Watching the Sunset on Your Contract
Posted on 31 October 2022
Maddison Thomson
The Relationship Between Developers and Residential Off the Plan Contracts
The Sunshine Coast has experienced an unprecedented population growth in recent years. This growth has prompted many large-scale property developments across numerous estates on the Sunshine Coast to meet the increasing demand on housing. Prospective buyers are eager to lock down house and land packages in an attempt to enter the property market, often opting to enter into off the plan residential contracts with developers.
Residential off the plan contracts present many benefits to the prospective buyer. This type of Contract allows buyers to lock in land at a fixed market price with the opportunity to settle at a later point in time. This means more time to save towards moving costs, furniture, the home itself and the much anticipated house-warming party.
These contracts are generally conditional upon the land becoming registered with the Department of Natural Resources. As such, a common feature across off the plan residential contracts is the presence of a sunset clause.
What is a Sunset Clause?
A sunset clause is generally a provision that sets a date at which a buyer or a developer can effectively walk away from a contract if the land has not been registered. Put simply, the clause effectively places an expiry date on the contract of sale.
In Queensland, the minimum sunset date is 18 months. However, parties to an off the plan contract can agree to either a shorter or longer period, as necessary.
Sunset clauses are in principle, a way of protecting buyers to ensure the return of their deposit in the event that there are substantial delays to a development.
The Reality of the Sunset Clause
There has been recent attention given to the tactics of developers to use a sunset clause to their advantage, in a fluctuating market that has seen a significant increase in the price of land over the past couple of years.
The harsh reality is that a developer can choose to walk away from a contract if the land has not been registered prior to the expiration of the sunset clause. The developer can then relist the land at an increased value.
The deposit in most cases will refunded to the buyer; however, the buyer has often been locked into the contract for a substantial amount of time and has missed the opportunity to buy elsewhere.
Parfitt & Another v Burrell Avenue Development Pty Ltd [2022] QSC 60
There are currently proceedings before the Supreme Court of Queensland, whereby four purchasers entered into a contract to purchase a block of land in a proposed estate in Eumundi.
The land was not registered prior to the expiry of the sunset clause, and subsequently the developer sought to terminate the contract.
The proceedings have been brought on the basis that the developer engaged in misleading and deceptive conduct and the buyers seek specific performance from the developer to honour the contract.
The buyers allege that they have effectively lost their position on the property market, with the value of the land having increased two-fold.
This case highlights that there can be significant risks associated with entering into a residential off the plan contract which has a sunset clause. It is important that prospective buyers seek professional legal advice surrounding the negotiation and amendment of such clauses.
HOW CAN OMNIA LEGAL ASSIST WITH your property legal needs?
The Property Law team at Omnia Legal are trusted advisors that can assist with reviewing your off the plan residential contract. We will liaise with the parties to ensure that the final contract reflects your key interests and protects your venture into the property market.
Contact Omnia Legal today for your complimentary consultation to discuss your business needs.
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