Have you heard the term – Sunset Clause?
Did it leave you asking…
What is a sunset clause
To put it simply – It is a time limit that is put on the validity of the contract. Therefore if the settlement has not taken place by the end date both parties can legally walk away from the contract. Plus the buyer is entitled to receive their deposit back in full.
It is used commonly in 2 ways
Off the plan – The clause in an off the plan purchase states the date when the developer must finish the project. It also states that if the project is not finished by that date the buyer can walk away and get their deposit back in full. In most cases, this date is well outside the expected time frame and allows for common building delays.
Conditional sale – A buyer may make a purchase that is conditional on the sale of their current home. Here the seller inserts the clause date so they can decline the deal if the buyer takes to long to sell their home.
Are there risks
There have been a few cases where developers have deliberately run over time so they can terminate the contract and attempt to resell at a higher price. There has been new legislation put in place in NSW to stop this abuse.
Do your research
As with all purchases of property you need to do your homework. If you are purchasing from a developer, make sure you look into their track record and industry presence. What are their past projects, see if you can contact people who have bought off them in the past and visit other locations they have developed.
Make sure you have a conveyancer look over the contract before you sign just so you know that you have not missed anything important beyond the sunset clause.
Contact Nicola @ Select Conveyancing for your next property purchase or sale.