A Sunset Clause is a common condition included within a Contract of Sale when purchasing a property off-the-plan. It’s a common term discussed among friends, but we want to help you understand that this isn’t a ‘bad term’. Many take this as problematic issue when buying. Sunset Clauses are usually included as a way of protecting the interests of both parties when it comes to a sale.
What is a Sunset Clause?
The Sunset Clause refers to the maximum time in which the developer has to finish the project on hand. It’s irrelevant if its a house, townhouse or apartment. The Sunset Clause time frame differs from each project. The larger the development, the longer the Sunset Clause. A large high-rise apartment may need 3-5 years to construct, while a boutique Townhouse project may only need 12 months.
If your property is not finished by this time, you are legally entitled to walk away from your contract and receive your deposit back in full. With lending becoming more challenging for developer’s many Sunset Clauses are being set to 5 years. The bank’s request this to provide themselves with comfort, that the project will be delivered on time. As the bank is funding the project, this condition also needs to satisfy them. The extended time frame allows for any delays the developer may experience including wet weather, council approvals, illness etc.
What happens if the Sunset Clause is surpassed?
It’s not a regular occurrence, but this can certainly happen. If you are really set on moving in or investing into the property, but worried the project won’t finish in time, your conveyancer can correspond with the developer’s solicitor to extend that Sunest Clause. You can draft some legal documents that are counter signed by both the buyer and developer/vendor. With the assistance of a property adviser, they will help you in advance. With good communication, a developer doesn’t want the buyer to rescind the contract so as a buyer you should draw comfort that the build has plenty of time to meet the Sunset Clause.
Where can I find out how long the sunset clause goes for?
If you are wanting to buy off the plan, the sunset clause terms are included in the contract of sale. Your conveyancer or solicitor can review the contract of sale and explain the terms of your agreement. However if you are uncomfortable with the length of the sunset clause, in some circumstances a developer/vendor may be able to reduce it. This should however be looked upon with caution. In the event you proceed with a short sunset clause, the developer/vendor also has the right to rescind the contract. This would be very frustrating if the property increased in value during construction.
If you’d like to learn more about buying off the plan, please don’t hesitate to contact us. We specialise in sourcing brand new and off the plan properties for buyers.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
June 2018
