What is a sunset clause in off-the-plan contracts?
A sunset clause is a provision in an off-the-plan property contract that allows either party (or in some states, only the purchaser) to rescind if the development is not completed and the plan is not registered by a specified date. Sunset clauses protect purchasers from indefinite delays. In NSW, the vendor cannot rescind under a sunset clause without the purchaser's written consent or a court order (section 66ZL Conveyancing Act 1919, as amended in 2015). Victoria has similar protections under the Sale of Land Act 1962 (VIC).
How sunset clauses work
The sunset date is a date specified in the contract — typically 18 months to 5 years after the contract date, depending on the development. If the plan of subdivision is not registered by the sunset date, the contract can be rescinded. The deposit is refunded in full on rescission. The key issue is whether the vendor can use the sunset clause to exit the contract and resell at a higher price.
NSW protections
Following widespread misuse, NSW introduced section 66ZL of the Conveyancing Act 1919 in 2015. The vendor cannot rescind under a sunset clause without the purchaser's written consent or a Supreme Court order. The court considers whether the vendor has acted reasonably and in good faith, the reasons for the delay, and the likely date of completion.
How I review sunset clauses
When reviewing off-the-plan contracts, I flag the sunset date, assess whether it is reasonable for the development timeline, and check the rescission provisions against the applicable state legislation. I also identify any clauses that attempt to limit the purchaser's rights on sunset — which may not be enforceable.
Common issues
- Vendors historically used sunset clauses to exit contracts when property values rose — NSW and VIC now restrict this
- The sunset date should be realistic for the development — unreasonably short dates are a red flag
- Deposit protection (held in a trust account or with a deposit bond) is critical for off-the-plan purchases
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