Presale Fell Over? What Happens to Your Development Loan
Construction Hub
Presale contracts · Development facilities · Purchaser default
A presale can fail while the building is still being funded, or a buyer can reach completion and then fail to settle. The finance problem changes at each stage. This guide follows that chain from the first notice to the lender through replacement presales, drawdowns, settlement shortfalls and the exit if completed stock is left behind.
Quick Answer
If a qualifying presale falls over, your development facility may require notice, a fresh presale-cover test, lender consent before the next drawdown, or a cure before funding continues. Check the presale definition, testing, notification and cure clauses immediately, then tell the lender within the timeframe your facility requires.
Also called: lost qualifying presale, failed presale, off-the-plan purchaser default, failed settlement.
Which presale problem do you have, and who do you call first?
Treat the problem as one of four finance states. A qualifying presale lost during construction is mainly a presale-cover and drawdown problem. A purchaser who fails to settle at completion is mainly a repayment shortfall. A buyer asking to nominate, on-sell or delay settlement raises the question of whether the lender will still count that contract. If the lender discovers the issue before you disclose it, the original problem is joined by a notification problem.
One thing to settle before you read any further. This page is written for the developer, the party who sold the unit and borrowed against it. The same event has a buyer side, and the two sides want opposite things from the same clause. If it is your own purchase that is in trouble, the material you want is if you are the buyer in this situation, not this guide. Most of what is published on this subject is written for buyers and then read by developers, which is why so much of it does not fit.
There is a fourth way developers arrive here, and it is the worst one to be in. The lender raised it first. A drawdown request came back with a question attached, or a covenant test date passed, or someone in credit asked for updated presale evidence, and the developer is finding out from the lender rather than the other way round. That is not a different event, it is the same event discovered late, and the notification obligation has usually already been missed by the time the email lands.
| What has happened | Where you are in the build | What the lender cares about first | Who you call first |
|---|---|---|---|
| A presale contract has been rescinded, terminated or has lapsed | Construction is still running and the facility is still being drawn | Whether coverage has fallen below a condition in the facility | Your solicitor on the contract, your broker or lender on the covenant, in that order |
| A purchaser has failed to settle at completion | The build is finished and the facility expects repayment | Whether the proceeds it was relying on are still coming | Your solicitor first, because the contract governs what you may do next |
| A buyer has gone quiet, or has asked to nominate or on-sell | Either | Whether the contract still counts, and on what terms | Your solicitor, before you agree to anything |
| Your lender raised it before you did | Either, and usually at a drawdown request or a covenant test date | Why it was not told, and what else it does not know | Your broker or lender the same day, then your solicitor |
The table is a triage tool, not an answer. Whether a breach has actually occurred, and what you are entitled to do about it, is a question about your contract and your state, and it is a solicitor's question rather than a broker's. What follows is the other half of the problem, the half your solicitor does not answer: what the event does to the facility that is funding the building.
What should you not do in the first week?
Six decisions are worth holding until the contract and the facility are in front of the right advisers.
- Do not discount to replace the sale quickly before you have spoken to your lender. A discounted replacement can move the value the whole sell-down is built on, not just the one unit.
- Do not agree to a nomination or an on sale until you know whether the varied contract still counts toward your presale condition.
- Do not assume the deposit is yours, or touch it, until you know where it is held and what your state requires.
- Do not wait for the legal position before notifying if your facility requires notice. The obligation is usually to tell them, not to tell them with a solution attached.
- Do not put anything in writing to the buyer or their solicitor before your own solicitor has seen the file, because what you say now can constrain what you can do later.
- Do not re-list the unit at a price your valuer has not been asked about, particularly if a valuation is due or a drawdown is pending.
If this has landed on a Friday evening, and it often does, the useful work before Monday is assembly rather than decisions. Get the rescission, the termination notice or the non-settlement confirmed in writing from whoever told you. Pull the contract of sale and the facility agreement. Mark the clauses you need read. Then make the calls in business hours with the documents in front of you rather than from memory.
What should you tell the lender, and how soon?
Check the facility's notification clause immediately. If a lost presale, buyer default or failed settlement is a notifiable event under your document, notify the lender within the contractual timeframe rather than waiting for the buyer dispute to be resolved. The first notice can be factual and incomplete: identify the contract, say what has happened, state the coverage position you can presently calculate, and give a date for the next update.
| What to bring | Why the lender needs it | Where it comes from |
|---|---|---|
| Which contract, identified specifically | It has to be matched to the presale schedule the lender is holding | Your contract of sale and the presale schedule annexed to the facility |
| What has happened, in factual terms | The legal characterisation is not yours to make yet, and a factual account does not commit you to one | The notice, letter or agent report, in writing rather than from a phone call |
| Your coverage position on their basis of measurement | A figure calculated on the wrong basis will be corrected in front of you | The presale definition and testing clause in your own facility agreement |
| Whether the deposit is held or released | It determines what is actually recoverable and what is already spent | The stakeholder holding the money, confirmed rather than assumed |
| What is already in train, and what you are asking for | It is the difference between a commercial discussion and a credit discussion | Your own file: solicitor instructed, agent briefed, unit back on the market |
| The next QS report, progress claim and cash needed to reach the following stage | It shows whether the presale issue can become an immediate construction-funding problem | The lender-appointed QS timetable, builder claim and current project cashflow |
| A revised sell-down and settlement register | The lender needs to see whether this is one contract or a wider settlement-risk problem | The sales register, settlement pipeline, contract status and current agent update |
| What sponsor cash, equity or additional security is actually available | It tells the lender whether there is a credible cure other than waiting for a replacement buyer | Current sponsor liquidity and security position, verified before it is offered |
What should you get back from the lender in writing?
