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Oct 25, 2018

How The Sunset Clause Can Set You Back – Aston Homes

Though it may sound golden, warm and wonderful – a Sunset Clause is a legal barrier that can cause property buyers a lot of stress when it comes to buying their dream home. Originally implemented as a means of protecting the interests of both buyer and developer, the legislation has more recently been criticised in the media for providing developers with a self-serving loophole that can leave buyers out of pocket.

In today’s blog, the Aston Homes team unpack what the Sunset Clause is, how it affects you as a buyer, and why we don’t include them in our contracts! Read on.

What is the Sunset Clause?

The Sunset Clause is a term included in a Contract of Sale between a buyer and a developer, outlining the maximum time the developer has to complete the building project. This time-frame can vary, depending on the requirements of the build and the size of the property. If your home is not completed by the date stipulated in the Contract of Sale, this clause allows you to walk away from the agreement and have your full deposit refunded. As the home buyer – in this interpretation of the legislation –  you are protected by the incentive for the developer to complete the works within the agreed time frame.

How can a Sunset Clause set you back?

Positioned as though it is there to protect you, there is great cause for concern when the Sunset Clause is observed from the developers point of view.  Recently, there have been a number of cases reported in the media (and perhaps many more that were not reported), where developers have intentionally extended the permit process or construction time, in order for the Sunset Clause to take effect.  The developer then cancels the contract and refunds deposits, only to then offer the land, partially or completed property for sale at a higher price. Currently the onus is on the home buyer to pursue the developer through court if they feel there has been wrong-doing. A change to Victorian Sunset Clause legislation is currently being debated in parliament.

To explain further, in 2018 you put a deposit on a house and land package totalling $400,000 through a developer.  The contract includes a Sunset Clause of two years.  The land surrounding your block experiences a boom and increases in value by 30% over the next 12 months as the permits and construction get underway. After 18 months you notice construction start to stall, making it less likely that the home will be ready within the agreed two year period.  After two years, the developer exercises their right under the Sunset Clause and refunds your deposit.  After two years, you no longer have a new home to move into and the market prices have drastically increased from when you first signed the contract.

How come Aston Homes doesn’t include a Sunset Clause?

Simply put, Aston Homes are home builders, not developers and do not include a Sunset Clause in our Contract of Sale! Many of our clients come to us with pre-purchased blocks. Although from time to time we do have a limited number of house and land packages available, none of our contracts include a Sunset Clause.  This not only holds us accountable to complete each building project as originally agreed but reiterates our team’s shared values of respect and transparency. These values are at the heart of all that we do at Aston Homes!

At Aston Homes, we believe it’s always best (whether you have any concerns regarding the Sunset Clause or not) to get independent legal advice on your Contract of Sale. If you’re looking for further advice, please get in touch with the Aston Homes team.