What is a sunset clause?

When purchasing a house which has not yet been built, or “off the plans”, the Agreement for Sale and Purchase typically includes a ‘sunset clause’.

A sunset clause enables the buyer, and sometimes the seller as well, to cancel the contract if a certain event hasn’t occurred by a certain date.  This generally relates to either the construction of the building, or the issue of titles as part of a subdivision. This protects buyers from being in limbo for an endless period of time while waiting for the project to be completed.

However, there has been criticism of sunset clauses being used by developers (vendors) to cancel contracts and re-sell the land and/or property at a higher price, essentially cutting off the buyer.

This risk can be mitigated by purchasers by:

1. Ensuring that the timeframe for the expiry of the sunset clause adequately reflects the time expected for the project to be completed, including contingencies for unexpected delays; and
2. Ensuring that the buyer is the only one entitled to cancel under the sunset clause.

It is very important to seek legal advice to ensure you are fully informed of the risks of signing an agreement to buy ‘off plans’, before you sign any such agreement.  Your legal advisor will be able to assist with negotiating amendments to the agreement to better protect you, if required.  

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Laurie Pallett and Hanifa Kodirova