Home » Sun sets on developers’ rescission rights

Sun sets on developers’ rescission rights

Posted by Taryn Ellertington | 23 November 2015 | Property & Real Estate

Last week NSW Parliament passed legislation amending the Conveyancing Act to restrict the ability of developers to rescind an Off the Plan Contract for Sale by relying on the sunset clause within the contract.

An Off the Plan contract is a contract for the sale of property which has not yet come into existence at the time the contract is made. Such a contract contains a clause which permits either party to rescind the contract if the subject property has not yet been created by a certain date, known as the “sunset date”.

In a rapidly rising market such as the one currently being experienced in Sydney, there have been several reported cases of developers rescinding contracts in reliance on the sunset clause, leaving purchasers with no right to complete the purchase, only for the developer to resell the property at much higher price shortly after.

Public outcry over the conduct resulted in the Minister for Innovation introducing a bill which on 17 November 2015 was passed through both houses.

A vendor of an Off the Plan contract entered into AFTER 2 November 2015 will no longer be able to automatically rescind subject to a sunset clause. Rather, any clause which purportedly grants that right will be null and void.

Should a vendor wish to rescind the contract, he must provide 28 days’ notice to the purchaser of his intention to do so and either obtain the purchaser’s consent, or an order from the Supreme Court that the rescission is permitted.

The amending legislation prescribes that the Court must consider whether the rescission is just and equitable in all the circumstances, taking into account the terms of the Off the Plan contract, whether the vendor has acted unreasonably or in bad faith, and whether the subject lot has increased in value, among other factors.

The potential effect of these changes for developers is of course yet to be seen. Perhaps contracts will be drafted to include additional means by which the vendor may rescind the contract. Perhaps the penalties for developers who fail to complete a project by the sunset date will be too great to consider rescission a worthwhile option.

Regardless, it appears that, for the short term at least, purchasers of Off the Plan property might rest a little easier as their own sunset date draws nearer.

If you would like information on this or any construction related matter, please don’t hesitate to contact our team on +612 9016 0141).


This publication is © Nexus Lawyers Pty Ltd and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.

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