A sunset clause lets an off-the-plan contract be ended if the plan is not registered, or another set event has not happened, by a set date.
In NSW, a developer cannot use a sunset clause to end an off-the-plan contract by its own decision.
It needs the written consent of every buyer, or an order of the NSW Supreme Court.
What a sunset clause is
An off-the-plan contract is for a lot that does not exist yet. The building or subdivision is still to be finished.
The contract names a sunset event and a sunset date.
- The sunset event is usually the registration of the plan that creates your lot, or the issue of an occupation certificate.
- The sunset date is the last date for that event to happen.
If the event has not happened by that date, the contract can be ended under the sunset clause.
Why the law limits the developer
If property values rise during the build, a developer may gain by ending the contract and selling again at a higher price.
NSW law limits that. A sunset clause cannot end an off-the-plan contract automatically.
Instead, the clause is read as allowing the contract to be ended on or after the sunset date, and only as the law allows.
How a developer can end the contract
A developer can end the contract under a sunset clause only if:
- Every buyer under the contract consents in writing, or
- The NSW Supreme Court makes an order allowing it.
The contract must also require the developer to give each buyer written notice at least 28 days before ending it.
The notice must say why the developer wants to end the contract and why the sunset event has not happened by the sunset date.
Any term of the contract that conflicts with these rules has no effect.
What the Supreme Court looks at
The Court will only allow the developer to end the contract if it is just and fair in all the circumstances. The Court considers:
- The terms of the contract.
- Whether the developer has acted unreasonably or in bad faith.
- The reason the sunset event has not happened.
- The likely date the event will happen.
- Whether the value of the lot has gone up.
- The effect on each buyer.
- Any other matter the Court thinks relevant.
In general, the developer must pay the buyer's legal costs of the court case, unless the developer shows the buyer refused consent unreasonably.
Your rights as a buyer
The limits apply to the developer, not to you.
A buyer does not need court approval to end the contract under a sunset clause, if the contract gives the buyer that right.
If you receive a notice from the developer, do not sign a consent until you have had advice.
Other clauses that end the contract
Some off-the-plan contracts contain other clauses that let the developer end the contract. These are not sunset clauses, and the sunset rules may not apply to them.
We read every termination clause in the contract before you sign.
Where people get caught
Signing a consent too quickly
Once every buyer has consented in writing, the developer can end the contract without a court order.
Not reading the sunset date
The disclosure statement must set out the sunset date. Know it before you sign.
Missing the other termination clauses
A clause that is not a sunset clause may give the developer other rights.
Ignoring a developer's notice
The notice must give at least 28 days. Use that time to get advice.
Common questions
Can the developer cancel my contract and sell for more?
Under a sunset clause, only with your written consent or a Supreme Court order.
How much notice must the developer give?
At least 28 days' written notice, with reasons.
Who pays the costs if the developer goes to court?
In general, the developer pays your costs, unless it shows you refused consent unreasonably.
Received a sunset notice from a developer? Call us before you sign anything. Call (02) 8062 6300.
This article is general information only. It is not legal advice for your situation.