What is a sunset clause you ask? A sunset clause is a condition included in a contract which provides that if a specified event has not occurred by a specific date, then either one or both parties can cancel the contract on giving written notice to the other.

In the context of a new build purchase or buying off the plans, a typical sunset clause will provide that where the development has not reached a certain milestone(s) by a particular timeframe, for example, if the title has not been issued within two years of the date of the contract, then either the purchaser, vendor or even both parties may cancel the contract.

For the most part, sunset clauses in a new build contract will only allow for the purchaser to cancel, however, in some circumstances, an ability for the vendor to also cancel is provided for. 

When to use a sunset clause?

The inclusion of a sunset clause in a new build contract (provided that it is drafted to allow only the purchaser and not the vendor to cancel) can be particularly important for a purchaser for several reasons including:

  • If an unexpected event occurs which significantly slows down or halts the development altogether, the purchaser has an ability to cancel the contract and look to find something else rather than waiting around for what could potentially be a significant period of time.
  • Protecting the purchaser against the vendor not meeting its obligations by the sunset date, then cancelling the contract and selling the property to another buyer for a higher price.

Recent events have highlighted the importance of obtaining legal advice before signing a new build contract in order to ensure that the clauses drafted into a contract protect a purchaser from cancellation by the vendor. Read the full story here. 

For more information:

If you are considering entering into a new build contract, come and see our property experts at Morrison Kent. Call 04 472 0020 to book your consultation with one of our highly skilled property lawyers today.

Read more helpful property law articles:

Sunset Clauses - Property Law Morrison Kent