Buying off the plan means committing to a property that does not exist yet. The sunset clause is the contract term that deals with what happens if the building is not finished in time - and for years, some developers used it as a way out of contracts they no longer wanted to honour.
Victorian law changed to stop that. If you are an off-the-plan purchaser, you have significant protections against a developer using a sunset clause to cancel your contract and resell your property at a higher price.
Received a sunset clause notice from a developer? Do not sign anything until you understand your rights - you are not obliged to consent.
Book a Free Consultation →What a Sunset Clause Is
A sunset clause is a provision in a residential off-the-plan contract that allows the contract to be rescinded if the relevant plan of subdivision has not been registered, or an occupancy permit has not been issued, by a nominated sunset date. Because an off-the-plan property depends on a development actually being completed and registered, the clause exists to deal with genuine delay.
The problem: in a rising market, some developers deliberately delayed projects so the sunset date would pass, then used the clause to cancel contracts signed at lower prices and resell the same properties at a profit. The law was changed to end that practice.
The Protections Under the Sale of Land Act
The Sale of Land Amendment Act 2019 inserted protections into the Sale of Land Act 1962, applying retrospectively to residential off-the-plan contracts on foot from 23 August 2018. Under these provisions, a vendor cannot rescind a residential off-the-plan contract under a sunset clause unless one of two things happens:
You consent in writing - after receiving at least 28 days' written notice before the proposed rescission; or
The Supreme Court permits it - if you do not consent, the vendor must apply to the court for an order allowing rescission.
Any provision in a contract that tries to contract out of these protections is of no effect. And a rescission made in breach of these sections is itself a breach of the contract.
What the 28-Day Notice Must Say
The written notice the developer must give you has to set out the reason the vendor is proposing to rescind; the reason for the delay in registering the plan of subdivision or issuing the occupancy permit; and a clear statement that you are not required to consent to the proposed rescission. Off-the-plan contracts must also contain a prescribed statement explaining these rights.
If You Do Not Consent
You are under no obligation to consent. If you refuse, the developer cannot rescind unilaterally - they must apply to the Supreme Court, which will only make the order if satisfied it is just and equitable in all the circumstances. The court weighs a range of prescribed factors, and it can order the developer to pay you reasonable compensation as a condition of allowing rescission. The costs consequences fall on the unsuccessful party.
This shifts the balance decisively. A developer can no longer simply wait out the sunset date and walk away - they must justify the rescission to a court, at their own risk and cost.
How Phan Campbell & Associates Can Help
At Phan Campbell & Associates in Footscray, our property team acts for off-the-plan purchasers across Melbourne and Victoria. We review off-the-plan contracts before you sign, advise on sunset clause notices when they arrive, and represent purchasers where a developer applies to the court.
If you have received a sunset clause notice, do not consent to anything before you understand your position.
Frequently Asked Questions
1. What is a sunset clause in an off-the-plan contract?
A clause allowing the contract to be rescinded if the plan of subdivision is not registered or an occupancy permit is not issued by a nominated sunset date.
2. Can a developer cancel my off-the-plan contract using a sunset clause?
Not freely. Under the Sale of Land Act, the vendor needs 28 days' written notice and your written consent, or a Supreme Court order if you do not consent.
3. What must the developer's notice tell me?
The reason for the proposed rescission, the reason for the delay, and a statement that you are not obliged to consent.
4. What happens if I refuse to consent?
The developer must apply to the Supreme Court, which only allows rescission if just and equitable and can order compensation for you. If you received a notice, book a free consultation with Phan Campbell & Associates.