Understanding your off the plan contract: the Sunset Clause explained

The sunset clause is one of the more controversial aspects of purchasing an off the plan apartment or townhouse, but thanks to updated government reforms and increased understanding from purchasers, it can now offer increased peace-of-mind and empowerment when entering into an off the plan contract of sale.

The way recent legislation mandates the clause be used puts further power and control in the hands of buyers in an off the plan purchase, alleviating much of the negative stigma that has formed pertaining to the clause in recent years. 

In a nutshell, the sunset clause is a statement within the contract of sale of on off the plan dwelling which puts a time-frame on the contract’s validity. If construction of the property is not completed and settlement has not taken place by the end date outlined in the clause, both parties are legally entitled to terminate the contract. By law, the buyer would receive their deposit back in full.
 

Positives for buyers 

Each state and territory has specific legislation relating to the enactment of the sunset clause, but in almost all cases it provides the purchaser with the opportunity to legally terminate a contract if the developer misses key deadlines and the construction process runs behind excessively behind schedule. 

Thanks to recent reforms for off the plan contracts in NSW, a developer cannot end the contract via the sunset clause without permission from the Supreme Court, unless the purchaser agrees. Moving forward, the sunset clause will often provide further control to the purchaser in an off the plan sales agreement. 
 

When is it most commonly used?

The sunset clause is not exclusive to off the plan purchases. Often this clause is used when a buyer makes a property purchase conditional on the sale of their current home. A seller commonly chooses to utilise a sunset clause in the contract of sale under these circumstances, so that they maintain the ability to pull out from the deal if the buyer is not able to sell their current home within the time-frame stipulated within the sunset clause. 

In the context of off the plan purchases, a developer may include a sunset clause in order to allow for excessive delays. It is used as a protection for both the developer and the buyer. Commonly, the project is finished well before the date outlined in the clause, but it is put in place if for unforeseen circumstances these delays are unavoidable. 

Thanks to reforms in states across Australia, the stipulation of permission from the Supreme Court in order for the developer to terminate the contract under the sunset clause means that the clause cannot be taken advantage of. 

Buying off the plan can be a great way to create the home you want, and thanks to increased buyer protections, the sunset clause does not have to be an intimidating aspect of the agreement.  
 

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