Cordato Partners, Business Lawyers, Property Lawyers, Tourism Lawyers
 
 

Are you buying an off the plan apartment?
Keep an eye on the sunset date

 

Buying an apartment off the plan is like buying a pizza - you need to wait until it is ready.

The purchase contract will contain a sunset clause, which will normally give the developer two or more years to build the apartment. If the building is not completed by the sunset date, then the sunset clause will give the right to the vendor and to the purchaser to terminate the sale contract.

In the Sydney property market, the sale price in a contract entered into 2 years ago looks like a complete bargain compared with today’s value. Is it possible that a property developer might take advantage of the sunset clause, and take their time in building? And is it possible that once the sunset date has passed, to terminate (the legal term is rescind) the sales contract and re-sell the apartment at a higher price?

After receiving many complaints about developers who have used sunset clauses to terminate contracts in this way, leaving purchasers with only their deposit back and being unable to afford a replacement property because the property market had risen, the NSW Government has passed new laws to limit the use of sunset clauses by property developers in off the plan sales.

Under the new laws, a property developer can no longer use this ‘out’ to rescind the purchase contract, as from 2 November 2015, without the purchaser’s permission.

If the property developer wants to argue that the purchaser has unreasonably refused permission, then they must apply to the Supreme Court for permission to rescind. To obtain permission, the property developer bears the onus of proof to demonstrate that it would not be unfair to rescind the contract.

As a result, the new laws make it difficult for property developers to use sunset clauses to get out of an off the plan contract.

My advice? If you are purchasing off the plan, take a good look at the sunset date in the contract. If you are yet to sign, make sure that it is 3 years minimum. If you have already signed, check when the sunset date will be and monitor the progress of the building work.

For more information Click Here




© Copyright 2018 Cordato Partners