Carruthers Law

Off Plan Property Deals

July 26, 2025

Solicitor Negligence in Off Plan Property Deals: Buyers Recourse When Developments Fail

In this article:

• Understanding Off-Plan Purchases and Their Risks
• The Solicitor’s Role and Duty in Off-Plan Transactions
• Common Breaches: How Solicitors Can Be Negligent in Off-Plan Deals
• Consequences of Solicitor Negligence: Lost Deposits and Client Losses
• Legal Recourse for Buyers – Making a Negligence Claim
• Conclusion: Protecting Your Investment and Next Steps

For more information see our Professional Negligence, Conveyancing Negligence and Solicitor Negligence pages
Contact Carruthers Law on 0151 541 2040 | 0203 846 2862, info@carruthers-law.co.uk or Visit our Contact Page

Understanding Off-Plan Purchases and Their Risks

Buying a property off-plan means agreeing to purchase a home, such as an apartment or house, before it is built or completed. Buyers often pay a deposit, typically around 10% of the price, though some schemes require far higher deposits, at the time of exchanging contracts, with the balance due on completion. Off-plan investments can be attractive. The price is often below market value, and buyers hope to benefit from rising property values by the time of completion. However, off-plan purchases carry significant risks, especially if the development stalls or collapses. In fact, the investment can become effectively worthless if the development is never finished.

One major risk is that the developer may go bust before completion. If the developer becomes insolvent and the project fails, buyers can be left with nothing to show for their deposit.

Other known risks of buying off-plan include possible market fluctuations, property values might fall by completion; difficulties in obtaining mortgages for an unfinished property; construction delays; or the final building not meeting promised specifications. A crucial protective measure for buyers is to ensure their deposit is safeguarded. For instance, the deposit can be held in a trust or stakeholder account until completion, or covered by a warranty or insurance scheme that protects deposits if the builder becomes insolvent. Unfortunately, in many failed developments, buyers later discover that their deposits were not protected at all. Instead, in some buyer-funded schemes, developers have been using the buyers’ large up-front deposits (sometimes 50% to 80% of the purchase price) to finance the construction itself. If the project fails, those deposit funds are already spent, and buyers stand to lose that money entirely.

The Solicitor’s Role and Duty in Off-Plan Transactions

When purchasing any property in England and Wales, including off-plan units, buyers typically rely on a conveyancing solicitor, or licensed conveyancer, to guide them through the process. The solicitor’s role is not just paperwork processing; they owe the client a duty of care to act with reasonable skill, care, and diligence in protecting the buyer’s interests. This duty arises from the contract, known as a retainer, with the client and from the general professional obligations of solicitors. In essence, the solicitor must advise the buyer on all important issues and risks associated with the purchase, ensure the contract and documentation are in order, and take reasonable steps to safeguard the client’s position.

In the context of an off-plan purchase, a competent solicitor is expected to perform thorough due diligence on the transaction. This includes reviewing the developer’s contract pack, often called the seller’s pack, and any associated documentation. Key points a solicitor should check or advise on include:

• Contract Terms: Is there a long-stop date or sunset clause by which, if the building isn’t completed, the buyer can rescind the contract and get their deposit back? Are there clear terms about what happens if the project is delayed or fails? The solicitor should flag any contract that lacks reasonable protections for the buyer or heavily favours the developer.
• Deposit Handling: How and where will the deposit be held? A solicitor should insist that the deposit be held as a stakeholder, meaning it cannot be released to the developer until completion or other agreed conditions, rather than as an agent for the seller, which would allow the developer to use the money immediately. If the developer or its solicitor will hold the deposit, the buyer’s solicitor must explain the implications and ideally negotiate terms to protect that money. In some cases, deposits on new builds can be protected by insurance or warranty schemes, for example, certain new build warranty policies include insolvency deposit protection up to a limit. If no protection exists, that is a significant risk the client must be made aware of.
• Developer Background and Financing: While solicitors are not financial advisers, they should exercise caution and perhaps make basic inquiries about the developer. If the developer is a newly formed special-purpose vehicle (SPV) with little capital, which is common, or if the scheme’s financing seems to rely on buyers’ deposits, a reasonable solicitor should recognise this as a red flag. The solicitor should warn the client of the heightened risk in such scenarios. It may even be appropriate to advise that the project is high risk or suggest seeking further assurances such as a guarantee or bond securing the deposit.
• Planning and Permissions: The solicitor should check that the development has the necessary planning permission and approvals in place or at least disclose to the client if any are still pending. Buying off plan without planning permission secured is riskier; the solicitor should caution the client that the project might not go ahead at all if approvals fail.
• Buyer’s Financing: If the buyer is taking a mortgage, the solicitor should ensure the client is aware of any financing conditions. Importantly, exchanging contracts without a mortgage offer can be dangerous. If the lender later refuses, the buyer could be forced to default on completion and lose the deposit. A reasonably competent solicitor will advise the client not to exchange until finance is confirmed, or at least warn in clear terms of the risk of proceeding without a mortgage.

