not.

Home-loan pre-approvals commonly have a limited life. An off-the-plan development may take 12, 24, 36 months or longer to reach settlement.

The lender may reassess:

• the purchaser’s income;
• employment status;
• other debts and credit limits;
• living expenses;
• dependants;
• credit history;
• interest rates;
• serviceability buffers;
• lending policies;
• the type and location of the property;
• concentration limits applying to the development; and
• the lender’s valuation of the completed lot.

A purchaser who loses finance is not automatically released from an unconditional off-the-plan contract.

Many developer contracts contain no finance condition at all. Where a finance condition is included, it commonly expires shortly after signing and does not protect the buyer years later when settlement is called.

The buyer should therefore ask the lender or broker a more useful question than “Can I borrow this amount today?”

What changes in my income, expenses, interest rates, valuation or lender policy would prevent this loan from being available at settlement?

Valuation risk at handover

The lender will generally require a valuation close to settlement. That valuation is not required to match:

• the contract price;
• the developer’s advertised value;
• the price of another apartment in the project;
• the purchaser’s estimate of market growth; or
• an earlier desktop assessment.

If the market has weakened, the development contains many similar apartments or the completed lot differs from what was expected, the lender’s valuation may be below the contract price. The lender may then reduce the loan it is willing to provide.

A simplified valuation-shortfall example

Assume:

• the contract price is $800,000;
• the buyer paid an $80,000 deposit;
• the buyer expected to borrow the remaining $720,000; and
• the buyer expected the lender to accept a high loan-to-value ratio.

At settlement, the lender values the property at $720,000 and will lend only 80% of that valuation. The maximum loan would then be $576,000.

The buyer must still pay the $800,000 contract price. After allowing for the $80,000 deposit already paid, the buyer would need another $144,000 to bridge the purchase-price gap, plus duty, registration fees, adjustments, legal costs and lender charges.

This example is deliberately simplified. Lending policies differ. It demonstrates why a valuation shortfall is a cash-flow problem, not merely a disappointing opinion about value.

If the purchaser cannot produce the required funds, the purchaser may default, lose the deposit and face a damages claim.

Interest rates and borrowing capacity can move separately

A buyer may focus on whether repayments remain affordable if interest rates rise. That is important, but it is only part of the risk.

An increase in rates can also reduce the amount a lender is willing to advance under its serviceability assessment. The buyer may therefore face both higher repayments and a smaller approved loan.

The transaction should be stress-tested using repayment assumptions materially above the rate available when the contract is signed. The stress test should also allow for:

• reduced household income;
• parental leave;
• illness or incapacity;
• changed employment;
• another child or dependant;
• additional personal debt;
• higher living costs; and
• the need to sell an existing property in a weaker market.

A purchaser should obtain independent lending and financial advice. A conveyancer or property lawyer can identify the contractual exposure but does not determine whether the investment or proposed loan is financially suitable.

Completion delays create real holding costs

An expected completion date is not the same as a contractual settlement date. Construction may be delayed by:

• planning amendments;
• authority requirements;
• weather;
• labour or material shortages;
• builder or subcontractor disputes;
• finance problems;
• insolvency;
• utility connections;
• defects;
• occupancy-permit requirements; or
• delays in registering the plan of subdivision.

Delay can produce costs that are easy to overlook:

• rent continuing longer than expected;
• an existing mortgage remaining in place;
• bridging-finance complications;
• storage and removal expenses;
• repeated extension fees for finance or deposit arrangements;
• lost interest on the deposit;
• expiring interest-rate locks;
• disrupted sale arrangements for another property;
• temporary accommodation; and
• changed school, employment or family plans.

The contract should be reviewed for both the expected completion period and the ultimate sunset date. They are not the same thing.

A project advertised for completion in “late 2027” may contain a contractual sunset date considerably later.

Settlement can also arrive earlier than your personal plans

Purchasers often focus only on delay.

The opposite risk also exists. The developer may achieve registration and occupancy earlier than the purchaser expects, then issue a settlement notice requiring completion within a relatively short contractual period.

A buyer should not assume the developer must accommodate:

• the sale of the buyer’s existing home;
• the expiry of a lease;
• access to a term deposit;
• a family-law property settlement;
• release of funds from overseas;
• refinancing of another property; or
• the buyer’s preferred moving date.

Those arrangements should be planned independently or protected through negotiated contract terms where possible.

Duty estimates are not always final

Land transfer duty is another figure commonly treated as settled too early.

