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
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