Proposed reforms to the Conveyancing Act 1919 (NSW)
On 23 September 2015, Victor Dominello, the NSW Minister for
Innovation and Better Regulation announced a public consultation on
the use of sunset clauses to terminate off the plan property
NSW has seen an increase in litigation from disgruntled
purchasers who claim their off the plan contracts were unfairly
terminated by developers looking to obtain a higher sales price for
the apartments by taking advantage of sunset clauses in
Sunset clauses are usually contained in contracts for the
purchase of land or strata units off the plan. They allow the
purchaser or the developer to rescind a contract after a certain
date, usually in the event that construction is not finished on
In a campaign promoted by Domain and the Department of Fair
Trading, it was drawn to the NSW Minister's attention that
purchasers have had their contracts rescinded by developers using
the sunset clause, only for the land or apartment to be re-sold on
the same day for a higher price.
It is believed that Mr Dominello will propose reforms to the
Conveyancing Act 1919 (NSW) at the next available session
in Parliament. The new legislation will require a developer to seek
consent from purchasers to rescind a
contract after the sunset date. If the purchaser does not agree,
the developer will need to justify any termination and, if
necessary, apply to the NSW Supreme Court for permission to allow
it to take effect.
At present, the onus is on the purchaser to commence proceedings
if they feel their contract was unjustly terminated and they must
do this out of their own pocket.
The purpose of these reforms is to give purchasers statutory
rights where developers seek to terminate an existing contract and
re-sell at a higher price. The proposed legislation will require a
vendor who unjustly terminates under a sunset clause to pay damages
to the purchaser equal to the difference on the sale price should
the vendor re-sell the property.
Mr Dominello has stated:
"The NSW government is putting developers on notice
that from this day forward if they use a sunset clause for no other
reason than to reap a windfall profit at the expense of the
purchaser, then they do so at their own peril".
Both developers and purchasers need to be aware of these
upcoming changes as NSW tightens its grip on property development
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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