Buying off-plan in a new development

An off-plan purchase is a contract for something that does not exist yet, and usually for something that cannot yet be registered in anyone's name. A sectional title unit comes into existence only when a land surveyor's sectional plan is approved by the Surveyor-General and the developer applies to the Deeds Office to register that plan and open a sectional title register. Until that happens there is no unit, no title deed, and nothing a bond can be registered over.

That single fact drives almost everything else. Your transfer date is set by the developer's construction programme and the Deeds Office rather than by the ordinary conveyancing timeline. Your deposit sits somewhere for months. And the Alienation of Land Act 68 of 1981 treats you as a buyer who needs protecting, because its definition of a unit expressly includes a proposed unit.

• The developer sells off a marketing plan and a municipally approved building plan.
• Construction happens, at the developer's pace and subject to whatever extension rights the contract reserves.
• A land surveyor draws the sectional plan of the building as actually built, and the Surveyor-General approves it.
• The Deeds Office registers that plan and opens the sectional title register. Your unit now exists in law.
• Transfer and bond registration happen together, and the purchase price becomes payable.

A developer selling new units is a VAT vendor supplying in the course of its enterprise, so the sale is a taxable supply. Section 9(15) of the Transfer Duty Act exempts a taxable supply from duty, which is why you pay VAT or transfer duty and never both.

You do not pay that VAT as a separate line. Section 64 of the VAT Act deems any price charged by a vendor to include VAT, so unless the contract states in terms that the price excludes it, the advertised figure is the whole figure and 15% cannot be added afterwards. Read the price clause anyway. That is the clause a dispute turns on.

Seen in rand: on a R2 000 000 resale in the 2026/27 tax year the buyer hands SARS R33 786 in transfer duty on top of the price, in cash, and it cannot be bonded. On a R2 000 000 off-plan unit the buyer hands SARS nothing, but roughly R260 870 of that price is VAT the developer accounts for. The tax is larger and the cash requirement is smaller. Run your own figures through the transfer duty calculator before you compare a new unit against a resale.

One more provision matters off-plan, because of the long gap between signature and transfer. If the VAT rate rises in that gap, section 67A(4) of the VAT Act holds a residential purchase to the old rate where the price was fixed in a written agreement concluded before the increase took effect. That is the situation the provision was written for.

Section 26(1) of the Alienation of Land Act says no person may receive any consideration under a deed of alienation relating to an erf or a unit until that erf or unit is registrable. Contravening it is a criminal offence. Off-plan sales work only because section 26(3) provides two lawful routes, and your contract must use one of them.

The first is that you entrust the money to an attorney or estate agent to hold in trust for the developer's benefit. The second is that the developer takes it directly, but only against an irrevocable and unconditional guarantee from a registered bank or insurer to repay you if the unit does not become registrable within a stated period.

Section 26(4) is the provision worth memorising. If the developer becomes insolvent before the unit is registrable, the money held in that trust account, or guaranteed by that bank, becomes immediately payable back to you. A deposit paid into the developer's own current account has none of that protection, and taking it that way is the offence.

• Which trust account holds the deposit, named in the contract with the attorney's details.
• Whether it is invested for your benefit. A year of interest on a deposit is real money, and it is negotiable.
• What the guarantee says, if the developer holds the money directly, and by when it must repay.
• That the developer is a registered home builder. Section 10(1) of the Housing Consumers Protection Measures Act 95 of 1998 makes it an offence to receive consideration for the sale of a home without that registration.
• That the home is enrolled with the NHBRC. Section 13(7) stops the builder receiving anything beyond the deposit until enrolment is done.

No bond can be registered over a unit that does not exist, so your bond registers only when the sectional title register opens and transfer takes place. That cuts both ways.

In your favour: you pay no bond instalments while the building goes up. Unlike a self-build funded by a building loan, there are no progress draws and no interest accruing against you during construction. Your exposure is a deposit and a guarantee, not a monthly payment.

Against you: a bond grant is not open-ended. It is issued on your income, your credit record and the bank's valuation at that moment, and an off-plan completion date is often a year or more away. Expect the bank to re-confirm the grant close to transfer, on the affordability position and the rates applying then, and budget on the basis that the grant you hold today is not the one that registers. See bond pre-approval for how the assessment is done.

There is normally a gap between practical completion and registration. Developers commonly let buyers occupy once units are finished and the certificate of occupancy is issued, while the sectional plan works through the Surveyor-General and the Deeds Office. In that gap you pay occupational rent and you are not yet the owner. Get the rate in writing before you accept occupation. It is a contract term, not a market price.

