What protections exist under SA law for purchasers of off-the-plan properties if the developer becomes insolvent before completion?
Correct Answer
A) A deposit properly held in trust stays the buyer's money, beyond the developer's creditors
When an off-the-plan deposit is properly held in trust by an agent, conveyancer or lawyer until settlement, it does not form part of the developer's property and is not available to the developer's creditors. The buyer's rights to the deposit then depend on the contract, for example on termination under a sunset clause. For any other loss, the buyer is generally an unsecured creditor.
Why This Is the Correct Answer
A deposit held in trust by a stakeholder is not the developer's property, so if the developer becomes insolvent the developer's creditors cannot reach it. What happens to it then depends on the contract's terms.
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