What is a sunset clause in an off-the-plan contract in QLD?

When buying an off-the-plan property on the Gold Coast or anywhere in Queensland, you are entering a legally binding contract for a property that doesn’t yet exist. Because construction takes years and is subject to delays, these contracts include a mechanism called a “sunset clause.”

What is a Sunset Clause?

A sunset clause is a provision in an off-the-plan contract that sets an absolute deadline for the completion of the development. If the development is not completed and the community titles scheme is not registered by this specified “sunset date,” either the buyer or the seller (the developer) has the right to legally terminate the contract and walk away.

Historically, sunset clauses were designed as a consumer protection mechanism. They ensured that buyers wouldn’t have their deposits locked up indefinitely if a developer went bankrupt or faced insurmountable construction delays.

How Sunset Clauses Can Be Exploited

In recent years, particularly during rapidly rising property markets on the Gold Coast, some unscrupulous developers have weaponised sunset clauses against buyers.

The strategy involves deliberately slowing down construction or intentionally missing the sunset date. Once the date passes, the developer exercises their right to terminate the contract. They return the buyer’s deposit and then immediately put the newly finished apartment back on the market at a significantly higher, current market price. The original buyer is left with nothing but a returned deposit that has lost purchasing power over the years of the build.

Queensland’s 2023 Property Law Reforms

Recognising this exploitation, the Queensland Government introduced reforms in November 2023 under the Property Law Act.

For land contracts, a developer can now only terminate a contract under a sunset clause if:

1. They obtain the buyer’s written consent to the termination.
2. They obtain an order from the Supreme Court permitting the termination.

The Gap in Protection

It is critical for Gold Coast buyers to understand that this new protection currently only applies to land contracts, not strata title properties.

If you are buying an off-the-plan apartment or townhouse in a community titles scheme, you do not yet have this statutory protection. The developer can still exercise a sunset clause to terminate the contract without your consent if the sunset date is missed. The government is currently reviewing whether to extend these protections to strata properties, but until they do, apartment buyers remain vulnerable.

Related Topics

• Can a developer cancel my off-the-plan contract in Queensland?
• What is the valuation gap in an off-the-plan purchase?
• What is a Form 2 Seller Disclosure in Queensland?

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1. Property Law Act 2023 (Qld)
2. Land Sales Act 1984 (Qld)