Written by: Robert Cartmill, Solicitor & Associate Director
Are you aware of the new amendment passed regarding sunset clauses in an off-the-plan contract?
Sunset clauses in off-the-plan land sale contracts have been refined as of November 14, 2023. The Queensland Government successfully passed the Body Corporate and Community Management and Other Legislation Amendment Bill 2023. This bill introduced modifications to the Land Sales Act 1984 (Qld), specifically focusing on refining the implementation of sunset clauses within off-the-plan land sale contracts. The revisions align Queensland’s legislation with the existing laws in New South Wales and, significantly, apply retrospectively to contracts not yet settled.
What is a sunset clause?
A fundamental concept behind a sunset clause is to establish a specified expiration date or time constraint within the property contract. Should the settlement not occur by the specified date, both parties possess the legal right to terminate the contract.
Regularly incorporated into off-the-plan property sale contracts, this clause establishes the deadline for the developer to complete the project. It explicitly states that if the project isn’t finished by the specified date, both buyer and seller hold the legal right to terminate the contract and in that event the buyer will receive a full refund of their deposit.
The sunset clause affords protection against indefinite delays caused by factors such as industrial disputes, adverse weather conditions, or insufficient funding.
The new amendment
The new legislation restricts the circumstances under which developers can exercise their termination rights. Under the recent amendments, sellers can only use a sunset clause to terminate an off-the-plan contract in the following situations:
- With the written consent of the buyer.
- Pursuant to an order from the Supreme Court.
- In situations prescribed by regulations.
Termination with the buyer’s consent involves providing the buyer with a ‘sunset clause notice’ at least 28 days before the sunset date. This notice must include:
- A statement proposing termination on the sunset date.
- The condition that the seller can only terminate with the buyer’s written consent.
- The requirement for the buyer to respond by the day before the sunset date.
- The seller’s reasons for termination.
Buyers must act reasonably when giving or withholding consent. Failure to respond to the notice results in buyers being deemed to have consented to termination on the sunset date.
The legislation does not mandate the seller to state explicitly in the notice that a lack of response implies consent. It simply requires a statement indicating that the buyer ‘must respond to the notice no later than the day immediately before the sunset date.’
Option to apply to court
If the buyer does not grant consent, the seller must seek approval from the Supreme Court to terminate the contract (also called “rescission”). The Court will grant such an order only if it deems it fair and just. Factors considered include whether the seller acted unreasonably or in bad faith, the property’s appreciation, and the impact of rescission on each buyer.
Should the Court authorise rescission, it may also issue an order for reasonable compensation to the buyer. The seller is responsible for the buyer’s legal costs unless it can demonstrate that the buyer unreasonably withheld consent.
Greenhalgh Pickard’s Property Law team is here to assist you. Call today for tailored advice on your off-the-plan sunset clauses.
The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation.