What is a Sunset Clause?

If you are considering purchasing a property in Australia the following should assist you understand what a “sunset clause” means exactly.

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Terry Loftus, director.

Legal considerations re sunset clauses.

Sunset Clauses. A Sunset Clause in contract protects both the seller and the buyer. The Sunset Clause (in an “off-the-plan” Contract) will usually provide that if the development is not complete and a separate title for the lot is not issued by a certain date (the sunset date), either party may terminate the Contract. This provides certainty to both parties of the period of time which the parties are obligated to be bound by the Contract.

Usually, the developer will insert a sunset date to be certain period after the expected development completion date, such as 6 months after the expected development completion date. This period of leeway allows the developer additional time to complete construction should there be any delays.

The developer will also insert a clause in the contract allowing only the developer to further extend the sunset date should there be events beyond the control of the developer that causes the development to be delayed, such as consistently bad weather, industrial disputes etc.

There have been instances where a developer has cancelled Contracts (where the development has not been completed by the sunset date) and then reissued the Contract at a higher price. If this is of a concern to you, then you may request that the developer extend the sunset date before you sign the contract, or provide to you a right to extend the sunset date should you require it.

It is therefore critical to appoint a solicitor to review your contract before signing to ensure the contract suits your needs not the developers.

[Please note that this is general advice only and should not be a substitute for obtaining legal advice regarding a specific Contract.]

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