Sunset Date changes apply to land subdivisions in Queensland
Limitations on developers right to terminate land sales contracts
On 14 November 2023, the Land Sales Act 1984 (Qld) was amended to limit the ways in which a developer can terminate an off the plan land sales contract under a sunset clause. The amendments will apply retrospectively to existing unsettled contracts in Queensland.
What are Sunset Clauses
Off-the-plan land sale contracts often include a clause that provides for the contract to be terminated by the seller if a certain event, such as registration of the plan or settlement, does not happen by the sunset date (these are known as ‘sunset clauses’). Previously, property developers could unilaterally terminate a land sales contract under a sunset clause. The new laws limit when developers can terminate under these clauses. The buyer’s statutory right to terminate if the plan has not registered by the prescribed sunset date has not changed.
Under the new amendments, a sunset clause can only be used by a seller to terminate an off-the-plan land sales contract in the following circumstances:
with the written consent of the buyer,
pursuant to an order of the Supreme Court, or
in another situation prescribed by regulations (currently there are none prescribed).
In order to terminate with the buyer’s consent, a seller must provide the buyer with a ‘sunset clause notice’ at least 28 days before the sunset date which states:
that the seller proposes to terminate the contract on the sunset date,
that the seller can only terminate the contract under the sunset clause if the buyer consents in writing,
the seller’s reasons for terminating the contract, and
that the buyer must respond by the day immediately before the sunset date.
Buyers are required to act reasonably when opting to give or withhold their consent, however a failure to respond does not amount to deemed consent.
Termination by order of the Supreme Court
If a seller seeks to apply to the Supreme Court for an order allowing them to terminate the contract under a sunset clause, they must satisfy the court that it is just and equitable to do so in the circumstances. The court will consider among other things whether the seller acted reasonably or in bad faith, whether there is a reasonable prospect of the seller settling the contract, the effect of termination on the parties, whether the value of the land has increased and all steps the seller has taken to achieve settlement. This is likely to be a time consuming and expensive process and the seller must pay the costs of the buyer in relation to any such proceeding unless the seller can demonstrate that the buyer unreasonably withheld their consent.
If you have any questions regarding this article, please contact a member of our team below.
For further information contact Paul McHugh or Alison Fleming.
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