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Sunset Date Clawback under proposed reforms to Sale of Land Act

Reforms to the Sale of Land Act 1962 may result in sunset clauses in off-the-plan Contracts of Sale being unable to be invoked without a purchaser’s consent or Court order.

What is a Sunset Date?

The ‘Sunset Date’ is a colloquial phrase; it is the latest date by which the plan of subdivision must be registered.

What is the current position?

  • If the plan of subdivision is not registered by the sunset date, a Purchaser may rescind the Contract of Sale provided notice is given to the Vendor after the expiration of the sunset date but before the registration of the plan of subdivision
  • If the Contract of Sale so provides, the Vendor may also have the right to end the Contract of Sale pursuant to the sunset clause
  • The sunset date is taken to be 18 months from the date of the prescribed Contract of Sale or such other period as specified in the Contract of Sale

Summary of proposed reforms

  • Restrict the use of sunset clauses in residential off-the-plan Contracts of Sale
  • Restrict the circumstances in which a vendor can exercise a right to rescind a residential off-the-plan Contract of Sale under a sunset clause – purchaser’s consent must be obtained or a Court order
  • Vendor to provide written notice to purchaser setting out:
    • the reason why the vendor is proposing to rescind the Contract of Sale; and
    • the reason for the delay in registering the plan of subdivision or the issuing of the occupancy permit, and
    • that the purchaser is not obliged to consent to the proposed rescission
  • No contracting out of statutory provisions
  • Define sunset clause to specify that a residential off-the-plan contract can only be rescinded in one of two cases; if the plan of subdivision is not registered by the sunset date or the occupancy permit has not been issued under the Building Act 1993 by the sunset date
  • Define sunset date to make clear that it is the date that is either set out in the residential off-the-plan Contract of Sale or, a date that is an extension of the prescribed date that is determined in accordance with the terms of the contract
  • Supreme Court only to make order to rescind contract without purchaser’s consent if the Court is satisfied that such decision is “just and equitable” in all the circumstances
  • Penalties to vendors who fail to include relevant warnings in prescribed contracts
  • Consequential matters

How does this affect Property Developers / Vendors?

  • Now “locked in” to off-the-plan Contracts of Sale indefinitely even if significant delays encountered
  • No longer able to unilaterally end a Contract of Sale in circumstances where a project is not completed by the sunset date
  • Where the Purchaser’s consent cannot be obtained, the Contract of Sale cannot be terminated unless by Court order
  • May face hardship if a Contract of Sale cannot be ended when a delay may be outside of their control for example, delays by the registered mortgagee, the Municipal Authority, the State Government, the Land Titles Office etc.
  • Not able to recover losses by invoking sunset clause in circumstances where delays have cost the Property Developers significant sums of money

How does this affect Purchasers?

  • Improved consumer protections
  • Property Developers no longer able to take advantage of sunset clauses
  • Purchasers have a say on whether to continue with an off-the-plan Contract of Sale in circumstances where a development is delayed
  • Purchasers must consent to the Contract of Sale being terminated where a sunset date has lapsed

If the Bill is passed, some provisions will retrospectively take effect in relation to Contracts of Sale entered into from 23 August 2018.

Our team at Burke & Associates are experienced in acting for purchasers of off-the-plan properties and property developers in all facets of Property Development.

Please contact our Property & Development Team should you have any queries.

Contacts

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

George Hanger

Associate

George Hanger

Associate
LL.B BA
George was admitted to legal practice in May 2015 after completing a Bachelor of Arts at the University of Melbourne and a Bachelor of Laws at Monash University.

Emma Dickens

Paralegal

Emma Dickens

Paralegal
Emma previously completed a Bachelor of Legal and Dispute studies at RMIT University in 2015.

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