Developer tries to terminate off-the-plan sale to cash in on soaring property prices – which case won?
What is a “sunset clause” in a property sale contract?
Common in the contract for most off-the-plan real estate sales is what’s known as a “sunset clause”; a clause that allows either side to terminate the contract if certain conditions have not been met by a specified “sunset date”.
In recent years, there had been a growing trend whereby unscrupulous developers had deliberately delayed the completion of a project, invoked the sunset clause to terminate a contract signed months or even years earlier at a lower sale price, quickly completed the project and then relisted the property to take advantage of increased market values.
Following complaints from disgruntled buyers of off-the-plan lots, in November 2015 the NSW government introduced new laws that required developers to give buyers 28 days’ notice of their intention to terminate a contract under a sunset clause and their reasons why. If a buyer wasn’t satisfied, the developer would have to apply to the Supreme Court for an order to terminate.
Test case heard by Supreme Court under new law
And so it was in January 2016 that the developer of a residential project in Hurstville, NSW, brought an application before the court to terminate a number of property contracts that had been made with off-the-plan buyers two years earlier. The contracts with these buyers had included a sunset clause permitting the developer to terminate if, despite its reasonable endeavours, it had not been able to register the strata plan for the property by 31 December 2015. No strata plan had been registered by this sunset date.