Useful Tips

Split contracts and multi-unit developments

Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic.  Contact us to discuss your individual circumstances.


A split contract may occur when a developer sells land lots within a multi-unit development to individual purchasers.  These individuals then must finance both the land purchase and the subsequent costs to build their own townhouse or unit.

If one or more of the following applies then it may be treated by a lender or the valuation firm as a split contract:

  •       All of the buildings must be built to specifications within the development plan and as required by the developer.
  •       The buildings have common walls.
  •       The buildings are built on common slab(s).
  •       The developer will complete common driveways, shared services & landscaping.
  •       Vacant land lots can’t be sold without developer’s consent.
  •       The developer places restrictions on selling the land including the sale price if sold back to the developer.
  •       The developer requires the use of their nominated builder for every building.
  •       Construction draws are higher than standard at the beginning (up front loaded).
  •       Co-reliance on all dwellings being completed at the same time.

Developers would normally obtain specific development finance to construct all of the buildings and then settle the sale on the finished products, but split contracts enable them to outsource the funding costs & risks to the individual purchasers.

Why residential lending banks don’t accept them:

  •       The completion of the development relies on both the developer and builder remaining in operation.
  •       The customer’s risk is higher as the value and saleability of their property relies on the whole development being completed.
  •       Valuers consider that the individual land lot is encumbered by the development scheme so isn’t saleable as stand-alone vacant land.  In the event of a loan default the lender is restricted in it’s capacity to sell the land on the open market.

Things to consider:

  •      Change your land & build contract to an off-the-plan contract.  The developer will then fund the construction process and you can settle the full purchase price once the building is complete.