Victoria’s off-the-plan concession can reduce the dutiable value by excluding qualifying construction costs incurred after the contract date. The amount of the deduction depends in part on how much construction has already occurred when the contract is signed. Signing earlier in the project can produce a larger deduction than signing when construction is nearly complete.

Temporary concession applying in 2026

For eligible contracts entered into on or after 21 October 2024 and before 21 April 2027, Victoria has a temporary concession for off-the-plan dwellings in strata subdivisions with common property.

It can apply to:

• apartments;
• units;
• qualifying townhouses;
• owner-occupiers;
• investors;
• individuals;
• companies; and
• trusts.

There is no property-value threshold for this temporary concession.

It does not apply to every house-and-land package. The property must meet the relevant strata-subdivision and common-property requirements.

It also does not reduce foreign purchaser additional duty. Foreign purchaser additional duty is calculated without applying the off-the-plan concession.

Standard concession

The ordinary off-the-plan concession also continues for eligible owner-occupiers and first home buyers.

Eligibility can depend on:

• the identity and status of every purchaser;
• whether the property will be a principal place of residence;
• residence requirements;
• the dutiable value after applying the construction deduction;
• the contract date;
• the type of development; and
• the information supplied by the vendor.

The vendor generally controls key information needed to calculate the construction component. An estimate given at the sales stage should not be treated as the final assessment.

The contract should not be signed on the assumption that a particular duty saving is guaranteed.

Budget for costs beyond the purchase price

A proper settlement budget should consider more than the deposit and loan. Possible costs include:

• land transfer duty;
• foreign purchaser additional duty where applicable;
• title-registration and PEXA fees;
• legal or conveyancing fees;
• lender application and valuation charges;
• lenders mortgage insurance;
• loan-guarantee or deposit-bond costs;
• settlement adjustments;
• owners corporation contributions;
• moving and storage costs;
• utility connections;
• window furnishings;
• appliance upgrades;
• insurance;
• defects-inspection costs;
• initial repairs or alterations; and
• a contingency for valuation or finance shortfalls.

Marketing material may describe inclusions as “standard” without making clear whether items such as blinds, flyscreens, air-conditioning zones, lighting, storage fittings or telecommunications connections are included.

Only the contractual plans, schedules and specifications determine what the vendor is obliged to provide.

Owners corporation estimates can change

An apartment or townhouse purchaser will usually receive a proposed owners corporation budget.

That budget may be prepared well before the building is occupied. It is therefore an estimate based on assumptions about:

• insurance premiums;
• cleaning;
• lifts;
• fire systems;
• concierge or building-management services;
• security;
• gardens;
• pools and gyms;
• utilities used on common property;
• maintenance contracts;
• waste collection;
• compliance;
• repairs; and
• long-term capital works.

Actual costs can be materially higher after occupation.

The initial budget may also exclude or underestimate future expenditure on:

• façade maintenance;
• waterproofing;
• lifts;
• mechanical ventilation;
• embedded networks;
• access-control systems;
• essential safety measures;
• major plant; and
• building defects.

A low first-year owners corporation estimate should not be treated as a guaranteed long-term cost.

The buyer should examine the proposed lot liability, lot entitlement, rules, management arrangements and budget, not merely the advertised quarterly fee.

Rental estimates and guarantees require independent scrutiny

Investment buyers may be shown:

• projected weekly rent;
• rental-growth assumptions;
• vacancy assumptions;
• depreciation estimates;
• tax deductions;
• guaranteed-rent arrangements; or
• projected resale values.

These are not promises of investment performance unless they form part of an enforceable contractual obligation.

Even a genuine rental guarantee should be checked for:

• the identity and financial strength of the guarantor;
• the duration of the guarantee;
• exclusions;
• management fees;
• furnishing requirements;
• repair obligations;
• vacancy treatment;
• termination rights; and
• whether the guaranteed figure is gross or net of expenses.

An investor should test whether the property remains affordable if:

• rent is lower than projected;
• the property is vacant;
• owners corporation fees increase;
• land tax or other holding costs apply;
• interest rates rise; or
• significant defects affect occupation or leasing.

Tax consequences should be addressed with an accountant or registered tax adviser. A sales representative’s estimate is not a substitute for independent advice.

Changes to plans can change value without changing price

Off-the-plan contracts commonly give the vendor rights to amend:

• lot boundaries;
• dimensions;
• floor area;
• easements;
• car parking;
• storage;
• common property;
• landscaping;
• services;
• finishes;
• appliances; and
• owners corporation arrangements.

