Some buyers who buy off the plan are often worried when they see the Sunset Clause included in the Contract of Sale. These clauses are usually included as a way of protecting the interests of both parties when it comes to a sale. It’s not something that should make you wary, and here is why:
What is a Sunset Clause?
The Sunset Clause is the statement in the Contract of Sale that refers to the maximum time in which the developer has to finish the project. This time varies across developments, depending on the size of the property. If your property is not finished by this time, you are legally entitled to walk away from your contract and receive your deposit back in full.
What is the time limit?
Time limits will vary with developer and project. There are sometimes exaggerated time frames, which is there to allow for any delays the developer may experience such as industrial action, inclement weather or development funding delays, but generally the developer will finish well within the time frame.
Before you sign on it’s worth asking the developer or their representative if all permits for the development have been obtained. This is an area that may cause an extended delay, if the development gets held up in the planning process.
Are there any risks?
From time to time, instances have arisen where developers have run over time with construction and the Sunset Clause has been activated. They have then cancelled the contracts and refunded deposits, only to then try and resell the properties at a higher price.
One of the risks involved is if a developer does default on the Sunset Clause, while you will get your deposit back the market may have moved on in the meantime and property values may have risen above your means.
Research is key
As with all things relating to your new property purchase, you need to do your homework. Do your research on the developer and make sure they have a good track record and are a trusted presence in the industry. Be sure they are a reputed developer who has successfully completed similar developments in the past.
Remember that a developer defaulting on the Sunset Clause is a rare occurrence.
It’s important that buyers are able to have faith in what they are buying and the security of a contract. It’s always best, whether you have any concerns regarding the sunset clause or not, to get independent legal advice on the contract of sale.
Contact either Owun, Suzanne or Costa on 02 9517 1818 or email@example.com to discuss your options. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042. Be sure to share our blog on Facebook and Twitter and let others join the conversation!