Ask the lender to state the position it is taking rather than relying on a phone call. The useful written answer is whether the event is being treated as a review, covenant breach or default; whether further drawdowns can continue while it is cured; exactly what cure is required and by what date; what evidence will make a replacement presale count; and whether any waiver, extension, pricing change or default margin applies. That turns an open-ended problem into a documented set of conditions.
What you are asking for is worth deciding before you dial. It might be a remedy window, continued drawdowns while a replacement is found, or simply an acknowledgement that you have notified and a date to come back with more. A developer who arrives with all five rows above is having a commercial discussion. A developer who arrives with the first one and nothing else is having a credit discussion, and those are handled by different people.
What delay costs is best expressed as consequence rather than as a figure. A notification obligation that has already been missed changes the conversation from a request into an explanation. Everything you ask for afterwards is heard against the fact that the document said tell us and you did not, and the room you had to negotiate a remedy window or a variation narrows accordingly. It also changes who inside the lender is handling the file, which is a change developers feel immediately and rarely recover from quickly.
Two further things a lender will want that developers commonly arrive without: the revised sell-down with the lost unit back in the pool, rather than the original one with a gap in it, and whether anything else in the project has moved at the same time, because a lost presale alongside a programme delay or a cost overrun is a different risk to a lost presale on its own. Working out what changes in the numbers before the meeting is worth more than any presentation of them, and it is the same discipline as how development finance works end to end. If your existing lender will not work with the revised position, that is when structures across our construction finance hub and private lending become the conversation, and they are a much better conversation to have early than late.
From our broking, indicative
What follows is qualitative, drawn from placing development and residual stock deals as a broker, current as at August 2026. It carries no rates, no ratios, no approval odds and no timeframes, because this is a distress situation and none of those can be promised.
- In the first call after a presale dies, lenders want the facts before the plan: which contract, what happened, whether the deposit is held or released, and what the coverage position is on their basis of measurement. A plan offered before the facts are established tends to be read as a developer who has not looked properly.
- A replacement contract lands well when the buyer is unrelated, the terms are unconditional, the deposit is genuine cash, and the price is one the valuer can support without the feasibility being rewritten around it.
- What gets these files declined, in our experience: a replacement sale at a price the valuer will not support; a related-party buyer used to plug the gap; a deposit already released and spent; a quantity surveyor report that will not reconcile with the revised sell-down; a foreign-buyer concentration already at the cap; and a contract replaced without telling the lender.
- Once a formal default notice has issued, the conversation changes hands and changes tone. Decisions move to people who did not write the original approval, the appetite for informal accommodation drops, and what was a negotiation becomes a process. Almost everything worth doing is easier before that point than after it.
Indicative only, based on deals we have placed, and current as at August 2026. Not a quote and not an offer. Actual outcomes depend on lender policy, your contract and your circumstances at the time of application. General information only, not financial, legal or tax advice.
What does your facility do when a qualifying presale is lost?
Your facility agreement decides the consequence. Losing a qualifying presale can trigger a notification obligation, a fresh presale-cover test, a review event, a condition on the next drawdown, a requirement to restore coverage, or an event of default. Which one applies depends on how your document defines a qualifying presale, when coverage is tested and whether the facility gives you a cure or consent process.
A qualifying presale is a contract your lender has agreed to count toward the presale condition in your facility. For ADIs, current APRA APG 112 says good qualifying-presale policy should look for legally binding, arm's-length contracts, a required non-refundable minimum deposit, appropriate sunset dates, and limits on concentration to a single buyer or foreign purchasers. That is prudential guidance for ADIs, not a universal contract definition. Your own facility can be stricter, different, or written by a non-bank lender outside that APRA framework, so the definition in your document still governs your deal.
Does a deposit bond count as a presale?
Often not, and it is one of the most common reasons a developer's coverage is lower than they believe it is. A deposit bond is a guarantee that the deposit will be paid at settlement rather than cash held in trust by a stakeholder, and many facility definitions of a qualifying presale call for a genuine cash deposit. Where the definition says cash, a contract supported by a bond may not be counted at all, or may be counted only with the lender's specific agreement recorded somewhere.
Two consequences follow, and they arrive at different times. The first is that your coverage may already be short before anything falls over, which is a thing to establish now rather than during a covenant test. The second is that if a buyer whose deposit was bonded fails to settle, there is no money sitting in trust to apply against the loss, so the recovery runs against the bond issuer and against the buyer under the contract rather than against a fund you can reach. Whether your facility counts a bonded contract is a question about the definition in your document. Whether the bond responds, and to whom, is a question about the bond and your contract, and it goes to your solicitor.
Is losing a presale an event of default?
Not always, and the difference decides how much room you have. Facilities use both a review event and an event of default and they are not the same animal. A review event typically gives the lender the right to reassess the deal and to require something of you before it advances more money. An event of default puts the whole facility on a different footing, and the rights that attach to it are broader. Know which one you are in before you make the call, not after.
The second fork is when coverage is tested. Some facilities test presale coverage continuously, so a lost contract puts you outside the condition the moment it goes. Some test at each drawdown, which means the breach surfaces when you next ask for money. Some test at fixed dates written into the document. These produce genuinely different situations from identical facts, and there is no market convention that answers it for you. Find the clause.
The third fork is whether you get a cure period at all. Some facilities give a window to restore coverage before the lender acts on the breach. Some do not. The presence or absence of that window is close to your entire negotiating position, because a facility with a remedy window turns a lost contract into a task, and a facility without one turns it into a conversation about consent.
Can you cure a lost presale with cash or additional security instead?
Sometimes, but only if your facility already gives that cure right or the lender agrees to it. Australian development-finance guidance from Sparke Helmore identifies equity or security top-ups, conditional forbearance, waivers and covenant resets as possible responses to a covenant breach. Keypoint Law's 2026 construction-loan guide separately notes that failure of presale tests can be drafted as an event of default and that cure periods should be negotiated. A replacement sale is therefore one possible cure, not the only imaginable one, but none of the alternatives is automatic.
