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28 Nov 2019

Sunset dates: When does the clock run out on off-the-plan contracts?

BY George Kontoleon

Legislation sets out different sunset dates, sometimes even within the same state, so it's useful to know how they operate in key markets.

What is a legislative sunset date?

Several jurisdictions throughout Australia provide a legislative obligation on sellers to complete off-the-plan contracts within a set period of time after the contract date, failing which either the seller or purchaser has termination rights (depending on the jurisdiction). These provisions are also known as "sunset dates".

What are the legislatively imposed sunset dates?

With recent changes to the legislation in Victoria and NSW and optimism that the real estate market is set to rise, it’s an opportune time to revisit the legislative regulation of sunset dates in Queensland, New South Wales, Victoria, Western Australia, the Northern Territory and the Australian Capital Territory.

Australian Capital Territory

Legislative sunset date: Nil. There is no legislatively prescribed sunset date for off-the-plan contracts that applies in the Australian Capital Territory.

The standard Australian Capital Territory Contract for Sale provides that off-the-plan contracts only have to be completed by a particular date if such a date is specified in the Schedule or elsewhere in the Contract (Clause 37.3).

There is currently a proposal to reform the strata legislation in the Australian Capital Territory, however, it is unclear whether the imposition of a legislatively prescribed sunset date for off-the-plan contracts will be imposed.

Right to terminate: No statutory right.

New South Wales

Legislative sunset date: Nil. There is no legislatively prescribed sunset date for off-the-plan contracts that applies in New South Wales. Parties are required to rely on contractual sunset dates.

Right to terminate: Where a contract for a residential off-the-plan contract contains a sunset date, the contract cannot be automatically rescinded due to the expiry of that date. Here, the seller may only terminate the contract if the seller obtains the written consent of each purchaser at least 28 days before the proposed rescission or an order from the Supreme Court (section 66ZL Conveyancing Act 1919). The Court may make an order to rescind the contract if the Court is satisfied that making the order is just and equitable in all the circumstances having regard to the matters contained in section 66ZL(7) Conveyancing Act 1919.

If the seller seeks to rescind the contract without complying with section 66ZL(7), the rescission has no effect.

There is no legislative restriction on a purchaser rescinding an off-the-plan contract in accordance with a contractual sunset date. 

Northern Territory

Legislative sunset date: Nil. There is no legislatively prescribed sunset date for off-the-plan contracts in the Northern Territory.

Parties should be aware that development permits to subdivide land will contain a base period for compliance. If the works are not substantially commenced during the base period or the plan of survey is not approved under section 49(3) of the Licensed Surveyors Act 1983, the approval will lapse (unless extended) (section 58 Planning Act 1999) and the contract will be unable to be completed. 

Right to terminate: No statutory right.

Queensland

Legislative sunset date:

Non-strata greenfield land: settlement of the contract must occur not later than 18 months after the Contract Date (section 14(1) Land Sales Act 1984).

Section 14(1) does not apply to:

  • a large transaction (the sale of 6 or more lots to the same parties entered into at the same time);
  • land formed from the reconfiguration of land into less than 5 lots; or
  • land that will be subject to body corporate legislation (eg. strata).

Strata: The default position (excluding contractual sunset dates) requires settlement of the contract to occur not later than 3.5 years after the date the contract is entered into by the purchaser (section 217B(b) Body Corporate and Community Management Act 1997). The seller may (at the time of entering into the contract) elect a sunset date of up to 5.5 years after the date the contract is entered into by the purchaser (section 217B(ii) Body Corporate and Community Management Act 1997).

Right to terminate: The purchaser has the right to terminate after the expiry of the sunset date at any time prior to the contract settling (section 14(5) Land Sales Act and section 217B(2) Body Corporate and Community Management Act). 

Victoria

Legislative sunset date: The plan of subdivision must be registered within 18 months after the contract date or, where the contract specifies another period, that contractual sunset period (section 9AE(2) Sale of Land Act 1962).

Right to terminate: The purchaser may terminate the Contract after the 18 month period or the period specified in the contract up to the date the plan is registered (section 9AE(2) Sale of Land Act).

Where a sunset clause in a residential off-the-plan contract purports to automatically rescind the contract on the part of the seller, the sunset clause is taken to permit the contract to be rescinded by the seller on or after the sunset date (section 10A Sale of Land Act ). Before the seller is able to rescind the contract under section 10A, the seller is required to obtain the written consent of each purchaser at least 28 days before the proposed rescission or an order from the Supreme Court (section 10B(3) and section 10E Sale of Land Act ). The Court may make an order to rescind the contract if the Court is satisfied that making the order is just and equitable in all the circumstances having regard to the matters contained in section 10E(3) of the Sale of Land Act .

If the seller seeks to rescind the contract without complying with sections 10B(3) or section 10E of the Sale of Land Act the seller is in breach of the contract.

Western Australia

Legislative sunset date: The strata/survey-strata plan must be registered by the date specified in the contract, or where there is no date specified in the contract, 6 months after the contract date (section 70(4) Strata Titles Act 1985). The long awaited reforms to the strata legislation may impact the operation of this section.

The sunset date specified in the contract will be subject to the limitation imposed by the Planning and Development Act 2005, which requires a title application to be lodged within 24 months of the development approval issuing.

Right to terminate: The purchaser may terminate the Contract after the 6 month period, or the period specified in the contract, up to the date the strata/survey-strata plan is registered (section 70(4) Strata Titles Act).

The above timeframes are the legislatively set timeframes. Contractual sunset dates may be shorter than the statutory timeframes and may also provide parties with alternative termination rights.

Regardless of whether there is a sunset date imposed by legislation, parties should consider the appropriateness of including a contractual sunset date, and in New South Wales and Victoria, sellers should be mindful of the rigorous legislative framework that must be complied with before sellers can terminate under a sunset clause.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.