It is a case of "buyer beware" when you’re purchasing property.
The use of sunset clauses in off-the-plan agreements is becoming more common and increasingly hard to navigate for both purchasers and vendors.
It’s a timely reminder for anyone looking to buy off-the-plan builds, to make sure you conduct thorough due diligence investigations and seek the advice of a lawyer before you enter into any agreement.
A sunset clause is a condition included in a contract that states if a specified event does not occur by a certain date, the agreement may be cancelled by the party who has the benefit of that condition.
In off-the-plan agreements, the specified event is usually titles being issued, but recently, we’ve been seeing more prescriptive sunset clauses that provide staggered sunset dates for each milestone in the development process - for example when resource consent must be obtained, and the survey plan deposited.
Where the sunset clause is for the benefit of both parties, either party has the right to cancel if such milestones are not met within the timeframe indicated.
However, in a market where demand has outstripped housing supply, and there are ongoing delays for building materials, many purchasers are finding themselves at the mercy of their vendor sunset clauses.
In a NZ Herald article on 16 November, it was reported that four purchasers had their agreements cancelled by vendor developers. Each is now having to face re-entering a housing market where prices have skyrocketed by 24 percent nationally and over 30 percent in some areas. One couple, with the option to cancel, were holding off to avoid losing the agreement they had in place.
If you are buying or selling, we have a range of tools and resources on our website to help make the process a little easier.
