Has the sun finally set on sunset dates and buying off the plan?
New laws mean that developers selling off the plan must now act
differently in setting sunset dates in contracts and progressing
They must keep track and justify each and every cause of delay
in completing works, and must comply with legislative requirements
should they wish to rely upon sunset clauses to rescind a
We have seen a rising property market in Sydney and conveyancing
has been frantic. With a high demand for brand new properties,
Contracts to buy off the plan have been abundant as we see infill
development and rezoning to create additional space for
developments, generally apartments. Drafting and negotiating
contracts to buy off the plan has been a constant struggle for
certainty and flexibility where the Contract may be entered into up
to three years before completion of the building.
For a purchaser buying off the plan, the risk is that the
Contract cannot be completed until the plan of subdivision is
registered and a new lot or parcel of land has been created. It is
an act of faith on the purchaser's part that the building will
be built as envisaged, and that the price is reasonable.
For developers to obtain funding for their developments, they
need to have entered into enough off the plan Contracts with buyers
in order to satisfy their banks. Banks require pre-sales of off the
plan properties in order for the development to start. Often there
may be unforeseen delays or increased costs in the development
being completed giving rise to rights and opportunities to both
parties as a result of sunset dates.
The position until 2 November 2015 was that if the development
has not been completed with the new lot created by the sunset date
either party had a right to rescind the contract and the purchaser
would be refunded the deposit that they had paid. This has now
changed, as the NSW Government passed amendments to the
Conveyancing Act to protect purchasers. If a vendor is proposing to
rescind any Contract under a sunset date, it must serve each buyer
with a notice at least 28 days before the proposed rescission and
specify the reasons for the delay in creating the lot being
The laws are limited to residential land developments and apply
for any proposed rescission after 2 November 2015, which is
backdated from the date that the laws were passed, even where
contracts had been exchanged a number of years prior to that date.
Residential land is defined in the Conveyancing Act.
The changes also apply to any rescission that might otherwise
automatically arise under the Contract, so that the Contract is
deemed to be amended to require the notice, the vendor's
reasons and the purchaser's consent. The vendor may rescind
after giving the required notice but only if:
The purchaser consents in writing;
or The vendor obtains an order from the Supreme Court that it
or The reasons for the rescission are prescribed in the
regulations. At this time there are no prescribed reasons.
The Supreme Court will take into account the terms of the
contract, the reasons for the delay, whether the vendor has acted
unreasonably, any increase in the value of the property and
anything else it considers relevant. The Purchaser's costs will
generally be borne by the Vendor unless the Purchaser has acted
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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