Buying off the plan means purchasing a property that has not yet been built. As a result, the contract usually does not include a fixed settlement date. Instead, it provides an estimated timeframe that depends on construction and regulatory approvals.
What is a sunset date?
A sunset date is the final date set in the contract for a developer to complete the project. In practical terms, it sets the deadline for registration of the plan of subdivision or the issue of an occupancy permit.
Once the plan is registered or the occupancy permit is issued, the settlement date is triggered. Settlement usually occurs 14 to 21 days after the buyer receives notice of registration or issue.
If the developer does not complete by the sunset date, either party may terminate the contract. In most cases, the deposit is refunded to the purchaser.
Sunset clauses protect developers when delays occur. These delays may include planning approvals, legislative changes, supply shortages, or adverse weather conditions.
However, in some cases, developers have used sunset clauses unfairly. Some have delayed completion to achieve a higher sale price. This practice can leave buyers without the benefit of their original contract and with limited legal remedies.
The Sale of Land Amendment Act 2019 (Vic) addresses this issue. It now restricts developers from relying on sunset clauses to terminate contracts unfairly.
Developers must obtain written consent from the purchaser or seek Supreme Court approval before ending a contract under a sunset clause.
How do sunset law provisions work?
The Act amends the Sale of Land Act 1962 (Vic) and regulates how sunset clauses operate in off-the-plan residential contracts.
A sunset clause allows a contract to end if the plan of subdivision is not registered or the occupancy permit is not issued by the sunset date.
A developer can only rescind a contract if all of the following apply:
- the contract includes a sunset clause allowing rescission;
- the plan or occupancy permit has not been issued by the sunset date;
- the developer gives at least 28 days’ written notice to the purchaser.
The notice must explain the reason for the delay. It must also state that the purchaser is not required to agree to the termination.
If the purchaser does not consent, the developer may apply to the Supreme Court to end the contract. The Court will only approve the request if it considers the outcome just and equitable.
In making its decision, the Court considers:
- the terms of the contract;
- whether the developer acted in bad faith or unreasonably;
- the reason for the delay and expected completion date;
- any increase in property value;
- the impact on the purchaser;
- any other relevant factors.
Key takeaways
Developers should ensure their contracts comply with sunset clause laws. Contracts must also include required statutory warnings. Significant penalties may apply for non-compliance.
Purchasers should seek legal advice if a developer tries to terminate a contract under a sunset clause.
This article provides general information only. You should obtain legal advice for your specific circumstances.
If you or someone you know wants more information or needs help or advice, please contact us on (03) 9422 5439 or email [email protected].