Sunset clauses

On 10 November 2015 the Conveyancing Amendment (Sunset Clauses) Bill 2015 (The Bill) was introduced into NSW Parliament. The Bill proposes to amend the Conveyancing Act 1919 to restrict the rights of a developer (vendor) to rescind an off-the-plan contract under a sunset clause. The proposed changes relate only to residential lots (whether strata lots or otherwise).

Under the Bill a sunset clause is a clause that provides for the contract to be rescinded if the lot has not been created by a sunset date. In an off-the-plan context, the lot is created when the strata plan or plan of subdivision is registered. It is common for off-the-plan contracts to allow either party to exercise a right to rescind the contract if the lot has not been created by a sunset date.

Under the proposed changes to the law, if a developer (vendor) wishes to rescind a contract under a sunset clause, the developer must:

  • give the purchaser 28 days’ notice of the proposed rescission, specifying the reasons for the delay in creating the lot
  • either:
    • obtain the consent in writing of the purchaser to the rescission; or
    • obtain an order of the Supreme Court permitting the developer to rescind the contract.

It is proposed that the new laws will apply to all existing off-the-plan contracts, from 2 November 2015.

Strata law reform

The Strata Schemes Management Bill 2015 and the Strata Schemes Development Bill 2015 were passed by the NSW Parliament on 28 October 2015. New, modernised strata laws in NSW are expected to commence on 1 July 2016.

We have outlined below the strata scheme renewal provisions (which are well known, having been widely discussed during the law reform process) together with some other key changes that are relevant to residential developers.

Click here to view the table.

Click here to view the table.

But wait, there’s more

More law reform that will affect developers is on the horizon, including:

  • introduction of a foreign sales FIRB fee for off-the-plan sales (see our article here)
  • changes to community title law.