Victorian law requires the vendor to notify the purchaser of a proposed plan amendment. A purchaser may rescind within 14 days after being advised of an amendment that materially affects the lot.

Whether an amendment is “material” can be contentious.

Not every variation creates a termination right. A contract may also contain detailed provisions allowing specified tolerances or substitutions.

The financial consequence may nevertheless be significant. A smaller balcony, moved storage cage, changed outlook, altered car space or reduced internal area may affect market value, rentability and personal use even if the purchase price remains unchanged.

The original plans, specifications, display-suite records and marketing representations should be retained so the completed property can be compared with what was promised.

Sunset clauses protect against indefinite delay

A sunset clause identifies the date by which a specified event — usually registration of the plan or issue of an occupancy permit — must occur.

If the plan is not registered within 18 months after the contract date, or within another period specified in the contract, the purchaser may generally rescind after that period expires and before registration occurs.

Many contracts specify a substantially longer period than the statutory default.

The purchaser should check:

• the precise sunset date;
• whether there is more than one sunset event;
• extension rights;
• notice requirements;
• when the purchaser can rescind;
• whether the right disappears immediately upon registration;
• how the deposit is returned; and
• whether contractual costs can be deducted.

A purchaser who wants to exercise a sunset right should obtain advice promptly. Timing can be critical.

Can the developer use the sunset clause?

A developer cannot simply cancel a Victorian residential off-the-plan contract under a sunset clause because the property has increased in value.

Before a vendor can rescind under the sunset clause, the vendor must generally:

• give each purchaser at least 28 days’ written notice;
• explain the proposed rescission;
• explain the reason for the delay; and
• tell the purchaser that consent is not compulsory.

The vendor must then obtain the purchaser’s written consent after giving that notice.

Without consent, the vendor must apply to the Supreme Court for permission to rescind. The Court must be satisfied that rescission is just and equitable and can consider matters including delay, bad faith, increased property value and the effect on the purchaser.

A purchaser who receives a proposed sunset-clause rescission should not sign a consent without independent advice.

Defects at the pre-settlement inspection

A pre-settlement inspection is important, but buyers often overestimate what it achieves. The inspection should identify matters such as:

• incomplete work;
• damaged finishes;
• doors or windows that do not operate;
• missing appliances or fittings;
• water penetration;
• cracked tiles;
• defective paintwork;
• non-functioning services;
• departures from the agreed plans; and
• issues affecting car spaces or storage.

The purchaser should consider using an independent and appropriately qualified inspector, particularly for an apartment or technically complex property.

Defects should be:

• photographed;
• described precisely;
• allocated to the correct room or area;
• reported in writing;
• distinguished between the private lot and common property; and
• compared with the contractual plans and specifications.

The inspection is not the same as a general right to withhold settlement.

Developer contracts commonly require settlement to proceed despite incomplete or defective items that do not prevent lawful occupation. The purchaser may then need to rely on contractual defect procedures or other legal rights after settlement.

The contract should therefore be reviewed before signing for:

• access rights;
• the inspection procedure;
• notice deadlines;
• defect-liability periods;
• the vendor’s rectification obligation;
• dispute-resolution mechanisms;
• retention rights, if any;
• warranties; and
• whether settlement can be delayed in serious circumstances.

The purchaser usually has no direct building contract

A recurring difficulty is that the purchaser generally contracts with the developer to buy land and a completed lot. The developer separately contracts with the builder.

The purchaser may therefore have limited direct contractual rights against the builder. Responsibility for defects can involve the developer, builder, subcontractors, building professionals, owners corporation, insurers and regulators.

The legal position should not be reduced to the sales statement that “the builder will fix everything during the defects period”.

The identity and financial standing of both the developer and builder should be investigated before signing.

Victoria’s developer-bond scheme

Victoria has introduced a developer-bond framework for residential apartment buildings above three storeys.

The scheme is intended to require an affected developer to provide security equal to 2% of the relevant construction cost before applying for an occupancy permit. A two-stage inspection process then identifies defects, allows the developer an opportunity to rectify them and may permit the owners corporation to claim against the bond for qualifying outstanding defects.

However, purchasers should not assume that every apartment currently being sold will be covered.

The transition arrangements generally exempt projects whose building permit was issued before 1 July 2027.

Whether a particular project is covered will therefore depend on matters including:

• the type and height of the building;
• the building-permit date;
• applicable exemptions;
• the commencement and transitional provisions; and
• whether the required bond or permitted alternative has been arranged.

