The NSW Parliament introduced the Conveyancing Amendment (Sunset Clauses) Act 2015 on 24 November 2015. The Act commenced on this date and applies retrospectively to all off the plan contracts regardless of whether the contract was exchanged before, on or after this date.
Why was this new law introduced?
There have been recent class actions against developers who intentionally and unethically did not use reasonable endeavors to have the development consent approved and or the subdivision plans registered before the sunset date set out in their off the plan contracts. The developers exercised the sunset date clause to rescind the contract and then proceeded to sell the lots at higher prices resulting in them making more money.
This detrimentally affected many first home buyers who are now left with with no new home because they cannot afford to re-enter the property market at today’s prices. Following media, industry and public policy attention, the Act was introduced to protect buyers from developers who wish to use the sunset date clause and provisions under the contract to rescind a contract and gain an unfair advantage by manufacturing delays.
What are the new amendments?
The buyers right to the rescind under the contract remains unchanged. The developer’s right to rescind is no longer automatic. Developers now have an extra obligation in the event that they wish to exercise the right to rescind the contract in a scenario where they are unable to do what is required to be done by the sunset date under a contract.
What are these new obligations?
The developer may rescind only if:
- The purchaser consents to the rescission after the developer serves a 28 day written notice that outlines the reasons for the delay and why developer wants to rescind.
- If the purchaser does not consent to the rescission then the developer must make a Supreme Court application seeking an Order to rescind the contract after the sunset date. The developer must make a case to the court that it was just and equitable in the circumstances and the developer should be permitted to rescind the contract.
What can developers do to protect themselves?
The new law cannot be overcome by amending special conditions of a contract. Developers are encouraged to keep thorough and complete records of any events of delays.
Please contact our office should you require specific advice.