ByLawyers News and Updates

Sunset clause – QLD

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Amendments to the Land Sales Act 1984 affecting sunset clauses in off the plan contracts commenced on 22 November 2023. The new provisions provide that there is no automatic termination under a sunset clause.

The changes under Part 4 of the Body Corporate and Community Management and Other Legislation Amendment Act 2023 are intended to prevent developers using delaying tactics to enable them to terminate a contract under a sunset clause and sell the property for a higher price.

A new Division 4A of the Land Sales Act 1984 applies to all off the plan contracts that include a sunset clause entered into on or after 22 November 2023, and retrospectively to existing unsettled contracts.

When a seller can terminate under a sunset clause

Section 19D now provides that a seller can only terminate a contract for a relevant event not occurring by the sunset date if:

  • the seller has provided all buyers with a sunset clause notice and has their written consent to the proposed termination; or
  • the seller obtains an order permitting the termination from the Supreme Court; or
  • a regulation otherwise permits the seller to terminate the contract.

A relevant event is:

    • registration of the plan of subdivision for the proposed lot;
    • creation of a separate indefeasible title for the proposed lot;
    • settlement of the contract;
    • another event prescribed by regulation as a relevant event.

The sunset date means:

    • for a relevant event other than settlement, the day it must happen under the contract, including an extension provided for in the contract; or
    • the settlement day, including an extension provided for in the contract.

Section 19C provides that a sunset clause cannot automatically terminate an off the plan contract. If a sunset clause purports to automatically terminate the contract, it is taken to mean the contract can be terminated under the new provisions, on or after the sunset date.

Notice of termination under a sunset clause

A seller proposing to terminate a contract under s 19D must serve notice in writing on each buyer at least 28 days before the sunset date containing certain information including their reasons.

The buyer must consider the information in the notice and act reasonably in the circumstances. They must respond to the notice by the day before the sunset date. Failure to respond does not represent consent to the termination.

Supreme Court order for termination under a sunset clause

The Supreme Court can make an order permitting the seller to terminate the contract under a sunset clause if the seller satisfies the court it is just and equitable in the circumstances. Section 19F(3) sets out the factors the court can consider in making this determination.

The seller will also be liable to pay the buyer’s costs of the proceedings unless the seller satisfies the court that the buyer unreasonably withheld consent to the termination.

Publication updates

The By Lawyers Sale and Purchase of Real Property guides have been updated accordingly. Precedents for a termination notice and consent to termination precedent have been added to the respective matter plans, with letters enclosing them.

Sunset clause – Conveyancing – VIC

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From 1 March 2020, a sunset clause in a residential off the plan contract must include the statement set out in s 10F (1) of the Sale of Land Act 1962.

The By Lawyers Conveyancing (VIC) Guide, which includes the By Lawyers Contract of Sale of Land, has been updated accordingly. The amendments are:

  • New content added to Sale and Purchase Commentaries and 1001 Conveyancing Answers;
  • Notice required by new s 10F (1) of the Sale of Land Act 1962 added to General Condition 9(a) of Part 2 of the By Lawyers Contract and special condition ‘Subdivision – Sale subject to Subdivision’ in the library of special conditions.

The By Lawyers Contract of Sale of Land is available to all LEAP users until 30 June 2020. Beyond that date it will remain available to LEAP users who have By Lawyers as a companion product to their LEAP or LEAP Conveyancer subscription. It can also be accessed by non-LEAP users through InfoTrack or the By Lawyers website by subscribing to our Victorian Conveyancing publication, which has many associated benefits such as full access to 1001 Conveyancing Answers.

For further information, see our previous post Seven reasons to use the By Lawyers contract.

The By Lawyers legal and editorial teams ensure that the contract is immediately brought up to date with any changes in law or practice.

By Lawyers always keeps you up to date so you can enjoy practice more.

 

Off the plan – sunset clauses – VIC

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Vendors face new restrictions when seeking to activate sunset clauses to end off the plan contracts in Victoria.

Amendments for off the plan contracts

The Sale of Land Amendment Act 2019 commenced on 4 June 2019. It amends the Sale of Land Act 1962. The amendments require vendors wishing to end residential off the plan contracts pursuant to a sunset clause to either obtain the purchaser’s consent, or an order from the Supreme Court.

New notice requirements created by section 13 of the amending Act for off-the-plan contracts for residential land including a sunset clause, have yet to commence.

The changes do not affect the existing statutory rights of purchasers to end a contract if the plan of subdivision is not approved by the sunset date.

Rescission

Section 10A of the Sale of Land Act 1962 provides that if a sunset clause in a contract allows the vendor to rescind the contract, then rescission must be in accordance with the Act. Section 10C overcomes any inconsistent contractual provision.

Purchaser’s consent

Section 10B of the Sale of Land Act prohibits a vendor from relying on a sunset clause unless the vendor obtains the purchaser’s written consent to any such rescission.

A vendor seeking to obtain the purchaser’s consent must give the purchaser 28 days notice setting out the reason that the vendor proposes to rescind, the reason for the delay in registration of the plan and that the purchaser is not obliged to consent to the proposed rescission.

A precedent ‘Notice of rescission of off the plan contract’ in accordance with s 10B(3) can be found on the By Lawyers matter plan.

Court order

Section 10D of the Sale of Land Act provides that the vendor may apply to the Supreme Court for an order permitting the vendor to rescind a contract pursuant to a sunset clause. The Court must consider a wide variety of matters relating to the contract and the property, including increase in value. If an order is made it may include compensation to the purchaser and the vendor will be liable for the purchaser’s costs.

Notice

Section 10F, created by section 13 of the Amendment Act, has yet to commence. This new section will require residential off-the-plan contracts that include a sunset clause to include a notice informing the purchaser that:

  • the vendor may give a notice proposing to rescind the contract;
  • the purchaser may consent to rescission, but is not obliged to consent;
  • the vendor may apply to the court for an order permitting rescission;
  • the court may make such an order.

A precedent notice in compliance with s 10F will be included in General Condition 9 of the By Lawyers contract on commencement of s 10F.

By Lawyers contract

The general conditions and particulars of sale in the By Lawyers Contract satisfy all of the statutory requirements when selling prior to registration, relying on the default sunset period of 18 months.

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