Commercial Property Blog

Legal Tips and Traps

Off-the-plan buyers: You are safer than you think!

Posted by Dean Claughton on 27 Nov 2015

What is an ‘off the plan’ contract’?

An off the plan contract is one for the sale of a piece of land that does not have a separate title at the time the contract is entered into. These contracts are usually used to presell land lots or strata units before building can commence. Normally a buyer will pay a deposit while waiting for the developer to complete registration of the land before the contract can be completed.

What is a ‘sunset clause’?

Sunset clauses allow these kind of ‘off the plan contracts’ to be terminated in the event that the development or registration isn’t finalised. It is a clause in the contract that will rescind the agreement if the registration is not finalised by the ‘sunset date’. The date is usually considered the latest date by which the registration will be complete.

Why should I care about this?

On 17 November 2015 the NSW Government passed the Conveyancing Amendment (Sunset Clauses) Act 2015 to provide further protection for off the plan buyers. You might find yourself buying off the plan one day, and you should know how these changes might affect you.

Were bad things happening under the old legislation?

There were concerns that some developers were using ‘sunset clauses’ as a way of terminating an off the plan contract in order to line their own pockets. There had been reports of developers delaying projects so that this clause could be activated giving them an opportunity to sell at a higher price should the market be on the improve which meant buyers would potentially lose all of their legal and conveyancing expenses.

What are the key changes?

A new section is now in the Conveyancing Act 1919 that aims to prevent developers from unreasonably rescinding a contract under a sunset date clause. A developer must now give a buyer 28 days notice prior to rescinding under a sunset clause and must give reasons why. Now the developer will only be able to successfully rescind a contract if they have written consent from the buyers, an order from the Supreme Court permitting rescission or the reason for the rescission comes within a category permitted by regulation (however no regulations have been made yet).

Where to from here?

Rest at ease, knowing your next off the plan buy will be more secure than ever before. For added security and knowledge on sunset clauses, and the drafting of off the plan contracts, please do not hesitate to contact: