What’s So Interesting About Sunset Clause? What is Sunset Clause?

Understanding Sunset Clause

If you’re considering buying property, especially off-the-plan, then you need to be familiar with the term ‘Sunset Clause’. Today, we’re going to delve into what this means, its implications, and how you can use it to your advantage.

A Sunset Clause is a statement in a contract of sale that sets a time limit on the contract’s validity. If the settlement doesn’t happen by the date outlined in this clause, both parties can legally back out of the contract. For the buyer, this means getting the deposit back in full.

Sunset Clauses are commonly used in two situations.

Firstly, in off-the-plan property exchanges. Here, the clause sets the date by which the developer must complete the project. If the property isn’t finished by this date, the buyer can walk away with their deposit.

Secondly, a Sunset Clause can be used when a property purchase is conditional on the sale of the buyer’s current home. It’s a safety net for the seller, allowing them to re-enter the market if the buyer takes too long to sell their current home.

But, as with anything in real estate, there are risks. In recent years, some developers have intentionally delayed projects to terminate contracts and resell the property at a higher price. The buyer gets their deposit back, but they may face higher property prices, potentially pricing them out of the market.

In response to this, governments have stepped in. In New South Wales and Victoria, for example, developers must now get written consent from the buyer or the Supreme Court to terminate the contract due to project delays.

Despite the risks, a Sunset Clause can be beneficial if used correctly. The key is to research the developer thoroughly, check if the project has all necessary permits, negotiate a reasonable sunset date, and get a conveyancer or solicitor to review the contract before signing.

As with all property purchases, doing your homework is vital. Research the developer and ensure they’re a trusted industry presence. After all, buying a home is one of the most significant decisions you’ll ever make.

If you have any questions about Sunset Clauses or need advice about buying a property, don’t hesitate to reach out. Remember, it’s always better to be informed before making a decision.

Cheng Liu
KA-CHENG Property Group
Top Local Real Estate Agent Morley Dianella Noranda