An updated valuation or quantity surveyor report is usually evidence for the lender's decision rather than a cure by itself. It can show current value, cost to complete, programme, contingency and whether the project remains fundable after the lost sale. Keypoint notes that lender-appointed QS reports track drawdowns, variations and schedule or cost pressure, while regular borrower reporting commonly includes sales registers, settlement pipelines and updated project cashflows. If the lender wants fresh information before considering a waiver or reset, ask exactly what it needs and whether funding continues while that material is being prepared.
| What to find in the document | What it decides | Why it changes the conversation |
|---|---|---|
| The definition of a qualifying presale | Which of your contracts count at all | You may have more coverage than you think, or less, before anything is replaced |
| The presale condition and its measurement basis | What the required level is expressed against | A figure calculated on the wrong basis will be corrected in front of you |
| The testing clause | Whether coverage is tested continuously, at each drawdown, or on fixed dates | It decides whether you are already outside the condition or not yet |
| The notification obligation | What you have to tell the lender, and what triggers the obligation | Missing it converts a request into an explanation |
| The review event list | Whether the loss lets the lender reassess rather than enforce | A review event is a negotiation, and it is the better place to be |
| The event of default list | Whether the loss puts the whole facility on a different footing | The rights that attach are broader and the file often changes hands |
| The remedy or cure provisions | Whether you have a window to restore coverage before the lender acts | With a window it is a task, without one it is a request for consent |
| The conditions to further drawdowns | Whether the next progress claim gets funded while this is unresolved | It is the clause that reaches the builder and the programme, not just the balance sheet |
What a suspension of drawdowns actually stops is worth being concrete about, because developers often picture it as an administrative pause. On a live site it means the next progress claim does not get funded. The builder does not get paid on time, subcontractors slow down or leave, the programme stretches, and the practical completion date you built the sell-down around moves. Meanwhile interest keeps capitalising while drawdowns are frozen, so the balance the sales have to clear grows during the period you are least able to sell. A freeze is not a pause. It is a cost that compounds.
Two adjacent situations compound this one and are worth separating out. If the facility is also approaching its term, you have a calendar problem running alongside a contract problem, and they interact badly: the shorter the runway, the less appetite a lender has to work through a coverage shortfall. And if the lender has stopped advancing for reasons of its own rather than because of your presales, that is a funder that has stopped advancing altogether, which is a different problem with a different fix.
What happens if the lender calls a default?
A default is not the same as losing the site, and nothing about it is automatic. What a lender may do, in what order and on what notice, is written into your facility agreement and your security documents and is governed by law. In general terms the available steps run from suspending further advances and requiring the position to be restored, through repricing or requiring repayment, to exercising rights under the security in the more serious cases, which can include appointing a receiver or a controller. Which of those is actually open to your lender is a question about your documents, and it is one for a solicitor who reads finance documents, with a registered insolvency practitioner involved if the solvency of the project or the entity is genuinely in question.
The part that is specific to a development, and that general guidance on receivership does not deal with, is that the security is a building that is not finished. A partly complete project is worth materially less than either the land it sits on or the finished scheme, the programme depends on a builder who has to keep turning up, and completing it costs money that has to come from somewhere. That does not make enforcement unavailable. It does mean the commercial calculation behind it is different from enforcement against a finished asset, which is why an early conversation about how the building gets completed is worth more than an argument about whether the default is valid.
The practical point for a developer is about sequence rather than outcome. The room to negotiate is at its widest before a formal default notice issues and at its narrowest afterwards, because the file commonly moves to people who did not write the original approval. Almost everything worth doing is easier before that point than after it, which is the entire argument for making an uncomfortable call early.
None of these questions can be answered from a page. Get the facility agreement out, read the clauses in the table above, and take them to a solicitor who reads finance documents. What your lender is entitled to do is written down, and you are entitled to know it before you pick up the phone.
What is the presale requirement actually measured against?
A presale percentage means very little until you know its denominator. A requirement may be expressed against unit count, the facility limit, drawn debt, committed debt, senior debt or another deal-specific measure, so two lenders can quote the same percentage and be asking for materially different coverage.
| How the requirement is expressed | What it is actually measured against | Why it is not comparable to the others |
|---|---|---|
| A percentage of units presold | The number of dwellings in the project | Says nothing about price, so two projects with identical unit coverage can have very different debt cover |
| A percentage of the facility limit | The approved limit, drawn or not | Moves with the limit rather than with what is owed |
| A percentage of the debt | The debt as at the test date | Changes every time the facility is drawn |
| A percentage of committed debt | Debt the lender is committed to advance | Wider than drawn debt, so the same contracts cover a smaller proportion |
| Debt cover above one hundred per cent | Sale proceeds against debt | A coverage ratio, not a proportion of the project |
| A percentage of senior debt | The senior facility only | Excludes mezzanine and any other layer, so it understates total leverage |
| A proportion of an agreed presale target | A target the lender set for that deal | Circular unless the target itself is defined |
Does APRA require 100% presales?
No, not as a universal borrower or lender rule. In a clarification published on 13 February 2025, the Australian Prudential Regulation Authority stated that the reference to presales coverage in its March 2017 letter "does not represent a minimum requirement or expectation of APRA", and that "APRA has not set minimum requirements or expectations for presales in these standards and guidance". The figure everyone quotes comes from that March 2017 letter to authorised deposit-taking institutions, which recorded that "ADIs are now generally requiring qualifying presales equivalent to at least 100 per cent of committed debt". Read the grammar rather than the figure: the subject is the lenders and the verb is descriptive, so the regulator was reporting what it had observed in that market at that time.
