Sunset clauses and early release of deposits

By Charlotte Tully, Lawyer at Hillhouse Legal Partners
| 3 min. read

Key takeaways

  • An “off the plan” contract is a sale contract for a lot that does not yet exist - usually a vacant block of land in a housing estate that is yet to be subdivided, or a proposed lot under construction in a community titles scheme.
  • Public feedback pertaining to “off the plan” contracts is currently under review by the Queensland Government.
  • Once the feedback is assessed, potential change to the use of sunset clauses by developers (in their capacity as seller) to terminate the contract and the early release of deposits prior to settlement may be implemented.

As part of the Queensland Government's Property Law Review currently underway, two online surveys were released (one for consumers and one for developers) regarding issues around residential off-the-plan contracts. Feedback received from those surveyed will be reviewed and assessed over the coming months.

In an effort to respond to concerns of buyers of “off the plan” properties, particularly given the rapid rate of migration of interstate residents to Queensland during the peak of Covid-19, the Government identified two key issues for public feedback: 

  1. The use of sunset clauses by developers (in their capacity as seller) to terminate the contract; and
  2. Early release of deposits from a trust account to developers (sellers) prior to settlement, termination or finalisation of the contract. 

To provide context, an ‘off the plan’ residential property sales contract typically refers to a contract for a proposed lot, such as: 

  1. a vacant block of land in a new housing estate; or
  2. a proposed lot to be included in a community titles scheme, such as an ‘under construction’ apartment in a multi-storey building. 

An ‘off the plan’ contract should contain a ‘sunset clause’ which is a term in the contract allowing a buyer and/or seller to terminate the contract if the contract does not settle by a specified date. 

For a vacant block of land, section 14(1) of the Land Sales Act 1984 (Qld) states that the seller of a proposed lot must settle the contract for the sale of the lot not later than 18 months after the buyer enters into the contract for the sale of the lot. 

For a proposed lot in a community titles scheme, the Body Corporate and Community Management Act 1997 (Qld) allows for settlement to occur up to 5.5 years from the date of the contract.

Whilst those dates are the maximum, they can be reduced under the terms of a particular contract if the buyer and seller agree to do so. 

In ‘off the plan’ contracts, settlement can only occur once the proposed lot is registered. Typically, settlement will occur 14 or 21 days from registration of the plan. 

Given the technical considerations and complex requirements in property law, the Government is consulting with community and industry stakeholders to ensure solutions developed as part of the Property Law Review address relevant issues at hand, without producing unintended consequences. 

If you are considering purchasing ‘off the plan’, require a contract review or would like to know more about purchasing registered or unregistered property, please do not hesitate to contact us at email or call 07 3220 1144.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.