Sunset Clauses
Be aware of sunset clauses, particularly if you are buying an apartment. This is a very tricky area. If you are entering into an off-the-plan contract it must come to an end at some specified time. The sunset clause stipulates the date this occurs. If settlement can’t occur at the time the sunset clause expires, either party has the right to terminate the contract and any deposit moneys (plus interest) will be returned.
This is not a straightforward process, and many court cases result from sunset clauses. In some cases the vendor has the right to terminate a contract, but at other times this is not the case; the same thing goes for the purchaser. If a dispute arises, the outcome is determined by the exact wording of the clauses and the specific circumstances surrounding the case.
Because of sunset clauses and other related issues, you would be ill-advised to sign an off-the-plan contract without first consulting a lawyer, who can step you through any difficult issues, help you to understand your obligations and point out any traps.
I heard of one case where prices had rsien substantially since contrustion began, so the company deliberately slowed down things so that they went over the sunset clause, enabling them to cancel the original contracts and resell the properties at a much higher price.
On a similar note there were also cases when vendors used the finance clause date absolutely to do the same thing when delays in securing finance occured.
I am sure given the different market we are now in that there situations are less likely in todays climate.
Sunset clause – A legal clause giving a final date after which no remedy may be sought, regardless of the grounds of complaint.
“Be aware of sunset clauses, particularly if you are buying an apartment.“
Sunset clauses are common and more than often a provision intended to protect both/all parties interests.
“many court cases result from sunset clauses.“
Not necessarily correct given the fact that there is a sunset clause or other exit provision in most contracts.
Litigation is a result of not having the contract reviewed by a “qualified” lawyer. Or people ignoring legal advice.
If a sunset clause – or other exit provision, is not acceptable, do not sign the contract. The same applies to any condition of contract.
“so the company deliberately slowed down things so that they went over the sunset clause, enabling them to cancel the original contracts“
What development company?
A common provision any qualified lawyer will require before allowing a client to sign is the date of completion. If missed the development company is liable.
This has actually happened to me. We found out too late that our lawyer was not good enough, and the developer did indeed slow down the earthworks on the land subdivision to pass the sunset clause date.
We purchased 10 lots off the plan and they increased in value 30k each in that time.
There doesn’t seem to be much you can do though in though in those situations, as in a hot market (such as last year) if you try make the conditions on the contract in your favour for this type of situation, the developer will just sell to someone else.
As for taking the developer to court, it sounds good in theory, but we found the legal bills and time wasted would not be worth the exercise.
The developer was also a prominent Brisbane lawyer who I would love to name here but I would probably get sued so no chance of that.
On the other side of the coin, if values dropped I’m sure we all wouldn’t hestitate to use the sunset clause to get out of the purchase.
Cheers
Brendon
Acute Mortgage Reductions
“Better Finance for More Homes Sooner”
As you said.. “We found out too late that our lawyer was not good enough”.
If you did have an experienced and/or competent lawyer you would likely of had legal grounds to ensure the transaction went as intended – if the developer clearly intervened with the intention of terminating the Agreement.
It is also likely that the developer would have been forced to cover your legal costs as a result of his/her conduct.
Yes in the ideal world that would be great. The problem is no matter how good your lawyer is, there is no guarentee you will win the case so it is a punt, and you could potentially waste large amounts on legal bills and still lose.
There were many other buyers in this subdivision who attempted to sue the developer and all pulled out after a few months as the legal bills were mounting.
Brendon
Acute Mortgage Reductions
“Better Finance for More Homes Sooner”
“no matter how good your lawyer is, there is no guarentee you will win the case so it is a punt”
My point being.. it is very rare that legal action transpires from a sunset clause if the provision and agreement are properly drafted in the first instance.
I am not referring to your subdivision, rather the importance of using qualified legal counsel in general before executing any purchase agreement.
NAH, i have clients who have signed contracts and despite huge pressure from developers have capitalised significantly on vacant land – it aint been easy – the time line is >12 months – good legal team from day one i say.
I am not referring to your subdivision, rather the importance of using qualified legal counsel in general before executing any purchase agreement.
Absolutely, paying for a top lawyer is essential. Like most things in life you get what you pay for, so it’s always worth paying top dollar for the best.
In our situation though, it wouldn’t have made much difference. In a hot market, you take the contract the developer’s lawyers draw up or you buy elsewhere because if you don’t buy it, someone else will.
Brendon
Acute Mortgage Reductions
“Better Finance for More Homes Sooner”
Quick question, can a person who bought an off the plan apartment (2nd investment) via $1000 deposit and needs the remainder 5% next month (feb 2017) and have already signed the contract with the lawyer back in october 2016. Can he cancel/terminate the contract due to change in circumstance to his financial hardship and he wont be able to make the 5% deposit cos of his 1st investment property cashflow and has been delayed due to tenancy.
So can he cancel the contract or not possible?
Thank you in advance.
Zen
This reply was modified 7 years, 10 months ago by zen.
Happy New Years PI Team!!!
Quick question, can a person who bought an off the plan apartment (2nd investment) via $1000 deposit and needs the remainder 5% next month (feb 2017) and have already signed the contract with the lawyer back in october 2016. Can he cancel/terminate the contract due to change in circumstance to his financial hardship and he wont be able to make the 5% deposit cos of his 1st investment property cashflow and has been delayed due to tenancy.
So can he cancel the contract or not possible?
Thank you in advance.
Zen
Generally not.
But the contract may be defective in some way which could allow this. Best to seek legal advice.