The NSW government has announced its intention to clamp down on off-the-plan developers seeking to profit from the use of sunset clauses at the expense of property buyers.
The state government this week announced it is considering significant changes to the use of sunset clauses, following reports that they are being manipulated to increase developer margins.
Among the reforms under consideration include allowing only the purchaser to rescind off-the-plan contracts.
Another option under consideration is requiring a vendor who enacts a sunset clause, who then goes on to resell the unit, to compensate the original purchaser with the difference between the two sale prices.
Minister for Innovation and Better Regulation, Victor Dominello, acknowledged reports of sunset clauses being abused by developers in order to maximise profit.
“There is growing concern about the way sunset clauses are being used to rescind off-the-plan contracts,” Mr Dominello said.
“With buying off-the-plan becoming more and more common, particularly for new strata schemes, this is something we need to look at closely.”
Sunset clauses, a common fixture of off-the-plan sale contracts, allow either the buyer or the developer to rescind a contract after a certain date.
While intended to provide a solution to construction delays, there have been reports of some NSW property buyers having their contracts rescinded by a developer using the sunset clause to then find that the property has been re-sold for a higher price.
“Purchasing a property is a life-changing decision and we need to ensure consumers are protected against exploitative practices,” Mr Dominello said.
A press release issued by The Department of Finance, Services and Innovation, announcing the proposed reforms, cited reports where the resale of properties has taken place on the same day that the original purchase had their contract rescinded.
Land and Property Information and NSW Fair Trading have commenced a public consultation surrounding the proposed changes to sunset clause legislation, which will close on 14 October.