Overall, the solicitor must act in the best interests of the client and provide a proper standard of service; these are core principles in the Solicitors Regulation Authority (SRA) Code of Conduct. That includes giving the client all relevant information and advice about material risks so the client can make an informed decision. If an off plan deal is inherently very risky, the solicitor should convey that in no uncertain terms.

Common Breaches: How Solicitors Can Be Negligent in Off-Plan Deals

Professional negligence by solicitors in off-plan purchase transactions typically involves failures to meet the expected standard of care. Some common mistakes or omissions include:

• Failure to Advise on Deposit Risks: Perhaps the most frequent mistake is not clearly warning the client that their deposit could be lost if the developer fails, and not ensuring the deposit is protected. For example, a solicitor should explicitly advise if the contract allows the developer early access to the deposit, or large stage payments, and explain the danger in that arrangement. Negligence might be found if a solicitor simply lets the client proceed without highlighting that if the developer goes bust, you may not recover your money. This is considered an obvious risk of off-plan purchases that must be communicated. A competent solicitor would advise the client to ensure the deposit is held safely, as a stakeholder or in escrow, or covered by insurance, or at least obtain a personal guarantee from the developer, especially for large deposits.
• Inadequate Due Diligence on the Contract and Developer: Negligence may occur if the solicitor misses red flags in the contract or the developer’s setup. For instance, if the contract lacks a long-stop date or any refund mechanism if the project isn’t completed, failing to raise this with the client could be a breach of duty. Similarly, if the developer’s company is obviously just a shell with no assets apart from the hoped for sale proceeds, a solicitor should recognise that any default or insolvency will leave the buyer with little recourse. Not investigating or informing the client of this structure,  for example, not pointing out that the development is financed by buyers’ deposits rather than a bank loan, might amount to a negligent omission. In some failed schemes, solicitors did not properly explain to buyers that their money was effectively funding the project and was unsecured, a perilous situation that a reasonably prudent lawyer would have flagged.
• Not Explaining Key Contractual Terms or Rights: A solicitor should walk the client through important provisions such as completion dates, what happens if construction is delayed, whether the property will have a warranty, such as an NHBC Buildmark,  on completion, and so forth. If those terms are unfavorable or there is an absence of typical protections, the client must be informed. For example, if there is no clause allowing the buyer to withdraw with a refund after a certain long-stop date, that means the buyer’s money could be tied up indefinitely, a critical point to mention. Failing to explain such terms or failing to advise the client to negotiate better terms or reconsider the deal can be negligent.
• Conflicts of Interest or Undue Developer Influence: In some off plan schemes, the developer or an agent might refer buyers to a particular solicitor, or a law firm may act for a large number of buyers in the same project. The solicitor must remain independent and loyal to the buyer’s interests only. If a solicitor yields to pressure from the developer, for example, by downplaying risks to keep the sales moving, or even agreeing to mechanisms that favour the developer’s cash flow, this is a serious breach.
• Permitting Unsafe Release of Funds: In rare scenarios where the buyer’s solicitor might hold the client’s deposit, or part of it, pending some condition, it would be negligent to release those funds without ensuring the condition is met. Generally, the developer’s solicitor holds the deposit, but if the buyer’s solicitor did receive funds on the client’s behalf, say, to forward to the seller, they should only transfer it under the agreed safeguards.

For further reading on claims against solicitors, visit our Solicitors’ Negligence page.

Consequences of Solicitor Negligence: Lost Deposits and Client Losses

When a solicitor is negligent in an off plan transaction, the consequences for the buyer can be devastating. The most common loss is the forfeiture of a hefty deposit, often tens of thousands of pounds, with no property to show for it. This typically happens after a development fails: the building is never completed or the developer goes bankrupt. Alternatively, the buyer might be left in a position where they have to pull out and thereby lose the deposit, for example, due to not securing a mortgage in time, which a solicitor should have cautioned about.

If the solicitor had breached their duty, the client may argue that but for the solicitor’s negligence, they would not have suffered that loss. For instance, the buyer might say: “Had my solicitor warned me that my deposit wouldn’t be protected and that the developer’s financing was shaky, I would never have gone ahead with this purchase.” Or: “If I knew I could lose my £50,000 deposit, I would have insisted it be held in escrow or would have walked away.”

