Off-plan: where your risk really sits between the first payment and the keys
Buying off-plan, while the project is still being built, has simple economics: a lower price and staged payments in exchange for waiting and risk. There is nothing wrong with that trade, provided you know exactly where the risk sits. And it sits in one place: the period between your first payment and the transfer of ownership.
What the payment path looks like
The pattern is similar on most markets. First a reservation fee, usually a few thousand euros, which takes the unit off the market. Then the contract and a deposit, most often 20–30% of the price. Then instalments tied to construction progress, and finally the payment at handover and transfer of ownership.
Each of these payments has a different legal status. The reservation fee can be non-refundable even when your lawyer reads the contract and advises against the deal; check that before paying it, not after. The deposit and the instalments are serious money, and the question you must be able to answer is: what happens to them if the construction stops.
Where your money actually goes
By default, instalments land straight in the developer's account and fund the build. If the developer fails mid-project, you are one of its creditors. Recovering payments from an insolvency estate in a foreign country is a scenario whose cost and duration are hard to overstate.
The alternative is escrow: a trustee account that releases money to the developer as construction stages are certified. Here the markets differ, and the difference matters:
In Cyprus the buyer's main protection is something else: depositing the sale contract at the Land Registry. A deposited contract gives priority over later encumbrances and the right to demand specific performance. It is a standard, tested mechanism, but someone has to make sure the deposit actually happens, and on time.
In Thailand escrow accounts exist but are voluntary. By default the money goes to the developer. Escrow has to be negotiated and written into the contract; projects that offer it are inherently safer than those collecting payments directly.
Either way the conclusion is the same: payment protection does not happen by itself. It is the product of specific clauses in a specific contract.
How to recognise a higher-risk project
A few signals that carry the most weight in our practice:
- A developer with no completed projects. A track record of delivered buildings is the only hard evidence that a company can carry a build to the end. We wrote about this in more detail in how we vet developers.
- A price clearly below the market. Somebody is financing that gap. Usually you, with risk.
- No escrow and no contract protection, combined with a payment schedule loaded towards the start of construction.
- Vague deadlines. A contract without a completion date and delay penalties moves the whole risk of time onto you.
- A "guaranteed rental" with no named operator standing behind the guarantee, and no answer to what happens to it if the operator disappears.
- Time pressure. A genuine opportunity survives a week of legal review. An offer that cannot survive it was not an opportunity.
None of these signals is conclusive on its own. Two or three together are a reason to leave the table.
What belongs in the contract
The contract is your lawyer's job to read, but knowing what to look for helps the conversation: a payment schedule tied to measurable construction progress, a completion date with delay penalties, a handover and defects procedure, protection for your payments (escrow or a contract deposited at the registry), and a clear exit path with your deposit if the developer fails to deliver.
And one thing outside the contract: the lawyer reading it must not be the lawyer recommended by the seller. That rule has no exceptions.
Where we come in
On the Vesteri platform developers are vetted before they are admitted, and the legal side of each transaction is handled by an independent law firm on the target market. Off-plan remains a purchase with risk; no platform changes that. What changes is something else: whether you learn about that risk before your first payment, or after it.
This article is provided for information and is not legal or investment advice. Payment-protection rules differ between markets and between contracts. Before deciding, consult a lawyer qualified to advise in the jurisdiction of your transaction. See also our disclaimers.