In New South Wales, Section 66ZS of the Conveyancing Act 1919 (NSW) sets out how a vendor may rescind a contract under a sunset clause. A sunset clause is a clause within a contract which provides for the contract to be rescinded if the sunset event does not occur by the sunset date. The sunset event is usually the creation of the subject lot by registration of the relevant plan, and receipt of the Occupation Certificate for the property.
For a vendor to rescind a Contract under a sunset clause, they must follow the following procedure:
- Notice
A vendor seeking to rescind a contract under a sunset clause must serve each purchaser with notice in writing at least 28 days before the proposed rescission. The notice must also contain information specifying why the vendor is proposing to rescind the Contract, and the reason for the sunset event not occurring by the sunset date.
- Rescission by consent
A purchaser who has been served with notice may consent to the rescission in writing. If consent is received, the vendor may rescind the Contract under the sunset clause.
- Application to the Supreme Court
If consent is not obtained, the vendor may make an application to the Supreme Court for an order permitting the vendor to rescind the contract under a sunset clause. In making this application, the vendor must satisfy the Court that making such an order would be ‘just and equitable’. The Court will consider the following factors in determining whether the order is just and equitable:
(a) The terms of the contract;
(b) Whether the vendor has acted unreasonably or in bad faith;
(c) The reason for the sunset event not occurring by the sunset date;
(d) The likely date on which the sunset event will occur;
(e) Whether the subject lot has increased in value;
(f) The effect of the rescission on each purchaser;
(g) Any other matter considered relevant by the Court; and
(h) Any other matter prescribed by the regulations.
This procedure was brought into effect to protect purchasers under off the plan contracts. Prior to the introduction of this legislation, a developer may have been able to delay completion of the project past the sunset date to enable them to rescind the Contract and resell the property at a higher price.
If you require assistance in relation to an off the plan contract, please reach out to our experienced team.
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