A new home carries statutory warranties that a resale does not. The Housing Consumers Protection Measures Act requires the builder to be registered with the NHBRC and the home to be enrolled before construction starts, and it writes warranties into your agreement whether the agreement mentions them or not. Section 13(6) makes any clause excluding or waiving them null and void, so voetstoots cannot be used against you here the way it can on a private resale.

The clock starts on the occupation date, which the Act defines as the date you accept the home as recorded in a document confirming acceptance, failing which the date on the certificate of occupancy. Get your acceptance in writing and dated. That document decides when your three months and your five years begin.

• Ask for the enrolment certificate. Section 14(3) obliges the builder to give you a copy, and fund cover under section 17 depends on the home actually having been enrolled.
• Notify in writing, to the builder, dated. A list handed verbally to a site foreman is not notification.
• The fund is a backstop, not a maintenance plan. The NHBRC puts the maximum payable at the lesser of the enrolment value and R500 000, inclusive of professional and accommodation costs.
• The warranties follow the house. Section 13(4) cedes them to the next owner if you sell inside the five years.
• Check which Act governs you. The Housing Consumer Protection Act 25 of 2024 will repeal the 1998 Act, but it takes effect only on a date fixed by proclamation and had not been brought into operation when this guide was published. It lengthens the roof leak warranty to two years. Your conveyancer will know which Act applies to your agreement.

The snag list is the walk-through you do before accepting the home: doors that bind, tiling, paint, missing fittings, a geyser sited somewhere other than the plan. Section 13(2)(b)(ii) gives you at least three months from the occupation date to notify the builder of any non-compliance with, or deviation from, the terms, plans and specifications of the agreement. Miss that window on a cosmetic item and it becomes your maintenance.

Section 13(1)(c) requires the specifications and the plans approved by the local authority to be attached to your agreement as annexures. Those annexures, not the brochure and not the render, are what the finished unit gets measured against. Get them, keep them, and check that the plan attached is the approved one.

Floor area deserves a tape measure. Under section 32(1) of the Sectional Titles Act 95 of 1986 your participation quota is your section's floor area divided by the floor area of all sections in the scheme, measured to the median line of the boundary walls. That quota sets your share of the levies, the value of your vote and your undivided share of the common property. A section smaller than sold reduces what you own; other sections coming out larger raises your levy share. Most developer contracts reserve a tolerance on area and a right to vary the design, so read that clause and see how wide it is.

Then ask whether a right to extend has been reserved. Section 25 lets a developer reserve a real right to add sections, buildings or exclusive use areas later, which is how phased schemes are built. It can be sold to someone else, and exercising it revises the participation quota schedule for every owner. Section 25(14) requires the right to be disclosed in the deed of alienation to every purchaser, and section 25(15)(a) makes a deed that does not disclose it voidable at your option. Ask which part of the common property it covers, because the lawn in the render can be the next phase's footprint.

Late is the ordinary case. Off-plan contracts typically give an anticipated completion date and then a broad set of extension rights: weather, strikes, municipal delays, force majeure. An anticipated date with unlimited extensions is not a deadline. What you want is a long-stop date, a point at which you may cancel and recover your deposit with interest. Negotiate it before you sign, because afterwards you have no leverage.

Without such a clause, lateness on its own rarely lets you walk away. You generally have to demand performance within a reasonable time first, and can cancel only if that demand goes unmet.

One thing works in your favour. Because a developer sells in the ordinary course of business, the Consumer Protection Act 68 of 2008 applies in a way it does not to a private resale; its definition of goods expressly includes a legal interest in land. How it and the NHBRC warranties interact on a given defect is fact-dependent, so treat that as a question for an attorney.

Insolvency is the tail risk. If the developer is liquidated before the unit is registrable, section 26(4) of the Alienation of Land Act returns the money held in trust or covered by the guarantee. It does not give you the building, and it does not make you a secured creditor for anything else. There is a second, less obvious consequence: section 14(5)(a) of the Housing Consumers Protection Measures Act deems a home's NHBRC enrolment automatically cancelled when a court grants an order for the provisional liquidation or sequestration of the home builder before the occupation date. The Council may reinstate it under section 14(6), but cover is not simply unaffected.

None of this makes off-plan a bad buy. A unit from a well-capitalised developer, with your deposit in trust, the enrolment certificate in hand and the approved plans annexed to the agreement, is a sound transaction. It simply carries a different shape of risk from buying a house that already stands, and the paperwork is where that difference lives.