There is, however, a separate current capital rule that is easy to confuse with that clarification. Under APS 112, an authorised deposit-taking institution can apply the lower 100 per cent risk weight to certain residential land acquisition, development and construction exposures only if specified conditions are met. For a single development exposure above $5 million, one of those conditions is qualifying presales at least equal to 100 per cent of total debt. Other residential ADC exposures receive the higher treatment set by the standard. That is a regulatory capital rule for ADIs, not a statement that every development loan in Australia must carry 100 per cent presales.
APRA opened a new consultation on 29 June 2026. Its current consultation is designed to let more residential ADC exposures qualify for the lower 100 per cent risk weight, and the draft APS 112 proposes reducing that presale condition to 50 per cent of total debt. Submissions close on 7 September 2026 and APRA has proposed a 1 April 2027 commencement. As at 27 August 2026, the 50 per cent proposal is not in force and may still change.
Are lenders lowering presale requirements right now?
Some are, according to the Reserve Bank, which is the opposite of the received wisdom. In its Financial Stability Review of March 2026, the Reserve Bank of Australia records that "some lenders have loosened loan covenants, or lowered presale requirements for residential developments". In the same review, on non-bank lenders, it notes that the most notable easing "is reported to have been for property developers, including less stringent presales requirements and some reduced collateral requirements".
Those are system-level observations as at March 2026, drawn from the central bank's own liaison and supervision work. They are not an offer, they are not a forecast, and they say nothing about the appetite of the lender who holds your facility this week. What they do establish is that presale requirements are a commercial term that moves, not a regulatory floor that is fixed.
The operational conclusion is that presales sit in two different layers. Your lender sets the credit policy and the covenant that control your facility, while APRA capital rules can affect the economics of an ADI lending against a development. For your live deal, the number you must comply with is still the one in your own facility agreement, on the denominator and testing dates written there. If you are earlier in the cycle and looking at funding a project without presales at the outset, read that alongside how a lender builds the approval numbers and what sits behind gross realisation value.
How long are you exposed before a replacement presale counts?
A replacement presale counts only when it satisfies the definition in your facility and the lender has accepted whatever evidence or approval that definition requires. Signing a new contract can therefore start the cure process without ending the coverage shortfall, which is why the period between the failed contract and lender acceptance is the exposure to plan around.
Start with the criteria the lender is actually using. Current APRA APG 112 says good ADI policy for qualifying presales should require legally binding, arm's-length contracts, a required non-refundable minimum deposit and sunset dates consistent with expected completion, and should limit concentration to a single entity or individual and to foreign purchasers. Your facility may add further requirements around cooling-off, finance conditions, deposit form, nominations, incentives, price support or formal lender approval. That distinction matters: an APRA good-practice criterion is not a promise that your lender must count a contract, and a non-bank lender may use a different policy altogether.
| What the lender is looking at | What lands well | What stalls it |
|---|---|---|
| Who the buyer is | An unrelated buyer with no connection to the developer or the project | A related party used to plug the coverage gap |
| The terms of the contract | Unconditional, with nothing still waiting on the buyer's finance | A contract still subject to finance or to another condition |
| The deposit | Genuine cash, held in trust the way the contract requires | A deposit bond or other substitute where the facility definition calls for cash |
| The price | A price the valuer can support without rewriting the feasibility | A discount cut to move the unit quickly, which moves the whole sell-down |
| The sunset date | A date that sits comfortably against the programme and the facility term | A sunset date the lender will not accept |
| When the lender found out | Told early, before the contract is signed rather than after | A contract replaced first and disclosed to the lender afterwards |
| Cooling-off and finance conditions | Cooling-off has expired or been validly waived and no finance condition remains outstanding | A contract that is signed but still conditional |
| Buyer concentration | The buyer and related entities stay within any concentration limits the lender applies | One buyer or group acquiring multiple lots and pushing the book over a lender limit |
| Foreign purchaser concentration | The sale fits any lender policy or facility cap that applies to foreign purchasers | A replacement that is individually valid but increases a capped concentration |
| Nomination or purchaser-entity change | The lender has confirmed the varied or replacement purchaser still counts | Changing an individual buyer to a company, trust or nominee without lender re-approval |
| Incentives, rebates or guarantees | Everything affecting the economics of the sale is disclosed and acceptable to the valuer and lender | Undisclosed rebates, rental guarantees, furniture packages or other incentives that change net value |
| Evidence and lender acceptance | Contract, deposit evidence, condition status and any required solicitor or agent confirmation are complete | Treating exchange as the finish line before the lender has accepted the contract |
The gap is the part nobody writes about. From the day the old contract dies, your coverage position is calculated without it. That is true while the unit is being remarketed, true while you are negotiating with a new buyer, and still true after the new contract is signed, because a signed contract is not a counted contract until your lender has seen it and approved it. Lender sign-off is a process with its own queue, its own information requests and its own credit sign-off, and it moves at the lender's pace rather than yours. Through all of it you are the one carrying the shortfall, which is why the honest way to think about a replacement is not as a fix but as a project with a start date, a finish date and a cost in between. It is worth checking the assumption underneath the whole exercise while you are at it, because the sell-down assumption in your feasibility was built on contracts settling on time.
What happens to the rest of your presale book?
Nothing happens to the other contracts automatically, but one failure can expose a risk that sits across the whole book. Recheck the remaining buyers before the lender asks you to. A finance approval obtained years earlier may need to be replaced, the buyer's settlement valuation can be below the contract price, a cluster of sunset dates can arrive together, and nominations or deposit-bond contracts may need fresh lender approval before they still count.
Why can a buyer who looked safe at presale still fail at settlement?
The risk changes during a long off-the-plan build. New South Wales Government guidance warns buyers that they may need to secure finance months or years after signing and that the completed property may be worth less than expected. APRA's residential mortgage lending guidance separately notes that developer prices on off-the-plan sales may not represent sustainable resale value, which is why the buyer's lender may apply a lower valuation at settlement. Western Australian consumer guidance also identifies changes in lending policy, financial circumstances and interest rates as risks to a buyer's ability to obtain finance later.
