Off-the-plan sunset clauses: what are your rights?

A sunset clause lets a developer or buyer end an off-the-plan contract if the lot is not ready by a set date. In NSW, Victoria and Queensland (land lots, not apartments), a developer generally needs the buyer’s written consent or a Supreme Court order before using it to end the contract. Queensland and Victoria also require 28 days’ written notice.

The detail matters, because the notice periods, consent rules and Court tests differ between states. Here is how each state handles it.

What is a sunset clause?

The NSW Government describes a sunset clause as a contract term requiring the plan to be registered, or an occupation certificate issued, by a set date. If that does not happen, a party can rescind the contract.

Victoria’s Sale of Land Act 1962 defines it as a provision of a residential off-the-plan contract that allows rescission if the plan of subdivision is not registered, or an occupancy permit is not issued, by the sunset date (s 2(1)).

In Queensland, a sunset clause cannot end a contract automatically. Under the Land Sales Act 1984, a clause that says it does is read as allowing termination on or after the sunset date, subject to the rules in the Act (s 19C).

What are the NSW rules?

The NSW Government says a developer needs the buyer’s consent to end a contract using a sunset clause. Without that consent, the developer must apply to the NSW Supreme Court. Buyers do not need Court approval to act on a sunset clause.

These protections were first introduced by the Conveyancing Amendment (Sunset Clauses) Act 2015, which inserted the original rule into the Conveyancing Act 1919 as s 66ZL. A NSW Registrar General discussion paper from November 2017 discusses the Court’s powers under that section. That paper predates later changes, so check the current Conveyancing Act on the NSW legislation website, or ask your lawyer, for the exact section and wording that apply to your contract.

What can I do as a NSW buyer?

• Withhold consent. If you do not agree, a developer who wants to rescind has to go to the Supreme Court.
• Read your disclosure statement. It must set out the sunset dates and other conditional events in the contract.
• Ask about extensions and other exit rights. Have a lawyer or conveyancer check whether, and when, the developer can extend the sunset dates. Other termination rights in the contract are not sunset clauses and need to be read separately.

What are the Victorian rules?

The Sale of Land Act 1962 (Vic) (ss 10A to 10F) control how a vendor can use a sunset clause in a residential off-the-plan contract.

• A vendor must not rescind under a sunset clause except as the Act allows (s 10B(1)). An “automatic” sunset clause is read as allowing rescission only on or after the sunset date (s 10A).
• A vendor may rescind if the plan is not registered or the occupancy permit not issued by the sunset date, but must first get each purchaser’s written consent after giving at least 28 days’ written notice (s 10B(2) and (3)).
• The notice must state the reason for the proposed rescission, the reason for the delay, and that the purchaser is not obliged to consent (s 10B(3)).
• Contract terms that are inconsistent with these rules have no effect (s 10C), and a purported rescission that breaks them is a breach of the contract (s 10D).

Since 1 March 2020, s 10F has set required wording for sunset clauses, with penalties of 240 penalty units for a person and 1,200 penalty units for a body corporate. That section does not apply to contracts entered into before it commenced (s 10F(2)).

How does the Victorian Supreme Court route work?

If a purchaser does not consent, the vendor can apply to the Supreme Court for an order permitting rescission. The Court may make the order only if it is satisfied that is just and equitable in all the circumstances (s 10E(1) and (2)). It must consider:

• the terms of the contract
• whether the vendor acted unreasonably or in bad faith
• the reason for the delay
• the likely date the plan will be registered or the permit issued
• whether the lot has increased in value
• the effect on each purchaser

The Court may also order the vendor to pay you reasonable compensation (s 10E(4)). The vendor pays your costs of the proceeding unless it shows you unreasonably withheld consent (s 10E(5)).

Do the Victorian rules cover older contracts?

The endnotes to the Act list the original ss 10A and 10B as commencing on 23 August 2018, and the Supreme Court route (ss 10C to 10E) on 5 June 2019, after the Sale of Land Amendment Act 2019 received assent on 4 June 2019. The savings provision in s 54 applies the amendments to contracts entered into before commencement that were still in force at that time, but not to court proceedings about a sunset clause that had already started. If your contract is older, ask a lawyer how these provisions apply to it.

What are the Queensland rules?

Division 4A of the Land Sales Act 1984 (Qld) (ss 19A to 19F) governs off-the-plan contracts with a sunset clause. Under s 19D, a seller may terminate under a sunset clause only:

1. with the buyer’s written consent, after giving a sunset clause notice
2. with a Supreme Court order under s 19F, or
3. in another way prescribed by regulation

The sunset clause notice must be in writing, be given at least 28 days before the sunset date, and state that termination needs the buyer’s written consent, the seller’s reasons, and that the buyer must respond by the day before the sunset date (s 19D(3)).

As the buyer, you must consider the notice, act reasonably and respond in time. Not responding is not taken as consent (s 19E).

How does the Queensland Supreme Court route work?

The Court may permit termination if the seller shows it is “just and equitable in the circumstances” (s 19F(2)). The matters it considers include the contract terms, the seller’s conduct, events beyond the seller’s control, the prospect of the contract settling, the buyer’s performance of the contract and any increase in the value of the land (s 19F(3)). The seller pays the buyer’s costs unless it shows the buyer unreasonably withheld consent (s 19F(4)).

When did the Queensland rules start, and what do they cover?

According to the Queensland Government, since 22 November 2023 the limits apply to contracts signed on or after that date, and to earlier contracts that were signed but had not settled by that date.

The reforms apply to off-the-plan land contracts. They exclude community titles schemes such as apartments. If you are buying an apartment off the plan in Queensland, get independent legal advice on how your contract’s sunset clause works.

What other protections do Queensland land buyers have?

The Queensland Government page also notes:

• An 18 month settlement limit. If the seller does not settle within 18 months (unless you defaulted), you may end the contract by written notice before settlement.
• Deposits stay in trust. Sellers cannot access deposits early. Deposits are released from trust only at settlement, or when the contract otherwise finalises and the seller is entitled to them.
• Legal advice. You can give or withhold written consent to a seller’s termination, and you should get independent legal advice on any contract with a sunset clause.

What should I check before signing an off-the-plan contract?

• The sunset date, and whether the developer can extend it.
• Which state’s rules apply, and in Queensland whether your purchase is a land lot or part of a community titles scheme.
• Where your deposit is held. Our guide to what happens to your deposit if a builder is insolvent covers the next question many buyers ask.
• The project’s progress and the developer’s status. Follow projects on our major projects trackers for Queensland, Sydney and Melbourne, and check our ASIC insolvency notices tracker for builders and developers.

Primary sources

• Sale of Land Act 1962 (Vic), Authorised Version 173
• Land Sales Act 1984 (Qld), current
• Buying off the plan, Queensland Government
• Buying property off the plan, NSW Government
• Off-the-plan contracts for residential property discussion paper, NSW Registrar General (November 2017)

General information only, not legal or financial advice. Check the primary sources above or get professional advice for your situation.