The Victorian Government has passed new laws that will stop developers using sunset clauses in contracts to exploit buyers purchasing off-the-plan projects.
The Sale of Land Amendment Act 2019 amends the Sale of Land Act 1962 to require developers to obtain the purchaser’s consent, or the permission of the Supreme Court of Victoria, before exercising a sunset clause.
Sunset clauses effectively put a time limit on the contract’s validity, so if a settlement from either party hadn’t taken place by the due date, both were able to walk away from the contract.
Developers could intentionally delay building projects, make use of sunset clauses, and rescind residential off-the-plan property contracts and then re-sell the properties at a higher price.
The new legislation applies retrospectively from 23 August 2018 to protect purchases who have existing residential off-the-plan contracts, or whose contracts may have been rescinded after that date.
As of that date, a developer must have the purchaser’s written consent to legally rescind residential off-the-plan contract under a sunset clause. As of June 4 2019, A vendor can seek an order from the Supreme Court of Victoria to allow them to invoke a sunset clause.
Unless either of these processes have been completed the rescission will not be valid.
The new amendment act is designed to give more protection to buyer and will also:
Strengthen the existing requirement for vendors or real estate agents to disclose material facts about a property, and enable guidelines to detail what a material fact is likely to be (for example, a property’s past history as a clandestine drug laboratory or the site of a homicide).
Prohibit public auctions of land before 1pm on Anzac Day, bringing the industry into line with the standard restricted business hours for the day.
Introduce greater protections for people who purchase options to buy land as part of a land banking scheme, including requiring money paid for options to be held in a trust.
Prohibit certain ‘terms contracts’ and rent-to-buy arrangements, with significant fines and potential jail time for vendors and third-party intermediaries to act as a strong deterrent.
While the new laws on sunset clauses apply from 23 August 2018, all other reforms will be implemented no later than 1 March 2020.