For the developer, that means the remaining presale schedule should be treated as a live credit-and-settlement book rather than a static list of signed contracts. The closer the project gets to completion, the more useful it is to know which buyers have refreshed finance, which contracts depend on a substitute deposit, where the sunset dates sit, and whether any buyer is already asking for a nomination, extension or change.
| What to check | Why it matters to the facility | What to do about it |
|---|---|---|
| Which contracts are still conditional | A conditional contract may not be counted, or may stop counting if the condition fails | Confirm the status of every outstanding condition and the date it has to be satisfied by |
| How each deposit is held, and whether any are bonded | Cash in trust and a deposit bond are not the same thing to a lender counting coverage, or to a recovery afterwards | List them and check each one against your facility's definition of a qualifying presale |
| The sunset dates across the book | Contracts sharing a sunset date can fail together rather than one at a time | Map the dates, identify the earliest, and put them against the programme |
| Buyers whose finance was approved long ago | An approval at signing does not survive to settlement on its own | Have the agent re-confirm, and expect some buyers to need fresh approval |
| Any nomination or on sale requests | A varied or replaced contract may need re-approval before it counts again | Do not agree to one before checking both the contract and the facility |
| Concentration limits your lender applies | Some lenders limit exposure to particular buyer groups or to one building | Ask what limits apply to your facility before you sign a replacement, not after |
| Buyer and related-entity concentration | One failure matters more if the same person or entity controls several contracts | Group contracts by buyer and related entity and compare the concentration with the facility and lender policy |
| Foreign-purchaser concentration | APRA good practice for ADIs includes limits on the proportion of qualifying presales to foreign purchasers | Identify the lender cap that applies and calculate the book on the lender's definition |
| Common bank, broker or finance dependency | Several buyers relying on the same credit channel can create a correlated settlement problem even where it is not a formal lender cap | Flag common dependencies where they are lawfully known and watch for the same valuation or credit issue repeating |
| Price versus current valuation evidence | A buyer settlement valuation below contract price can create an equity gap at completion | Compare contract prices with current valuer feedback and investigate any early low-valuation signal |
| Rebates, incentives and guarantees | They can affect the economics the valuer or lender attributes to the contract | List every incentive and confirm it has been disclosed rather than reading only the headline contract price |
| One buyer taking multiple lots | A single purchaser can make several contracts fail together | Treat the purchaser as one exposure when stress-testing the book rather than as several independent contracts |
What should a 90-day settlement-risk dashboard contain?
Use one row per contract and make the weak points visible before practical completion. A useful internal dashboard records the lot and contract price; whether the lender currently counts the sale; purchaser and related-entity concentration; cash deposit versus bond or guarantee; whether cooling-off and other conditions are finished; sunset and expected settlement dates; any nomination or purchaser change; disclosed incentives; current valuation warning signs; and the next action, owner and date. Where a buyer, agent, solicitor or broker lawfully provides a finance-status update, record the confirmation rather than assuming an old pre-approval is still current.
This is not a regulatory form and it does not give you a right to a buyer's private banking information. It is a way of turning the presale schedule into a live settlement-risk register. Current Australian construction-finance guidance notes that lender reporting commonly includes sales registers, settlement pipelines and updated cashflows, while APRA APG 112 expressly points ADIs to single-buyer and foreign-purchaser concentration when defining qualifying presales.
Your lender will ask about the remaining book at the first conversation, or at the second. Arriving with it already reviewed changes the tone of that meeting more than any presentation of the single lost contract does, because it answers the question underneath the question: is this one contract, or is this the first of several.
If no replacement comes, the honest answer is that you are into the other two conversations on this page. Either you are dealing with the consequences of terminating and reselling, which is whether you can just resell quickly and move on, or you are dealing with completed stock that has not settled, which is what a failed settlement actually costs. Both are survivable. Neither improves by waiting. A deferred settlement is sometimes part of the answer and sometimes just the same problem with a later date on it, and which one it is depends on whether the buyer's position is actually going to change.
Who holds the deposit and when can you touch it?
There is no single Australia-wide answer. New South Wales public guidance says off-the-plan deposits and instalments are retained during the contract period and are not released to the vendor before settlement. Queensland allows release at settlement or if the contract otherwise finalises and the seller is entitled to the deposit. Western Australian strata guidance allows access after plan registration unless the contract prevents it. The Victorian consumer page cited below addresses the deposit cap but does not answer the holding-and-release question, so a Victorian developer needs the contract and current legal advice rather than an assumption borrowed from another state.
| State | Where the deposit must be held | When the developer can access it | Source |
|---|---|---|---|
| New South Wales | Trust or controlled money account for the contract period | Government guidance states it cannot be released to the vendor before settlement. The statute specifies how the money is held, not when it may be released | New South Wales Registrar General, last updated 31 January 2025 |
| Victoria | Not addressed by the source | Not addressed by the source. Consumer Affairs Victoria states a deposit cap of no more than ten per cent of the contract price and does not cover holding, access or purchaser default | Consumer Affairs Victoria, page last updated 7 May 2021 |
| Queensland | Trust account | Released to sellers at settlement, or where the contract otherwise finalises and the seller is entitled to the deposit | Queensland Government, last updated 13 April 2026 |
| Western Australia | Trust account of a solicitor, real estate agent or settlement agent until the plan is registered | After registration of the plan, unless the contract prevents it. Before registration, release is a breach of the Strata Titles Act 1985 | Consumer Protection Western Australia, August 2021 |
Government sources checked 27 August 2026. South Australia, Tasmania, the Australian Capital Territory and the Northern Territory are not covered here.