The Sale of Land Act also contains a purchaser rescission mechanism in particular circumstances where an occupancy permit has issued for a covered residential apartment lot but the required developer bond has not been properly arranged.

The scheme is an additional protection. It is not a guarantee that every defect will be fully funded or promptly rectified, and it does not replace contract review, inspection or due diligence.

Developer and builder insolvency

A long settlement period creates exposure to the financial health of the organisations delivering the project. Before signing, consider available information about:

• the developer’s identity;
• the owner of the development land;
• mortgages and other interests over the land;
• the builder;
• related corporate entities;
• previous developments;
• litigation or regulatory history;
• project finance;
• planning and building approvals; and
• whether the contract permits substitution of the builder or transfer of the vendor’s interest.

If a project fails, the deposit may be recoverable under the applicable trust arrangements. That does not mean the purchaser will receive the property, recover every associated expense or be able to buy a comparable replacement for the same price.

Do not assume you can nominate or resell before settlement

Some buyers sign an off-the-plan contract assuming they can later:

• nominate a spouse, trust or company;
• assign the contract;
• sell the property before settlement; or
• recover a profit by transferring the purchase opportunity.

The contract may restrict nomination, assignment, advertising or on-sale activity.

There can also be significant duty consequences.

Victoria’s sub-sale provisions can impose two or more lots of duty where a subsequent purchaser obtains the right to the transfer and the arrangement involves additional consideration or relevant land development.

A nomination that appears administratively simple can therefore produce unexpected tax and contractual consequences.

The proposed purchaser and ownership structure should be determined before signing wherever possible.

Stress-testing the purchase before signing

A prudent buyer should model at least three scenarios.

Expected case

Use the buyer’s genuine estimate of:

• settlement timing;
• completed value;
• loan amount;
• interest rate;
• duty;
• owners corporation costs;
• rent or occupancy; and
• cash available.

Adverse case

Assume:

• settlement is delayed by 12 months;
• interest rates are higher;
• borrowing capacity is lower;
• the valuation is 10% below the contract price;
• duty is higher than estimated;
• owners corporation fees exceed the proposed budget;
• rent is below the sales projection; and
• some defects remain after settlement.

Severe but plausible case

Assume:

• the buyer loses the expected lender;
• the valuation falls materially;
• an existing property takes longer to sell;
• household income falls;
• the project settles at an inconvenient time;
• the buyer cannot assign or nominate; and
• additional cash must be produced on short notice.

The critical question is not whether every adverse event will occur. It is whether the buyer can still settle if several occur together.

Pre-signing checklist

Before entering an off-the-plan contract:

• Obtain an independent legal review of the contract and Section 32 statement.
• Confirm the deposit amount and where it will be held.
• Identify the expected completion date and contractual sunset date.
• Check the vendor’s extension rights.
• Review all variation clauses and permitted tolerances.
• Confirm exactly what is included in the lot, car space, storage and finishes.
• Review the proposed owners corporation rules and budget.
• Ask a lender or broker to model future serviceability rather than relying only on current pre-approval.
• Stress-test a lower settlement valuation.
• Calculate duty using the current concession rules without assuming eligibility.
• Budget for settlement costs and a substantial contingency.
• Investigate the developer and builder.
• Check nomination and assignment restrictions.
• Keep copies of plans, specifications and marketing representations.
• Plan for both earlier and later settlement.
• Understand the pre-settlement inspection and defects procedure.
• Confirm whether the project is likely to fall within the developer-bond regime.
• Obtain independent accounting or financial advice for investment and tax assumptions.

How we can assist

An off-the-plan contract should be reviewed before it is signed. Our property lawyers can assist with:

• reviewing the contract and Section 32 statement;
• identifying sunset dates and extension provisions;
• checking plan and specification variation rights;
• reviewing the deposit arrangements;
• assessing finance and settlement exposure;
• reviewing proposed owners corporation documents;
• identifying likely duty concessions;
• advising on nomination and sub-sale risks;
• monitoring plan registration and settlement;
• coordinating the pre-settlement inspection;
• reviewing defects and variations; and
• completing the PEXA settlement.

This article states the Victorian position as at 16 July 2026. Off-the-plan contracts vary substantially. Duty concessions, lending policies, building protections and government schemes can change. Whether a purchaser has a right to rescind, delay settlement or claim compensation depends on the legislation, contract and facts of the particular transaction. This article provides general information and is not legal, financial, lending, building or tax advice for a specific purchase.