Sunset clauses in off the plan sales

A sunset clause is a provision in a ROTP contract that provides for the contract to be rescinded if the relevant plan of subdivision has not been registered or occupancy permit has not been issued by the nominated sunset date.

Relevant provisions in the Sale of Land (SL Act) Tax Act are:

1. Section 10A

A sunset clause in a ROTP contract on foot at or entered after 23 August 2018 can only be rescinded by a vendor in accordance with sections 10B to 10E of the Sale of Land Act.

2. Section 10B

Section 10B prohibits a vendor from rescinding a ROTP contract under a sunset clause unless the written consent of each purchaser to the rescission has been obtained and each purchaser has been given at least 28 days’ written notice before the proposed rescission.

The notice must specify:

• the reason why the vendor proposes to rescind the contract
• the reason for the delay in registering the plan of subdivision or the issuing of the occupancy permit
• that the purchaser is not obliged to consent to the proposed rescission.

3. Section 10C

Any attempt to contract out of sections 10A and 10B will be of no effect.

4. Section 10D

Any attempt to rescind an off the plan contract in contravention of the above provisions will be taken to be a breach of the contract. This entitles the purchaser to take all contractual remedies available to them for a breach of contract such as issue a default notice and rescind the contract and claim damages.

5. Section 10E

A vendor can apply to the Supreme Court for an order permitting rescission of a ROTP contract under a sunset clause if it is just and equitable in the circumstances. Section 10E details matters the court must take into account when determining whether it is just and equitable to order rescission of the contract.

6. Section 10F

Sunset clauses in ROTP contracts entered into after 1 March 2020 must include a statement that:

• the vendor is required to give notice of a proposed rescission of the contract under the sunset clause
• the purchaser has the right to consent to the proposed rescission but is not obliged to consent
• the vendor has the right to apply to the Supreme Court for an order permitting the vendor to rescind the contract
• the Supreme Court may make an order permitting the rescission of the contract if satisfied that making the order is just and equitable in all the circumstances.

Failure to provide the statement in the contract will expose the vendor to a penalty under the SL Act.

• Sunset clauses in residential off the plan sales contracts are governed by provisions in the Sale of Land Act 1962 (Vic).
• The legislation prevents a vendor rescinding ROTP contracts based on a sunset clause without:
  • at least 28 days’ written notice to a purchaser and the purchaser’s consent, or
  • a court order.