Western Australia is the jurisdiction where the position flips on a single event. Consumer Protection Western Australia, in guidance dated August 2021, states that "a developer can access deposit money after registration of a plan unless there is a term in the contract to preclude this". The harder half of the rule is the other sentence: "it is a breach of the Strata Titles Act 1985 (WA) to release money before registration of the strata or survey-strata plan". Registration is the switch. Before it, release is not merely a contractual issue, it is a statutory breach. That guidance is now some years old, so it is worth confirming currency before relying on it in a live deal.
New South Wales holds the money and is careful about what it says. The New South Wales Registrar General, in guidance last updated 31 January 2025, states that deposit and instalment money "must be retained by the stakeholder in a trust or controlled money account during the contract period", and that "these monies cannot be released to the vendor before settlement". Note the qualifier carefully, because it is the difference between an accurate statement and a claim you cannot support: the statute specifies how the money is held, and the "before settlement" statement is government guidance describing the effect of the regime. It is not a statutory rule about what happens to the deposit when a contract is terminated.
Queensland is the only one of the four whose government guidance contemplates the contract finalising rather than settling. The Queensland Government, in guidance last updated 13 April 2026, states that deposits paid under off-the-plan contracts "can only be released from a trust account to sellers at the time of settlement or if the contract otherwise finalises and the seller is entitled to the deposit". That second limb is doing real work, and it is the limb the other three sources do not have.
Victoria is the honest gap, and it belongs on the page precisely because it is a gap. Consumer Affairs Victoria, on a page last updated 7 May 2021, states that a buyer is "required to pay a deposit of no more than 10% of the contract price". On who holds that deposit, whether the developer can access it, and what happens when a purchaser defaults, the page says nothing at all. That is a limit on what the public guidance answers, not a finding that the money is unprotected, and it is not a statement about what Victorian legislation does or does not provide. The table says so rather than borrowing an answer from another state, and the practical consequence is that the page a Victorian developer finds first should not be relied on as though it answered the question.
Can you keep the deposit if the buyer walks away?
That is three questions wearing one coat, and only one of them is a finance question. Whether you are entitled to keep it is a matter of your contract and the law of your state, and it is a solicitor's call rather than anything a website can answer. Whether you can reach it is the jurisdictional question in the table above, and in at least one state releasing it at the wrong moment is a statutory breach rather than a contractual argument. And whether it has already been released is the one your lender will ask first, because a deposit that was drawn during the build is part of the cost base and cannot be applied twice.
Why this matters to a facility rather than to a conveyancer: a released deposit and a held deposit are different exposures. A deposit you have already spent on the build is gone into the cost base, while a deposit still sitting in trust is money whose destination is decided by the contract and the law rather than by you. When you are working out what a failed sale actually costs, the deposit's status is the first line item, and it is worth confirming before you make any assumption about it. If the sale is late rather than dead, interest on a late settlement and what a notice to complete does are the next two questions, and both are ones to put to your solicitor rather than to answer from a website.
Can you just resell the unit quickly and move on?
A resale may be available after the required contractual steps, but the contract and the law of the relevant state decide what the developer may do, what notices are required, what happens to the deposit and what loss may be recoverable. Get that sequence from your solicitor before the unit is re-listed or the buyer is told the contract is over.
If termination and resale are available, the finance problem and the legal problem then collide. The development lender wants a credible repayment date, while the resale price can affect the valuation of the remaining stock and any later argument about the loss caused by the default. A fast discount is therefore not just a sales decision. It can change the facility exit, the project's valuation evidence and the legal recovery at the same time.
The deposit already held is part of that arithmetic and not a windfall. Where it is applied, and what remains recoverable after it is applied, changes the size of the claim and therefore the shape of the commercial decision. Treat it as a line in the calculation rather than as a consolation.
There is one further concept that belongs here and that this page deliberately does not resolve. In some circumstances an off-the-plan contract can attract statutory restrictions on a vendor's right to terminate, under the body of law dealing with instalment contracts. Whether that regime applies to your contract depends on the contract itself and on the state it was made in, and the qualifying tests are not something to take from a general guide. If anyone tells you your contract is or is not an instalment contract, ask them to show you the section. This is a solicitor's call and nothing on this page should be read as an answer to it.
Does GST change how much of the resale price reaches the lender?
It can. For taxable sales of new residential premises, the Australian Taxation Office requires the purchaser in relevant transactions to pay the withheld GST amount directly to the ATO at settlement and pay the remaining balance to the supplier. The margin scheme and settlement adjustments can also change the calculation. Your accountant or registered tax agent should work out the GST position on the resale, because the development lender is repaid from the net cash that actually arrives, not the headline contract price.
What a broker can usefully add is the finance consequence. If the resale is going to take a defensible campaign rather than a quick clearance, the facility needs to know that now, because the repayment date it is holding is no longer the date you are working to. That is the same conversation as a valuation that lands under the contract price, which is the other common way a settlement arrives short, and it runs into the same question of covering a shortfall at settlement when the numbers do not meet. Anything that touches your rights under the contract goes to your solicitor first. Anything that touches what the facility does next comes to your broker or your lender, and the two conversations should be running in parallel rather than in sequence.
How much does a failed settlement actually cost you?
A failed settlement creates an immediate proceeds shortfall and a second group of costs that continue while the unit remains unsold. Facility interest, holding costs, remarketing and legal work can keep increasing after the missed settlement date, so the number you give the lender on day one should be treated as a moving exposure rather than a fixed gap.
| Cost line | Once, or does it keep running | What decides its size |
|---|---|---|
| The sale proceeds that did not arrive | Once, and it is the part everyone counts | The price on the contract that failed |
| The deposit | Once, but its status changes the whole answer | Whether it was released during the build or is still sitting in trust |
| Interest on the facility | Keeps running | The unrepaid balance, and how long the unit takes to sell |
| Holding costs on the unsold unit | Keeps running from practical completion | Rates, levies, insurance and services on the lot |
| A fresh sales campaign | Partly upfront, partly ongoing while the campaign is live | Agent fees, marketing spend and any incentives offered |
| Legal costs | Ongoing while the matter runs | The termination, the recovery and the resale, which may be three separate pieces of work |
| The difference on the eventual sale | Once, and not knowable until it sells | What the unit achieves against what the original buyer agreed to pay |
Can the lender take more of the other settlements after one buyer fails?
