Seller’s rights to terminate a contract by the sunset date

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Off the plan contracts usually have a ‘sunset date’, which is the date by which settlement must occur. Usually, if settlement does not occur by that date, the contract would allow for either the buyer or the seller to terminate the contract and the deposit be refunded to the buyer.

These sunset clauses on paper protect buyers and developers from delays where neither party is at fault and allows them to exit the contract. It also provides a developer with security that a purchaser can’t withdraw from a contract before it is complete.

There are two types of laws which set out the requirements for the sunset date and those are discussed below.

Sunset Date for vacant land without a body corporate

The Land Sales Act requires that the disclosure statement for the proposed vacant lot, without a body corporate, must state that the seller must settle the contract for the sale of the proposed lot no more than eighteen months from the contract date.

Sunset Date for vacant land or units and townhouses within a community titles scheme (body corporate)

The Body Corporate and Community Management Act 1997 (Qld) provides buyers with a right to terminate an off the plan contract if the seller does not settle the contract by the statutory sunset date.

The maximum sunset date is five and a half years from the date the contract is signed by all parties. When a contract does not specify a sunset date, the seller must settle the contract within three and a half years after the day the contract was entered into by the buyer, unless otherwise agreed by the parties. Importantly, a buyer will only be able to terminate after the expiry of the sunset period if they are not in default under the Contract. This means for example, that where a vendor is ready, willing and able to provide a registrable instrument of transfer, a buyer cannot simply refuse to attend at settlement, wait for the sunset period to expire, and then terminate their contract without consequence.

What changes have now been made to the sunset date for off the plan vacant land without a body corporate?

Typically, these sunset dates span several years, and across a property cycle, this can mean that the parties arrive at a sunset date where the value of the property has either increased or decreased dramatically since the initial contract date.

After 22 November 2023, a seller is only able to terminate a contract under the sunset clause/by the sunset date under the following circumstances:

  • the seller has obtained the written consent of the Buyer after informing the buyer that it proposes to terminate the contract on the sunset date;
  • the seller has obtained an order of the Supreme Court; or
  • other circumstances prescribed by regulation.

If a seller wishes to terminate, the seller must give a “sunset clause notice” at least 28 days before the sunset date, which must give reasons for the proposed termination.

Some of the matters the Court may consider in deciding if termination would be “just and equitable in the circumstances” are:

  • whether, in the performance of their obligations under the contract, the seller acted unreasonably or in bad faith;
  • whether matters beyond the seller’s reasonable control affected—
    • the seller’s ability to settle the contract; or
    • the viability of the seller’s business;
  • the effect of terminating the contract on the buyer;
  • whether the proposed land the subject of the contract has increased in value.

In Queensland, unit developers have escaped the net for now and these will be reviewed after the reforms on ‘off the plan’ land contracts have begun so as to consider whether these reforms go far enough or if protections are also needed for people buying proposed community titles and similar lots ‘off the plan’.

As lawyers love to say, each case depends on its own facts, but this case is an example of the importance of being aware of your position before you sign a contract.

FC Lawyers are very experienced in giving pre-contract advice. Please let our property law team know if you need any help discussing sunset dates or off the plan contracts by contacting us today.

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