An off the plan contract is a contract for the sale of a lot that does not have separate title at the time contract is entered into. Off the plan contracts are used by developers to pre sell vacant land lots or strata units before the necessary building and contract works have been finalised.

A sunset clause is a provision in an off the plan contract that provides for a contract to be terminated if the development is not finalised. Most sunset clauses allow either the vendor or the purchaser to rescind if the development is not completed within the time provided for by the sunset clause. However there has been much concern that some developers are using the sunset clause as a way of terminating an off the plan contract specifically for financial gain.

On 17 November 2015 the NSW Government passed the Conveyance Amendments (Sunset Clauses) Act 2015 to provide further protections for purchasers in off the plan contracts. This Act inserts a new Division 10 into the Conveyancing Act 1919 entitled ‘Off the plan contracts’. The new Division 10 of the Conveyancing Act 1919 aims to prevent developers from unreasonably rescinding off the plan contracts for residential property under a sunset clause. Under the new protections, a vendor must give each purchaser notice in writing at least 28 days prior to rescission under a sunset clause. The notice has to provide reasons the vendor is proposing to rescind.

If the lot has not been created before the sunset date, the vendor can only rescind under a sunset clause if:

  1. The purchasers give written consent to the vendor’s proposed rescission; or
  2. The vendor obtains an order from the Supreme Court permitting the rescission; or
  3. The reason for the rescission comes within a category prescribed by the Regulations.

The new laws apply to any purported rescission that takes place on or after 2 November 2015.