Do not assume the answer is either yes or no. The facility's release schedule, account-control provisions and any waiver or variation decide where the next settlement proceeds go. A release price is the amount the development lender requires from a lot or unit settlement before it releases its security over that lot, so a successful settlement can reduce senior debt without the developer receiving the same amount as free cash.
One failed settlement does not automatically rewrite every release price. But if you need the lender to waive a breach, continue funding or extend the facility, any accommodation may be documented with conditions, including tighter cash control or extra debt reduction. Australian finance-law guidance specifically recognises conditional waivers, forbearance, equity injections, security top-ups and covenant resets as possible responses to development-facility breaches. Model the remaining settlements using the contractual release amounts and net cash that actually remains after lender repayment, GST and sale costs, rather than the gross contract prices.
Which of these costs keep running every week?
Three of them: interest on the unrepaid balance, holding costs on the unsold lot, and the marketing spend on a live campaign. None of those waits for the legal position to resolve, which means the honest way to size the exposure is not as a number but as a number plus a rate of increase. A developer who works out the gap on the day of the failed settlement and does not revisit it a month later is working from a figure that has already moved, and that figure is usually the one that ends up in front of the lender.
One of the reasons an approved buyer still fails at completion is that their own lender values the unit below what they agreed to pay. APRA's prudential practice guide on residential mortgage lending, APG 223 in the version dated 19 June 2025, notes that on off-the-plan sales "developer prices might not represent a sustainable resale value" and that "a prudent ADI would make appropriate reductions". That is guidance about how a bank should assess the purchaser's home loan, not a rule about your development facility, and it appears here only because it explains why a buyer who had finance approved at signing can still be unable to complete two years later.
The Reserve Bank made the structural point a decade ago and it has not stopped being true. In its Bulletin of June 2016, the bank observed that "instances of buyers failing to settle their apartment purchase, settlement failures, can affect the financial position and credit risk of apartment developers". That is a mechanism, stated in 2016, and it is quoted here as a mechanism rather than as a description of current market conditions.
On what finance exists against completed but unsettled stock: the structures are the ones that lend against finished dwellings that have titles and no buyer, rather than against a project under construction. They are assessed on the value of the stock and the credibility of the sell-down rather than on progress claims, and they are generally shorter and more expensive than the facility they replace, which is the trade for the time they buy. That is as specific as this page goes, because the terms are a function of the deal and quoting any of them here would be inventing a number. If you are at the point of needing one, the practical starting points are development finance for the structure, residual stock loan for the term itself, holding completed stock rather than selling into a soft market for the decision, and how a private funder reads a rollover for what the assessment looks like from the other side of the table.
What if you cannot replace the presale before the next drawdown, completion or facility expiry?
The problem changes shape as the development moves forward. Before completion it can stop being a sales issue and become a funding issue at the next drawdown. At completion it becomes a settlement and debt-repayment shortfall. If the construction facility reaches maturity while stock remains unsettled or unsold, it becomes an extension or refinance problem. The earlier you know which date arrives first, the more options you can test before the lender is deciding under default pressure.
Which finance option fits which stage of the project?
The stage of the asset narrows the lender list. If construction is still incomplete, the practical options are usually a cure, waiver or extension with the existing lender, more sponsor equity or security, or another lender willing to underwrite the remaining cost to complete. If practical completion is reached but titles or final approvals are still outstanding, an exit lender still has completion and registration risk to assess. Once the dwellings are complete, separately marketable and titled, residual stock finance becomes a more natural refinance structure. If there is no credible cost-to-complete or repayment path and solvency is in question, another loan is not a substitute for legal and insolvency advice.
Private credit, bridging or mezzanine money can sometimes sit in that pathway, but structure matters. A second-ranking or mezzanine lender generally needs the senior lender's consent and priority arrangements; Keypoint Law's August 2026 developer lending guidance notes that mezzanine debt used alongside senior construction finance is likely to require senior consent and a deed of priority. Do not treat a more expensive layer of debt as a cure unless the project still has a believable completion and repayment exit after that layer is added.
What if the next progress claim arrives first?
If continued advances are conditional on presale cover, covenant compliance or lender consent, the next progress claim is the point where the shortfall can become operational. A delayed or suspended draw means the builder is waiting for money while interest and programme risk keep moving. Put the next quantity surveyor report, progress claim date and cash needed to reach the following stage on the same page as the cure plan.
What if the building completes before the replacement buyer is ready?
The exposure stops looking like unfinished construction and starts looking like completed stock that has not produced the expected settlement proceeds. Recalculate the debt after the settlements that did complete, identify which dwellings remain unsold or unsettled, confirm titles and marketability, and model the sell-down from that point. If the original buyer failed because of a valuation shortfall, do not assume the replacement market value is the old contract price.
What if the building is finished but titles have not registered?
Then the project may be physically complete without yet being ready for ordinary unit-by-unit settlement or a clean residual-stock exit. Separate titles sit on the critical path because each dwelling generally needs to be separately marketable and capable of release from the lender's security before an individual buyer can settle. Put the registration date, any outstanding authority or survey steps, the facility maturity date and the expected first settlement on one timeline. An exit lender may still consider the deal, but it will underwrite the registration risk and the cash runway rather than treating the asset as fully seasoned completed stock.
What if the construction facility expires before the stock is sold?