Beyond the financial loss, there are other consequences: the buyer may have missed other opportunities having tied up funds in this failed project, and there is understandable anger or distress at having been let down by a trusted professional. Many off plan investors, especially overseas buyers, feel that they were not just unlucky with a developer, but actively misadvised or inadequately protected by their solicitors.

It’s worth noting that when a development fails, suing the developer is usually futile, as the developer is likely insolvent. That’s why attention turns to the professionals involved, like the solicitors or sometimes the project marketers. Claims against developers’ solicitors are less common and more difficult to succeed with, since usually there’s no direct solicitor client relationship. However, in limited situations such as where the developer’s solicitor held deposits as a stakeholder for the buyers such claims have been attempted as well.

Legal Recourse for Buyers – Making a Negligence Claim

Buyers who have lost money in a failed off-plan investment due to possible solicitor negligence do have legal recourse. To succeed in a claim against a solicitor, the buyer generally needs to establish three key elements:

• Duty of Care: The solicitor owed a duty to the claimant. In conveyancing transactions, this is straightforward by virtue of the retainer the solicitor unquestionably owes the client a duty to exercise reasonable care and skill. This duty is also often expressed in the solicitor’s client care letter or terms of engagement. Even if there were no formal contract, a duty could arise by the solicitor assuming responsibility for the advice, but in typical purchase cases a contract will exist.
• Breach of Duty (Negligence): The solicitor breached that duty by not meeting the standard of a reasonably competent professional. Here, the claimant must show that the solicitor’s actions or omissions fell below what a typical competent conveyancing solicitor would have done in the same situation. Evidence might include comparing what advice was given or not given to industry practice, to establish that any ordinary solicitor would have warned the client about X, Y, Z. In off plan cases, breach might be shown by the kinds of failures discussed earlier, e.g. not informing the client of the deposit risks, not investigating obvious red flags, or giving incorrect or incomplete advice about the contract.
• Causation and Loss: The claimant suffered loss as a direct result of the breach. This means proving that, but for the solicitor’s negligence, the loss, for example, the lost deposit, would likely have been avoided. The buyer must usually assert that they would have acted differently with proper advice; for example, that they would not have entered the contract, or would have insisted on protections that could have prevented the loss. It also must be shown that the type of loss was a reasonably foreseeable consequence of the solicitor’s breach. Losing a deposit in a development collapse is certainly a foreseeable outcome of failing to advise on insolvency risks, so this element often focuses on the “but for” question: would the client truly have behaved differently if fully informed? In many cases, claimants say they trusted their solicitor’s guidance and went ahead only because no significant warnings were given.

If these elements are proven on the balance of probabilities, the solicitor will be found liable for professional negligence. The measure of damages typically aims to put the claimant in the position they would be in had the negligence not occurred. In practical terms, that usually means the return of their deposit and related costs plus interest, or other losses that flowed from the negligence.

Conclusion: Protecting Your Investment and Next Steps

For anyone considering an off-plan property investment, the key takeaway is to proceed with caution and ensure you have a diligent, independent solicitor on your side. Off-plan developments can offer great opportunities, but if something goes wrong, such as a developer insolvency, a market crash, or simply an abandoned project, your financial exposure can be severe. A solicitor’s job is to protect you by anticipating those “what if” scenarios and advising you accordingly. If your solicitor fails to do so, and you end up losing money as a result, the law provides a mechanism for you to seek redress.

When consulting a new lawyer about a possible claim, be prepared to discuss and provide documentation of what advice was given at the time of purchase. Any emails, letters, or reports from your original solicitor can be crucial evidence. A professional negligence solicitor will evaluate whether your previous lawyer’s conduct fell below expected standards and whether that caused your loss. Given the complexity of these cases, and the fact that they often involve multiple affected buyers, you may find strength in numbers by joining a group action or at least sharing information with fellow investors.

Finally, while losing a deposit in a failed off plan development is distressing, you may have options to recover your funds. Solicitors are there to protect your interests; if they negligently failed to do so, they can be held accountable. Thanks to mandatory insurance, a successful claim means you are likely to actually receive the compensation due. The road to recovery involves proving the negligence, but with experienced legal assistance this can be achievable. Always remember: a solicitor’s negligence in an off-plan purchase is not the end of the road for you as an investor; it can be the beginning of a case to win back what you’ve lost, and to reinforce the standards that all property lawyers should uphold in the future.

To learn more about negligence in property transactions, visit our Conveyancing Negligence page.

Contact Carruthers Law on 0151 541 2040 | 0203 846 2862, info@carruthers-law.co.uk or Visit our Contact Page