What is a sunset date?
Any property purchased off-the-plan, whether it be a unit, apartment, house or land package is subject to a Sunset Clause expressed in the Contract. The Sunset Date is the day the developer fulfils the final obligation prior to settlement and registers the plan of subdivision. In essence, if the developer is unable to deliver by the Sunset Date, either party may rescind the Contract, without penalty.
Generally, the statutory period of 18 months is applicable, unless otherwise stipulated in the Contract. In many cases, the date can be up to or exceed 48 months from the date of the Contract. The Sunset Date is not an indication of the length between exchange and completion. It is a condition made by the third party financing the project (banks) to protect their interests should there be any unforeseen delay in completing the building.
The provision of a Sunset Clause is standard practice and not only crucial to the interests of the developer and financial provider. Should the developer not complete in accordance with the stipulated time period, the purchaser is not only entitled to rescind, but re-claim the deposit paid in full. \
When you purchase a property off the plan, whether it’s an apartment unit or a house, you usually buy it before it is has been built. Your contract for sale for these types of purchases will have what is known as a Sunset Date.
What Could Happen On Sunset Date?
The Sunset Date is the day by which the developer needs to fulfil their obligations as described in the contract for sale, for example registering the strata plan with Land and Property. If the developer fails to fulfil the contract terms by the Sunset Date, the buyer usually has the right to rescind the contract and receive a full refund of their deposit paid. This offers the buyer protection against project delays.
However, the sunset clause on a contract for sale can also be used by a developer to rescind or terminate the contract. Some unscrupulous developers activate the sunset clause when they find that they can resell the land or property at a higher price. This creates disappointment and uncertainty for the would-be buyers, who may have been waiting for the completion of their properties for months or years.
Changes to the Sunset Date
To prevent developers from terminating contracts unreasonably, the government has introduced new legislation in New South Wales. Under the Conveyancing Amendment (Sunset Clauses) Act 2015, a seller is required to give notice to all buyers, and all buyers must agree in writing before the seller can terminate a project. If a buyer doesn’t respond, the seller cannot proceed with the termination.
Alternatively, sellers can terminate a contract for sale of an off the plan property if they receive a permission from the Supreme Court.
When considering whether to grant a developer the permission to terminate a project, the Court in NSW takes many factors into account. These factors include:
● The terms in the contract for sale of the off the plan property;
● The reason for the delay;
● Whether the developer has been unreasonable or has acted in bad faith;
● Whether the value of the lot where the property is to be built has increased;
● The effect of the termination on buyers; and
● Other relevant information.
The Court will consider each termination proposal on a case-by-case basis. The proposed law also requires developers to pay all fees and costs that may be incurred with the termination process, unless the Court finds the buyer unreasonably withheld consent to the contract termination.
If you’re considering buying an off the plan property, contact us and we will be happy to guide you throughout the entire process. We have a team of experienced property lawyers who have the necessary skills and expertise to make the conveyancing process run smoothly.
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