In brief - Buyers aggrieved after purchase contracts
terminated under sunset date right
The current calls from apartment buyers for legislation to be
introduced allowing only purchasers to terminate an off-the-plan
contract if completion of a building is delayed are symptomatic of
an overheated property market.
Court upholds developer's right to terminate
off-the-plan sale contracts
Wang v Kaymet Corporation Pty Ltd
 NSWSC 1459, the court upheld the developer's right
to terminate 34 off-the-plan sale contracts on the basis that the
vendor had failed to deliver a registered strata building to the
purchasers by a "sunset date" as defined in the
The first sale contract was entered into in November 2009. The
last contract to be terminated was rescinded in April 2014.
Developer used reasonable endeavours to complete
development before sunset date
The purchasers were understandably upset because, as reported in
the newspapers, the market value of the apartments had appreciated
considerably between 2009 and 2014. In court, they argued that the
developer had unjustly enriched itself at their expense, and
therefore should not have been entitled exercise its contract right
to terminate the contract.
This argument was not accepted by the court, which found on the
basis of the (very substantial) evidence presented that the
developer had not deliberately delayed the project in order to take
advantage of the sunset date right; and in fact had used reasonable
endeavours to complete the development before the sunset date.
Off-the-plan purchasers lobbying for changes in
Using this and other recent similar instances as their basis of
argument, disaffected purchasers have made calls through the media
to "reform" the law by introducing legislation such as
allowing only purchasers to terminate an off-the-plan sale contract
if completion of a building is delayed; and requiring a developer
who terminates a sale under a sunset date right and then resells
the same apartment to pay the first purchaser damages equal to any
increase in contract price.
We would hope that the government not proceed with such
legislation for the following reasons.
Buyer approach to termination of contracts fluctuates
with market highs and lows
The complaints now being reported are very much the product of
an overheated Sydney property market. The injustice cited is that
developers are getting a profit margin that the disappointed
purchasers want, being a profit margin that neither party
anticipated when the contract was entered into.
If (as will happen one day) the market falls, the current crop
of disappointed purchaser stories will be replaced with stories of
purchasers looking for any possible technicality to escape their
Legislation which brands one party to a contract as the only
person who could ever act unfairly and the other party as the only
person who could ever be victimised should never be passed without
long and serious debate.
Should government introduce legislation denying
developers right to terminate in these circumstances?
When Sydney last had a seriously overheated property market, the
same purchaser complaints abounded and the same type of court cases
were fought out. In those cases, the courts consistently denied
developers the right to terminate contracts for failure to complete
by a sunset date if, on the evidence, it could be shown that the
developers had deliberately delayed completion in order to seek to
take advantage of this right.
This fundamental principle again underlies the court's
decision in Wang v Kaymet. Why is this principle now not
sufficient to protect consumers against developers acting
Disputes between developers and buyers could be heard
in a cheaper forum
If the government's concern is that it is unfair to force
purchasers to bear the cost of having to take a developer to court
to challenge the reasonableness of exercise of a termination right,
isn't the answer simply to transfer the hearing of such
disputes to a cheaper forum - perhaps such as the administrative
tribunals already set up in each state to hear and determine
consumer complaints against businesses?
The opinions expressed in this article are those of the
Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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