Simply put, a sunset clause stipulates the date by which the sun sets on the agreement allowing the property contract to be voided and the deposit be returned to the buyer. It is commonly inserted into agreements over properties that are not yet capable of being conveyed – i.e. in the absence of a title (new development or subdivision).
If your sale and purchase agreement contains a sunset clause, irrespective of whether you are the buyer or seller, make sure you speak to your conveyancing lawyer to understand the operation and the implications of the clause fully.
Typically for a property without a title, settlement will be set for 5 working days after the issue of title. However, unforeseen delays can freeze the buyer’s deposit indefinitely while still putting him under the obligation to complete the purchase. Putting in a sunset date in these situations give the buyer a safety net to fall back on. The seller is pressured to complete all necessary work in order to transact the property by the sunset date. When it has come and gone, both parties still have the option to continue with the (amended) contract.
In a hot market however, buyers should be aware of the potential loophole a sunset clause affords sellers. Consider this:
You have been enticed into purchasing a $500K property still at the blue print stage by putting down a $100K deposit, the agreement comes with a sunset date of six months from today so you...
