What is a sunset clause in off-the-plan contracts?

A sunset clause sounds like a cocktail you would enjoy on a tropical holiday, but a sunset clause is an essential term of off-the-plan contracts that requires close scrutiny.

A sunset clause generally provides a specific timeframe within which a vendor must satisfy a range of preconditions before being able to require settlement of a contract. There is no legislatively prescribed sunset date for off-the-plan contracts that applies in New South Wales. Parties are required to rely on contractual sunset dates.

In off-the-plan purchases, the preconditions to settlement will generally be the provision of an occupation certificate and registration of the plan of subdivision. If the vendor fails to satisfy these preconditions, the sunset clause will generally provide buyers the right to rescind the contract and receive a refund of their deposit.

Not all sunset date clauses are the same. Contracts will often provide the vendor the right to extend the sunset date where there have been delays beyond the control of the vendor. Such clauses need to be carefully reviewed to ensure there are appropriate limits to the number and length of such extensions. Otherwise, the purchaser may find themselves bound to a contract for substantially longer than first anticipated.

If you are looking at entering a contract for an off-the-plan development or your development is being affected by a sunset clause, reach out to speak with a highly experienced and friendly conveyancing team. At Kells we take great pride and care in providing a premium service and quality advice for a fixed price.

Photo 17947791 | Sunset © Shestakov | Dreamstime.com