There are two terms you should be familiar with if you are planning to purchase an off-the-plan house, apartment, or townhouse: off the plan and sunset date. An off the plan essentially means you are signing a contract to buy that property before it is built. As the purchaser of an off the plan, you can view the developer's plans, designs, and renders, but not actually see a physical building.

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In an off the plan contract, there is a date in which the developer must deliver the property to the buyer. This is called the 'sunset date' where the developer must fulfil its final obligations prior to settlement and register subdivision plans by this day. In the case where a developer fails to complete the property by the sunset date, the sunset clause allows the buyer to terminate the contract without any penalty. At the same time, the sunset clause allows the developer to cancel the contract without a penalty if the property is not finished by the sunset date. Therefore, the sunset clause exists to protect both you and the developer.

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Due to the recent property boom, developers have abused the sunset provision by deliberately delaying the completion of the building and registration of title by the sunset date. This allows them to resell the property at a higher market price. As a buyer, you enter an off the plan arrangement to lock in the property price in expectation of an increase in the property value. A developer can destroy this expectation by relying on the sunset clause. When this happens, you would lose your position in the market despite the deposit being refunded back to you. This is because the refunded money will no longer be sufficient to buy an equivalent property due to the surge in house prices.

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A relevant example was what happened in Gold Coast where multiple buyers of off the plan properties of the Hillview Estate on Pitta Street signed contracts and paid deposits in 2020. Since signing the contract, buyers engaged builders to construct their home, conducted soil tests, purchased furniture, and engaged pool builders. The properties were expected to be ready by March 2022. However, Metacap Developments unfairly terminated the contracts by relying on the sunset clause.

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Recently, in NSW, legislative changes were made to section 66ZL of the Conveyancing Act 1919 (NSW) to address this unfair practice of developers. The new provision of the law requires buyers to consent in writing to the rescission of a contract or alternatively, the developer must obtain an order of the Supreme Court to rescind the contract. In either case, this regulatory change prevents fraudulent developers from rescinding contracts using the sunset clause to make windfall profits.

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Just like NSW, Queensland is likely to introduce new changes into the law to address this issue. According to Queensland Attorney-General, Shannon Fentiman, Queensland's property rules is undergoing comprehensive review to address this issue.

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Until the change to the law is introduced, please seek legal advice when purchasing an off-the-plan property.

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DISCLAIMER

This article does not create a Client/Attorney relationship neither is it a legal advice. The information contained in this article is for information purposes only. Readers are advised to seek from qualified Legal Practitioners, legal counselling to any questions or concerns arising from their specific factual situation. You can reach Solomons Legal at info@solomonslegal.com.au or +61 7 3117 9433 and our team will be happy to assist and advise you with your house purchase process.

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