Investors walking blind into new-build contracts, warns legal expert

A post-budget surge in new-build property investment is pushing inexperienced buyers into some of the most complex sales contracts in the market, with many mistakenly believing off-the-plan and house-and-land agreements are safer or simpler than purchasing established homes.

That is the warning from Lawlab Managing Director Ian Perkins, who says a false sense of security is creating significant legal and financial risk for investors who are signing contracts they do not fully understand.

Mr Perkins said the tax changes introduced in the federal budget will trigger a wave of first-time property investors entering new-build projects at speed, driven by polished marketing materials, turnkey sales packages, and the widespread perception that “new” automatically means low-risk.

“Investors are walking blind into new-build contracts because the whole sales environment is designed to feel safe,” Mr Perkins said.

“The brochures look glossy, the process feels guided, and buyers assume the contract must be straightforward, but none of that reflects the legal reality.

“These contracts are long, complex, and often heavily weighted in favour of the developer or builder.”

According to Mr Perkins, many investors incorrectly assume new-builds are simpler transactions because there is no auction pressure, no immediate repair obligations, and no physical inspection required prior to purchase. Others interpret government building regulations as a form of broader consumer protection — a misreading that can prove costly.

“There’s a big difference between consumer protections and contract protections,” Mr Perkins said.

“Building standards don’t protect you from sunset clauses, variation rights, valuation gaps, or the developer’s ability to change materials, specifications, or timelines.”

Mr Perkins said a recurring pattern is emerging in which investors sign contracts without obtaining independent legal advice, only to discover significant gaps in their protections or broad developer rights to alter the build, substitute materials, or extend delivery dates well beyond the original agreement.

The absence of a standardised contract format across the new-build sector compounds the problem, he said, as each developer produces their own documentation with varying terms and risk allocations.

“Every developer writes their own contract, so there is no standard version,” Mr Perkins said.

“Investors are comparing it to buying an established home, where the risks are visible and the contract is familiar.

“However, with new-builds, the risks are buried in the fine print, and too many people are signing blind.”

Among the specific risks Mr Perkins highlighted are sunset clause provisions, which can allow a developer to terminate a contract if a project is not completed within a specified timeframe — sometimes leaving buyers without their property in a market that has since risen significantly. Valuation shortfalls, where a completed property is independently valued below the contracted purchase price, can also leave buyers unable to secure sufficient finance at settlement.

Mr Perkins said the current environment — combining tax-driven urgency, limited housing supply, and sophisticated project marketing — is creating conditions in which less experienced investors are particularly exposed.

“When policy changes rapidly, behaviour changes quickly, too, but contract understanding does not,” he said.

“If investors don’t slow down and get proper advice, they risk locking themselves into agreements that expose them to delays, cost blowouts, valuation shortfalls, or even contract termination under sunset clauses.”

Mr Perkins called on policymakers, industry groups, and developers to address what he described as a widening education gap, and to ensure prospective buyers are properly informed before contracts are executed.

“New-builds can be a great investment, but only when buyers understand what they’re agreeing to,” he said.

“Right now, the perception of simplicity is masking real contractual complexity.

“If we don’t lift contract awareness, we’ll see a wave of avoidable financial stress in the years ahead.”