Off-the-Plan Deposits in Victoria: What Actually Protects You

Developer collapses have been in the news for weeks, and the question we keep being asked is the obvious one. If the developer fails, what happens to my deposit?

The answer in Victoria is better than most buyers assume. It is also more specific than most people are told, and the part that surprises them is not the part they were worried about.

Here is the actual legal position, with the section numbers, so you can check it yourself rather than take anyone's word for it.

Your deposit is capped, and it is held in trust

Off-the-plan deposits in Victoria are governed by section 9AA of the Sale of Land Act 1962.

Two things matter in it.

First, the deposit is capped at no more than 10 per cent of the purchase price. That is a statutory ceiling, not a market convention. If someone is asking for more than 10 per cent on an off-the-plan contract, that is a question worth asking loudly before you go any further.

Second, any deposit paid before the plan of subdivision is registered must be paid to the vendor's legal practitioner, conveyancer or licensed estate agent, and held on trust for you until registration.

Trust money is not the developer's trading money. That distinction is the whole ball game, and it is why the situation is usually less frightening than the headlines suggest.

The protection almost nobody knows about

This is the part worth understanding properly.

In an ordinary purchase of an established home, the vendor can ask for the deposit early, before settlement. The mechanism is section 27 of the same Act. They serve a Section 27 statement disclosing any mortgage and any caveat, and you have 28 days to object in writing. If you say nothing, section 27(7) treats your silence as consent and the money goes.

Plenty of buyers sign that without thinking twice.

If someone presents you with a document that appears to release an off-the-plan deposit early, that is the moment to stop and call your conveyancer.

If the plan is never registered

Section 9AE(2) preserves your right to rescind and recover the deposit, together with any interest it has earned, if the plan of subdivision is not registered within the sunset or statutory period.

Interest matters more than people expect on a purchase that has been sitting for two or three years.

The developer cannot simply walk away at the sunset date either

Sunset clauses have a reputation, largely earned in another era. In Victoria the rules changed.

Rescission by the vendor of a prescribed residential off-the-plan contract is governed by Division 2 of Part I, sections 10A to 10E. A developer cannot simply rescind because the sunset date has passed. They need either your written consent after serving the statutory notice, or an order of the Supreme Court of Victoria that rescission is just and equitable.

That is a meaningful hurdle, and it exists precisely because the old position was being abused.

Now the part that actually costs people money

Everything above concerns the deposit. The deposit is the best-protected money in the transaction.

The exposure sits everywhere else.

• Upgrades, colour selections and bespoke finishes. Often paid separately, often outside the trust structure.
• Site costs and variations. Same issue.
• Anything paid directly to a builder rather than into the sale deposit trust.
• Deposit bonds and third-party stakeholder deeds. These are contractual devices, not statutory substitutes for the section 9AA trust regime. Whether one responds in an insolvency depends on its wording and on the developer's consent. Do not assume a bond does the same job as the Act.

If a developer becomes insolvent, money that sits outside the trust generally makes you an unsecured creditor. Financiers holding registered security over the project land rank ahead of you. Unsecured creditors in construction insolvencies frequently recover very little, and sometimes nothing.

There is also a clock most people never hear about. Where you have signed a separate domestic building contract for work over $16,000, Domestic Building Insurance should have been in place before any money was taken, and an insolvency claim generally has to be lodged within 180 days of you becoming aware of the insolvency. That window runs quietly while everyone waits for the next update from the administrators.

The lesson from Ralan

The clearest illustration is not a current matter. It is the Ralan Group collapse in New South Wales in 2019.

Purchasers there fell into two groups. Some had agreed to release their deposits to the group, effectively as an unsecured loan. Others left the money in trust.

The liquidators reported that most of the released money had already been spent.

Same building, same contracts, same developer. Two entirely different outcomes, decided by a single signature years earlier.

What to do if a developer you have bought from strikes trouble

1. Confirm exactly which entity is in administration. Check the company name against ASIC's published insolvency notices, and check it against the entity on your contract rather than the trading name on the billboard.
2. Get written confirmation of where your deposit sits. Ask the agent, conveyancer or legal practitioner holding it to confirm the trust account and the amount held, in writing.
3. List everything you have paid outside the deposit. Upgrades, variations, site costs, anything paid directly to a builder. That list is your real exposure.
4. Check whether a separate domestic building contract exists, and whether Domestic Building Insurance was in place. If it applies, the 180-day clock is already running.
5. Do not sign a novation, variation, extension or deed until someone has read it properly. A replacement builder can be genuinely good news. It can also be a materially worse deal wearing familiar clothing.

What we check before we introduce anyone to a project

We look at delivery history rather than renders. Whether the developer has completed comparable projects on comparable timelines, who is financing the project, how the deposit is structured, and what is being asked for outside the deposit.

None of that eliminates risk. Nothing does. But most of the buyers who end up badly exposed were not exposed by the deposit. They were exposed by what they paid around it, usually without being told the difference.

If you are partway through an off-the-plan purchase and want to understand where you actually stand, ask. It is a short conversation, and you are better off having it now than after the next headline.

This article is general information only and is current as at September 2026. It does not take account of your personal circumstances and is not financial, legal, taxation or investment advice. The legislation referred to may be amended, and how it applies depends on the terms of your particular contract. Please confirm your position with your own conveyancer or solicitor before making any decision.