When buying “off the plan”, purchasers should be aware of the risks associated with their purchase.  One of which is that an agreement to exchange Contracts will not always result in a settlement.

Contracts for Sale for “off the plan” property always include a Sunset Clause.  Sunset Clauses provide a date (the Sunset Date) by which the construction and registration of the plan of subdivision are to be completed.

If finance or development consent cannot be obtained or the works are not completed or the subdivision plan is not registered by the Sunset Date then the vendor (usually a developer) may rescind the Contract.  The purchaser will be refunded their deposit, receive no other compensation and no further legal obligations will exist between the parties.

Recently in NSW there have been several instances where developers have manipulated circumstances to take advantage of Sunset Clauses so they can rescind the Contract and on sell the property for a higher price.  Purchasers have been left without a property and without a remedy after waiting for numerous months or years and being out of pocket of their deposit money since the date of exchange of Contracts.


The NSW Parliament introduced the Conveyancing Amendment (Sunset Clauses) Bill 2015 to combat this issue.  The Bill was introduced on 10 November 2015 and assented to on 24 November 2015.

Under the amendments, a vendor may only rescind a Contract if the property has not been completed by the Sunset Date if:

  1. The purchaser has been served with a written notice to rescind by the vendor at least 28 days prior to the proposed rescission, and the purchaser has consented in writing to the rescission;
  2. The vendor has obtained an order from the NSW Supreme Court that the rescission under a sunset clause is just and equitable as per the legislation; or
  3. The vendor is able to rescind the Contract as per the regulations.

It should be noted that these amendments do not limit any existing right a purchaser may have to rescind a Contract for an “off the plan” purchase (although it is rare for developers to allow purchasers to have the benefit of Sunset Clauses) and relates to such existing Contracts whether entered into before, on or after its commencement.

Furthermore, the Bill contains provision for a retrospective application.  Therefore, its provisions apply to the rescission by vendors of “off the plan” Contracts on or after 2 November 2015.

Any rescission made by a vendor at this time must therefore comply with the vendor’s obligations provided under the Bill.

Time will tell whether or not the amendments will fulfil their purpose and will provide further protection for purchasers wishing to enter into “off the plan” Contracts for Sale or whether developers will find some other way to recover the current value of properties that were sold at lower prices years earlier “off the plan”.

Each developer’s Contract is different.  Most give the vendor several “outs” and the ability to significantly alter the plans.  No doubt each case will turn on its own specific facts.

Sunset Dates are only one of the many problems with “off the plan” purchasers.  If you are contemplating such a purchase we strongly recommend you obtain comprehensive expert legal advice first.

For more information contact Anthony Gavan on a.gavan@pigott.com.au  Brent Wilson on b.wilson@pigott.com.au or Victoria Balis on v.balis@pigott.com.au


This article is intended to provide general information in summary form on a legal topic, current at the time of publication. The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.