Reforms to the use of sunset clauses in Queensland off-the-plan contracts
Off-the-plan contracts, particularly for residential properties, can be complex arrangements and its parties may be exposed to various risks depending on fluctuations in the property market.
In Queensland (similar to the experience in New South Wales and Victoria), concerns were raised about the increased use of sunset clauses by property developers (as sellers) to terminate off-the-plan contracts, allowing them to re-sell the proposed lot at a higher price than at the time the off-the-plan contract was initially entered into. While the buyers still receive their deposit back on the termination of the contract, in a rising property market, buyers may struggle to acquire an alternative property following the termination of their initial contract.
In response, the Body Corporate and Community Management and Other Legislation Amendment Act 2023 (Qld) commenced on 22 November 2023 to, among other things, amend the Land Sales Act 1984 (Qld) (LSA 1984) to introduce a regime that limits a seller's ability to use sunset clauses to terminate an off-the-plan contract for a proposed lot. The regime is on similar terms to the corresponding legislation in New South Wales and Victoria and applies to an off-the-plan contract for a proposed lot that is either:
Entered into after 22 November 2023.
Entered into before 22 November 2023 but has not yet settled.
To guide subscribers through these new measures and their impact on new and existing off-the-plan contracts, Practical Law Commercial Real Estate has recently published Practice note, Sunset dates for off-the-plan contracts (Qld). This note:
- Provides an overview of Division 4A of Part 2 to the LSA 1984, which requires that a seller under an off-the-plan contract for a proposed lot must obtain an order from the Queensland Supreme Court before exercising a right to terminate under a sunset clause in that contract, unless the buyer has provided written consent.
- Considers the application of section 14 of the LSA 1984 and section 217B of the Body Corporate and Community Management Act 1997 (Qld) where a buyer wishes to terminate an off-the-plan contract for a proposed lot or proposed community titles scheme lot (respectively) if settlement does not occur within a particular period (being effectively a statutory "sunset date").