Buying off the plan traditionally gave buyers a chance to settle later, but at today’s prices. Developers were able to develop a land subdivision or a block of units based on finance enabled by the majority of lots being pre-sold. We have covered off the plan contracts generally before here.
One of the major features of any off the plan contract is the sunset date. This is the date after which the buyer can walk away and get the deposit back if settlement hasn’t happened.
The main reason for a sunset date is to allow buyers to be able to move on and buy elsewhere without being stuck in an endless contract if there are delays in a project.
Queensland law sets the maximum sunset date at 18 months for land, and a very long 5½ years for units.
The parties can agree on a shorter sunset date, and this would be put into the contract. However, the contract often allows a seller to extend the sunset date past the shorter agreed date, if there are delays outside the developer’s control.
Another feature of most off the plan contracts is a clause allowing the developer to terminate the contract. Sometimes, these clauses limit the developer’s ability to do this to specific situations such as the developer being unable to get finance approval for the project.
However, sometimes you see a clause which allows a developer to walk away from the contract for any reason. The deposit is refunded to the buyer, but this is cold comfort if the buyer has been waiting a long time and has missed other opportunities to buy elsewhere.
It is not unknown for developers to use these termination clauses to crash a contract and then re-sell the lots for a higher price.
This is especially a factor in a booming property market such as the current one. It highlights the need to get experienced legal advice to enable negotiation and amendment of clauses such as this.
Currently there is a Queensland Supreme Court case in progress where a homebuyer is challenging the validity of the developer’s termination of her contract under the termination clause. There are four buyers involved in separate court proceedings against a Eumundi developer.
The contract was signed in 2017, and the 18-month sunset clause date expired in December 2018.
On 16 July 2021, the developer terminated the contract. The property was registered on July 21, 2021, only five days after the 16 July termination.
The developer denies the buyer’s claims that it engaged in “misleading and deceptive” conduct after the December 2018 sunset date.
The Supreme Court of Queensland documents note emails from the developer between December 2018 and early July 2021 on progress updates.
The buyer claims she has lost her position in the market after she signed the contract to buy the land in 2017 for $255,000, saying that the block would now be worth $500,000.
The buyer is seeking to force the developer to honour the contract, and is also seeking damages including rent of $15,000.00 paid by the buyer over the delay period.
The developer is defending the claims in court and has said that the termination of the contract was valid and effective.
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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