A construction facility does not automatically roll because the project still has stock. The choices are deal-specific, but they generally become a variation or extension with the existing lender, repayment from new settlements, or a refinance. Once the project is complete and the remaining dwellings are marketable, a residual stock loan can be one refinance structure used to repay an outgoing construction facility while the remaining stock sells. The separate guide to a construction facility expiring with unsold stock covers that exit in detail.
What if the existing development lender will not extend or keep funding?
Another commercial lender, a non-bank or a private lender may be able to refinance a viable project, but the structure depends on whether construction is complete, the current valuation, the debt that has to be cleared, the remaining cost to complete, the security position and a believable exit. Near completion, the refinance is still a development-finance problem. After completion, it may become residual-stock finance. If no credible cure, extension or refinance exists and the lender is considering enforcement, involve a solicitor who reads finance documents and, where solvency is genuinely in question, a registered insolvency practitioner before the timetable is being set for you.
Two things decide how this goes, and neither of them is the sales campaign. The first is what your facility agreement actually says: whether the loss is a review event or an event of default, when coverage is tested, and whether you have a window to restore it. The second is how quickly you tell the lender, because the obligation is usually to notify, not to notify with a solution attached. Everything else, the deposit, the resale, the replacement contract and the rest of your presale book, is easier to negotiate before a formal notice issues than after one.
Key takeaway: find the presale definition and the testing clause in your own facility agreement before you make the call. A developer who can quote the clause is having a different conversation to one who cannot.Frequently asked questions
Two problems start at the same time. Your solicitor advises what the contract and the law of the relevant state allow you to do about the purchaser, including any notice, termination, deposit or resale steps. Separately, tell the development lender because the settlement proceeds it expected have not arrived, recalculate the debt and sell-down, and include the interest and holding costs that continue while the unit remains unsettled. The buyer-side process is explained in the guide to what a notice to complete does.
Not necessarily. Your facility agreement decides whether the loss is simply notifiable, causes a review or covenant issue, affects the next drawdown, or is itself an event of default. Find the qualifying-presale definition, the testing clause, the notification clause, the review and default provisions, and any cure period before assuming which state you are in.
Potentially, if your facility makes further advances conditional on presale cover, covenant compliance or lender consent. The exact right comes from the facility agreement, not from a general market rule. A drawdown freeze matters immediately on a live build because the next progress claim still has to be funded, so check the next draw date and the cash needed to reach the following stage while the coverage issue is being addressed.
There is no universal Australian notice period. Check the notification clause in your facility immediately and comply with the timeframe written there if the event is notifiable. Do not wait for the buyer dispute to be resolved before giving a factual notice if the document requires one; the legal answer and the lender-notification answer can run in parallel.
When it satisfies your facility's definition of a qualifying presale and the lender has accepted the evidence or approval required by that definition. A signed replacement contract may still fail to count if it is conditional, related-party, supported by a deposit instrument the lender does not accept, priced outside the valuer's supportable range, or otherwise outside the facility criteria. The replacement section above explains the exposure before lender acceptance.
Only if your facility definition and lender allow it. A deposit bond promises payment of the deposit later rather than placing cash into the stakeholder's trust account, so a facility that requires a genuine cash deposit may not count the bonded contract or may count it only with specific lender approval. Check the definition in your own document rather than assuming every signed contract contributes to coverage.
There is no single Australia-wide answer. Whether the developer is entitled to the deposit depends on the contract and the law of the relevant state, while whether the developer can access the money also depends on where it is held. New South Wales public guidance says off-the-plan deposits cannot be released to the vendor before settlement, Queensland permits release at settlement or if the contract otherwise finalises and the seller is entitled to it, and Western Australian strata guidance allows access after plan registration unless the contract prevents it. Get the answer for your contract from your solicitor before treating the deposit as available cash.
Nothing happens to them automatically, but the failed buyer may expose a risk shared by the rest of the book. Recheck buyers whose finance was approved a long time ago, settlement valuations, sunset dates, conditional contracts, nominations, deposit bonds and any concentration limits in the facility. A single lost sale is easier to manage than discovering several correlated failures at practical completion, so review the remaining presale schedule before the lender asks for it.
The issue becomes an exit and refinance problem as well as a sales problem. The existing construction facility does not automatically extend because stock remains. If the project is complete and the remaining dwellings are marketable, residual stock finance can be one structure used to repay the outgoing development facility while the stock sells. If construction is not complete, the solution is still a development-finance extension or refinance and will be assessed on the remaining cost to complete, current valuation, debt and exit.
It is a New South Wales government scheme that supports developers who have not yet achieved the presales their financier requires, by the government itself committing to buy dwellings in qualifying projects. On the scheme page as at 3 August 2026, the New South Wales Department of Planning, Housing and Infrastructure states that "the Government will commit to the purchase of up to 50% of dwellings in qualifying residential projects", and that "substantial commencement of construction must be achievable within 6 months of entering formal contracts". Read that commencement gate carefully, because it is the reason the scheme is not a rescue for a project already under construction whose presales have failed: it is aimed at getting projects started, and its published material makes no reference anywhere to failed, rescinded or terminated presales. A developer who never achieved presales at the outset is in a different position to one who achieved them and lost them.
No, not as a universal requirement for every development loan. APRA's 2025 clarification says the 100 per cent figure in its 2017 commercial-property letter was an observation of lender practice, not a minimum presales requirement under APS 220 or APG 220. Current APS 112 separately uses qualifying presales of at least 100 per cent of total debt as one condition for the lower 100 per cent risk weight on certain residential ADC exposures above $5 million. APRA is consulting on a draft 50 per cent condition with a proposed 1 April 2027 commencement; as at 27 August 2026, that proposal is not in force.
Sometimes, if the facility permits it or the lender agrees. A cure can involve extra equity, additional security, a conditional waiver or forbearance, a covenant reset or a replacement qualifying presale. Get the agreed cure, deadline, drawdown treatment, pricing and default consequences in writing.
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