In the spotlight: Sunset clauses

Sunset clauses for off the plan contracts are currently in the spotlight as some developers have been using this clause as a way of purposefully delaying construction in order to cancel off the plan contracts before selling the property at a higher price to another purchaser.

Victor Dominello, Minister for Innovation and Better Regulation, previously announced a public consultation on the use of sunset clauses in off the plan property contracts, after some NSW purchasers have reportedly had their contracts cancelled by developers using the sunset clause (after construction has gone outside the schedule), only for the property to be re-sold for a higher price.

To understand the extent of the problem, Land and Property Information and NSW Fair Trading commenced a public consultation. It has been reported that 639 people responded to the three week public consultation which closed on 14 October where industry groups also contributed.

Following on from the consultation, the NSW Government announced that it will introduce new laws this month with the intention of forcing developers to justify any sunset clause termination in off the plan contracts. If the purchaser does not provide their consent to the termination then a developer will have to apply to the Supreme Court for leave to terminate the contract.

The new laws will not only apply to new contracts but to contracts currently on foot.

Check back here for an overview of the new laws once they are announced.

If you have any issues in relation to sunset clauses or would like to discuss what the new laws may mean for you, please contact our Property team in Parramatta and Norwest.