In legal terms, a sunset clause is a condition included in a contract that says if a specified event hasn’t occurred by a certain date, then either one or both parties (the purchaser and/or the vendor) can cancel the contract on giving written notice to the other.
What is the purpose of the sunset clause?
The purpose of this clause is to provide the parties with certainty that the agreement can be brought to an end should the building not be completed within a certain timeframe for example, if the title has not been issued within two years of the date of the contract, then either the purchaser, vendor or even both parties may cancel the contract.
Who is protected by the sunset clause vendor or purchaser?
- If an unexpected event occurs which significantly slows down or halts the development altogether, the purchaser has an ability to cancel the contract and look to find something else rather than waiting around for what could potentially be a significant period of time.
- Protecting the purchaser against the vendor not meeting its obligations by the sunset date, then canceling the contract and selling the property to another buyer for a higher price.
Can the vendor go over time on purpose, as the house has gone up in value and they can get more money by marketing it again?
For the most part, sunset clauses in a new build contract will only allow for the purchaser to cancel, however, in some circumstances, an ability for the vendor to also cancel is provided for.
Advice to other first-time buyers is to be aware of sunset clauses shorter than one-and-a-half, to two years. There have been instances where developers have used sunset clauses to escape their obligations. Buyers, should insist the removal of any Sunset Clause favouring the developer.
More Advice?
Buy from reputable developers:
- What is the developer’s track record?
- How good is the quality of their work?
- Have their properties sold for more once completed?
- A higher price for the completed property versus off-plan is an indicator of quality.
Use experienced off-plan solicitors.
Delete the Sunset clause – The Sunset Clause is meant to allow only the buyer to exit the contract in the event of unacceptable delays. It is not, and should not, be used to allow developers to escape their obligations.
The importance of pre-settlement inspection
- Inspection should take place before the settlement day.
- Take a copy of the sale and purchase agreement with you to the pre-settlement inspection so you can refer to details of any conditions and chattels.
- Check that the property is in the same condition as it was when you signed the sale and purchase agreement.
- Make sure that all chattels listed on the agreement are in the property and are in good working order (unless it has been agreed and documented otherwise).
- It is important to ensure the property and chattels are in the same condition they were when the Agreement to buy the property was signed and it is essential that you keep your lawyer informed of any concerns you have as a result of this inspection immediately.
- It is also important to consider more than just the physical appearance of the property.
Ensure that you test all necessary features to ensure that everything is in working order-
- Plumbing
- Heating, Cooling, Amenities
- Appliances
- Doors and Windows
- Attic, Roof space
What to do if the condition is not the same
The Vendors obligation is to keep the property in the same condition as it was at the time the agreement was entered into. So if any damage occurs to the property between entering into the agreement and signing the agreement, the Vendor is required to fix the damage.
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about the author
Stephanie Havea
REGISTERED LEGAL EXECUTIVE
Stephanie completed a Bachelor of Business Studies and worked for many years in customer service, before achieving her Legal Executive qualification and moving into practice as a conveyancing specialist
