Sunset Clauses in Off the Plan Contracts
Vendors are no longer able to rescind off the plan contracts automatically under sunset clauses
The Conveyancing Amendment (Sunset Clauses) Act 2015 (Act) was passed by the New South Wales Government on 17 November 2015. The Act creates a new Division 10 of the Conveyancing Act 1919 (Conveyancing Act).
Under the new division of the Conveyancing Act, any vendor proposing to rescind an off the plan contract for the sale of a residential lot under a sunset clause, on or after 2 November 2015, must now serve written notice on each purchaser under the contract, at least 28 days before the date of the proposed rescission. Such notice must state:
- details of why the vendor is proposing to rescind the contract; and
- the reasons for the delay in the creation of the subject lot.
Further, under the new changes a vendor will now only be able to rescind an off the plan contract under a sunset clause (if the subject lot has not been created by the sunset date), if:
- each purchaser provides consent in writing to the vendor's proposed rescission; or
- the vendor has obtained an order from the Supreme Court allowing the vendor to rescind the contract; or
- the rescission is permitted under the regulations to the Act. (No regulations have been created as yet).
The Act has retrospective effective, with the above changes applying to any vendor purporting to rescind an off the plan contract under a sunset clause on or after 2 November 2015.
The Act has been implemented in an aim to stop developers and vendors from being able to deliberately rescind off the plan contracts under sunset clauses with the intention to immediately resell the property for a superior price in an inflated market.
The Act does not apply to a purchaser who may still exercise any right to rescind an off the plan contract under a sunset clause.
Vendors and developers should make themselves aware of the changes under the Act and should note that it is not possible to contract out of the new provisions. Vendors should consider what changes need to be made to their standard special conditions for off the plan contracts in light of the changes.
If you have any questions in relation to the above changes or in relation to off the plan contracts in general please contact Craig Munter, Michelle Barraclough or another member of our property team on 02 9233 7788.