Parliament passed the Sale of Land Amendment Bill 2019 (Vic) (Bill) on 28 May 2019. This Bill brought into effect retrospective legislation relating to sunset dates (also known as the latest date for registration) in the off-the-plan contracts of sale.
What are Sunset Clauses?
A “sunset clause” is a condition in an “off the plan” contract of sale which allows the vendor or the purchaser (or both) to terminate the contract if:
- the plan of subdivision has not been registered by the specified date (being the sunset date); or
- an occupancy permit has not been issued by the sunset date.
The Purchasers right to terminate an “off the plan” contract for failure of the vendor to procure registration of the plan of subdivision is set out under Section 9AE of the Act. However, it is usual for “off the plan” contracts of sale in Victoria to include contractual provisions extending this right to the vendor and to include a right to terminate if the occupancy permit has not been issued by the sunset date.
Why did the legislation change?
There were numerous cases coming from NSW about the increasing concerns some developers were terminating residential “off the plan” contracts of sale under a sunset clause as the property had substantially increased in value and then re-selling the property for financial gain. The dodgy practice being used by some developers involved using a “sunset clause” which allows them to terminate a contract of sale if the subdivision of land or strata lots is delayed.
The NSW government introduced new legislation in November 2015. The changes to the Act proposed by the Victorian Government mirrored the NSW legislation.
The legislation now requires the vendor to obtain the purchaser’s consent or an order from the Supreme Court before the vendor can terminate an “off the plan” contract of sale under a sunset clause.
What does this mean?
- Vendor’s no longer have an automatic right to rescind an off-the-plan contract of sale under the sunset date clause.
- Vendor’s may only rescind an off-the-plan contract of sale under the sunset date clause if:
- the plan has not been registered by the sunset date; or
- an occupancy permit has not been issued by the sunset date.
- Vendor’s must obtain the purchaser’s consent to rescind under the sunset date clause.
- Vendor’s must give 28 day’s written to purchasers before the proposed rescission setting out:
- why the Vendor is proposing to rescind the contract; and
- reason for delay in registering the plan or obtaining an occupancy permit; and
- noting the purchaser is not obliged to consent to the proposed rescission.
A new section 10F is to be inserted into the Sale of Land Act 1962 setting out the information Vendors will be required to include in a sunset clause.
The amendments contained in the Bill will retrospectively apply to all off-the-plan contracts of sale entered into, on and from 23 August 2018.
For all further questions and inquiries on sunset clauses and property law contact our office on (03) 8590 8370.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.
Last updated: 3 October 2019 Article by: Halil Gokler Edited by: Mohamed Chaarani
