Sunset clauses, escrow and your deposit: what's actually protected

Off-plan contracts are full of terms that sound reassuring but are easy to misread. Three of them decide what happens to your money if the project runs late or does not complete at all: the deposit, escrow, and the sunset clause. Here is what each one actually protects.

Your deposit

The deposit, usually around ten per cent, is the money you commit when you sign. It is not a payment to the developer to spend. In a properly structured off-plan contract it is held on your behalf until settlement, and it is refundable in specific circumstances set out in the contract, such as the project being cancelled under the sunset clause.

Escrow and trust accounts

Escrow simply means your deposit is held by an independent third party, typically a solicitor's or agent's trust account, rather than by the developer directly. The money cannot be released until the agreed conditions are met. This is the mechanism that keeps your deposit safe even if the developer runs into trouble, which is why confirming where your deposit sits is one of the most important checks you can make.

• Your deposit should sit in a regulated trust or escrow account.
• The developer should not be able to access it before settlement.
• The contract should state clearly when it is refunded.
• Never pay a deposit directly to a developer outside a trust account.

The sunset clause

The sunset clause is the deadline by which the project must be completed. If that date passes without completion, the contract can be ended and, in a fair contract, your deposit is returned. The risk is in the detail. Some clauses allow the developer to cancel once the date passes, refund your deposit, and resell the apartment at today's higher price, leaving you with your money back but no home and no gain.

Putting it together

Read as a set, these terms answer one question: if the project slips or fails, do you get your money back, and could the developer profit from cancelling? A buyer-friendly contract holds your deposit in escrow, refunds it cleanly if the sunset date passes, and does not reward the developer for walking away. Have a conveyancer confirm all three before you sign, and use an independent risk signal to judge how likely it is you will ever need to rely on them.