Off-Plan Property Risk Is Rising

In the 12 months to June 2026, 3,805 construction businesses became insolvent in England and Wales. The construction industry accounted for 17% of all recorded business insolvencies, the highest number of any sector.

Hamptons found that only 33% of new homes sold in England and Wales during 2025 were purchased before completion, the lowest proportion since 2013. The decline in off-plan sales, combined with higher interest rates and build costs, added an estimated £264.5 million to housebuilders’ financing costs compared with a decade earlier.

When properties take longer to sell, developers must fund construction, borrowing and operating costs for longer. This reduces development margins and increases the financial pressure across the entire delivery chain.

Ardmore Construction Group entered administration in June 2026, bringing work to a halt on major projects across London. Hackney Council subsequently terminated Ardmore’s contract for the Shoreditch Parkside development and appointed Wates Construction to manage the site.

Wates must assess the work already completed, review the existing design and safety information and renegotiate contracts with the supply chain before construction can restart. Hackney Council said this process was expected to take approximately three months, with a formal recommendation due in September or October 2026. No confirmed restart date has been published yet.

This followed the collapse of ISG in September 2024, when eight companies within one of the UK’s largest construction groups entered administration. The Ministry of Justice later confirmed that affected prison construction and maintenance programmes faced delays of between three and 18 months. Replacement contractors have been appointed, but pre-construction work and remobilisation remain ongoing.

These cases demonstrate that replacing a failed contractor is not simply a matter of appointing another builder. Completed work must be inspected, designs and safety records recovered, materials accounted for, subcontractors renegotiated and approvals secured from lenders, insurers and warranty providers. Even where a replacement contractor is found, projects can remain suspended for months and incur substantial additional costs.

X1 Manchester Waters Limited, the special purpose company behind a development promoted under the established X1 brand, entered administration in June 2026. According to reporting based on the administrator’s proposal, more than £24 million was owed to 336 investors who had paid substantial deposits on apartments in two blocks that were never built.

The administration remains ongoing, and there is currently no certainty about how much of those deposits investors will recover. The outcome will depend on how individual deposits were held, the contractual protection provided and the assets available to creditors. Investors treated as unsecured creditors may recover only part of their investment or nothing at all.

This demonstrates why investors must understand the legal structure before exchanging contracts. The company named in the purchase agreement carries the obligation to deliver the development. The reputation and financial strength of a wider group provide no automatic protection if that company fails.

Meaningful protection exists only where funds are securely held or supported by a legally enforceable parent company guarantee, performance bond, insurance policy or equivalent arrangement. Without that protection, the investor’s capital is directly exposed, and complete financial loss is a foreseeable outcome if the development fails.

Many developments are delivered through special-purpose companies often with limited assets. A recognised group name provides no automatic protection if the project company fails. The investor’s capital is protected only by the specific legal safeguards written into the purchase agreement, such as an enforceable parent company guarantee, a performance bond, a warranty, or insolvency protection.

The way a deposit is held can determine whether the investor’s capital remains protected if the development fails.

When funds are held as stakeholder, the solicitor normally retains them until completion or another event specified in the contract. When the seller’s solicitor receives funds as agent for the seller, the contract may permit their release to the developer before completion.

Once released, the money may be used to fund the development and is no longer protected within the solicitor’s client account. If the developer becomes insolvent, the investor may be left pursuing repayment as an unsecured creditor, with no certainty that the deposit will be recovered.

Investors seeking the highest level of protection should require every payment connected with the purchase to be held as stakeholder until completion. This includes the reservation fee, exchange deposit, staged payments, furniture packages and upgrades.

The investor’s independent solicitor must confirm in writing where each payment will be held, whether it can be released before completion and the precise contractual authority for any early release.

The New Homes Quality Code requires participating developers to explain deposit protection and maintain reasonable financial arrangements to meet their obligations. However, investment purchases generally fall outside the Code’s definition of a protected customer. The investor’s security, therefore, depends on the legal protections written into the purchase agreement.

A protected deposit reduces the risk of financial loss if the development fails. It does not guarantee that the property will be completed on time.

Buying within a development where construction is already well advanced reduces the investor’s exposure to delay. However, completion can still be affected by factors beyond the developer’s control. These include the discharge of outstanding planning conditions, building control or building control safety approval, warranty sign-off, fire safety documentation and utility connections.

The long stop date provides the principal contractual protection against prolonged delay. The protection it offers depends on any permitted extensions, the termination procedure and the deadline for returning protected funds.

Delay also carries a financial cost. Capital remains tied up without producing rental income, while mortgage applications, valuations and legal work may expire or need to be repeated.

Off-plan investors usually exchange contracts too early to secure a mortgage offer that will remain valid until the property is completed. Mortgage offers are time limited, extensions are not guaranteed and an expired offer may require a new application under different interest rates, lending criteria and rental stress tests.

The lender values the property when the mortgage application is assessed. That valuation is based on completed comparable sales and current market conditions, not the price agreed when contracts were exchanged.

An investor may agree to pay £300,000 and expect a 75% mortgage of £225,000. If the lender values the completed property at £240,000, the maximum 75% loan falls to £180,000. The investor must contribute £120,000 rather than £75,000, requiring an additional £45,000 to complete.

The purchase contract remains binding even when the lender’s valuation is lower or the required mortgage is unavailable. The developer is not normally required to reduce the price or refund the deposit, leaving the investor responsible for funding the shortfall.

During the recent period of reduced market confidence, SmartLandlord has been contacted by investors reporting valuation shortfalls of between 20% and 30%. These are individual cases rather than national market data, but they demonstrate the scale of the financial exposure created when the contract price is not supported by the completed property’s market value.

Off-plan property remains a credible investment strategy when the correct legal and financial protections are secured before exchange.
Investors must establish where every payment will be held, whether funds can be released to the developer, which company is legally responsible for delivery, when the contract can be terminated and how much additional capital may be required at completion.
Once contracts are exchanged, the purchase price and contractual obligations become legally binding. If funds have already been released, the protection cannot be added retrospectively.

SmartLandlord continues to bring carefully selected off-plan opportunities to market. However, speculative investment decisions are less forgiving than at any time in the past 20 years. Investors must understand both the commercial advantages and the risks of every purchase, particularly the additional financial, contractual and delivery risks created by buying before a property is complete.

Insolvency Service Company Insolvency Statistics, June 2026
Hamptons Off-plan sales 2025
Companies House X1 Manchester Waters Limited filing history
Place North West X1 Manchester Waters owes £25.7m to creditors
Hackney Council Update on the Britannia project
Insolvency Service ISG group of companies in administration
Law Society Soluble problem: deposits
New Homes Quality Board Contract, solvency and investment-purchase provisions
MoneyHelper How long do mortgage offers last?
RICS Valuation of individual new-build homes, 3rd edition
The Guardian Mortgage brokers report valuation shortfalls