An off the plan contract is one for the sale of a piece of land
that does not have a separate title at the time the contract is
entered into. These contracts are usually used to presell land lots
or strata units before building can commence. Normally a buyer will
pay a deposit while waiting for the developer to complete
registration of the land before the contract can be completed.
What is a 'sunset clause'?
Sunset clauses allow these kind of 'off the plan
contracts' to be terminated in the event that the development
or registration isn't finalised. It is a clause in the contract
that will rescind the agreement if the registration is not
finalised by the 'sunset date'. The date is usually
considered the latest date by which the registration will be
Why should I care about this?
On 17 November 2015 the NSW Government passed the Conveyancing
Amendment (Sunset Clauses) Act 2015 to provide further protection
for off the plan buyers. You might find yourself buying off the
plan one day, and you should know how these changes might affect
Were bad things happening under the old legislation?
There were concerns that some developers were using 'sunset
clauses' as a way of terminating an off the plan contract in
order to line their own pockets. There had been reports of
developers delaying projects so that this clause could be activated
giving them an opportunity to sell at a higher price should the
market be on the improve which meant buyers would potentially lose
all of their legal and conveyancing expenses.
What are the key changes?
A new section is now in the Conveyancing Act 1919 that aims to
prevent developers from unreasonably rescinding a contract under a
sunset date clause. A developer must now give a buyer 28 days
notice prior to rescinding under a sunset clause and must give
reasons why. Now the developer will only be able to successfully
rescind a contract if they have written consent from the buyers, an
order from the Supreme Court permitting rescission or the reason
for the rescission comes within a category permitted by regulation
(however no regulations have been made yet).
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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