What Is a 'Sunset Clause' and Why Could It Kill Your Property Deal?

/

As explained by David Dawn, Licensed Conveyancer at Victorian Property Settlements, many buyers in Victoria are shocked to discover that even after signing a contract, their dream home can slip away due to a little-known but powerful legal tool: the sunset clause.

This article explains how sunset clauses work, what protections exist for buyers, and what both purchasers and agents should watch for—especially in off-the-plan contracts.

Understanding the Sunset Clause

A sunset clause sets a deadline for the contract to be completed—most often used in off-the-plan sales. If the development is not finished by the specified sunset date, either party (vendor or purchaser) may be allowed to walk away.

In Victoria, these clauses are standard in contracts involving:

  • Off-the-plan apartments or townhouses

  • House and land packages

  • Subdivided land yet to be titled

On its face, the clause exists to protect both sides. But in reality, developers have been known to exploit it, using delays to exit existing contracts and relist properties at higher prices during a rising market.

Real-Life Example: The Re-Listing Rort

A couple purchases an off-the-plan apartment in Melbourne’s inner north in early 2021 for $590,000. The developer faces planning and construction delays and invokes the sunset clause in 2023, terminating the deal. Within weeks, the apartment is re-listed and sold to another buyer for $690,000.

The original buyers spent over two years preparing for the purchase—organising finance, changing jobs, and delaying other plans—only to be left with nothing.

Legislative Protection in Victoria

The Sale of Land Amendment Act 2019 (Vic) introduced tighter restrictions to protect purchasers. Under section 10B of the Act:

A vendor cannot rescind a residential off-the-plan contract under a sunset clause without the purchaser’s written consent or a Supreme Court order.

If a developer wants to terminate a contract, they must provide:

  • At least 28 days’ notice

  • Reasons for the delay

  • The steps taken to complete the project

  • Why they believe it is “just and equitable” to rescind

This gives purchasers a voice—but many feel pressured to consent, fearing further financial loss or no chance to purchase elsewhere.

What Purchasers Should Do

Before signing:

✅ Ask about the sunset date. Is it reasonable for the development timeline?

✅ Clarify who can terminate and under what conditions.

✅ Get independent advice from a licensed conveyancer—not just the developer’s rep.

During the contract period:

📅 Track progress and planning approvals.

📣 Raise concerns early if delays are evident.

📑 Keep all written correspondence about timeline updates and expectations.

Guidance for Real Estate Agents

Agents should ensure that buyers:

  • Understand the difference between a genuine sunset clause and one that is open-ended

  • Are not misled by assurances that completion is “just around the corner”

  • Are referred to a conveyancer for a full contract review

If you’re selling off-the-plan properties, your credibility is on the line. A poorly explained sunset clause could create long-term reputational risk.

Conclusion

Sunset clauses are legal but they’re not harmless. They must be understood, questioned, and negotiated with caution. Purchasers deserve clarity, and developers should not be allowed to misuse them.

At Victorian Property Settlements, we review every sunset clause with a critical eye and help our clients understand the full picture before they sign.