Imagine this. You’ve saved for a deposit on an apartment in a new building and you’re delighted by how much the property value is escalating well before the construction phase is even finished.
And then the builder rescinds your contract, refunds your money, and puts your apartment back on the market for a higher price.
This can happen, it has happened, and it is all based upon a sunset clawback clause in building contracts.
Sunset clauses can be very useful for purchasers but their significance can be easily overlooked unless you have a mind like a conveyancer which is attuned for paying attention to all the small details in real estate contracts.
What is a sunset clawback clause, and should I be afraid?
This issue has been brought back to our attention due to a Guardian article regarding the use of a sunset clawback clause in Sydney, Sydney developer wins right to void 37 first-home buyers’ contracts after value doubles.
In essence, a sunset clause is an instrument in construction contracts to protect buyers if a development doesn’t go ahead; when the date has elapsed, contracts can be rescinded.
However, in the Guardian story it was the buyers who argued the developed dragged their feet to stall work so the sunset clawback date would pass, allowing them to void the contracts and regain ownership of the property.
The judge disagreed and found in favour of the developer.
Why home buyers should watch the sunset closely
There is a timely lesson to arise from this story: clauses in contracts need to be scrutinised and taken seriously.
From our perspective there is not a lot a conveyancer can do to solve problems like these, but we can help avert them.
If our client was signing a contract, in our usual routine we would make sure they were aware of the sunset clause date so that contact could be maintained with the vendor to make sure they keep actively pushing towards completion by the crucial date.
I know I can sound like a broken record, but once again we see an aspect of real estate in which attention to detail by a trusted, experienced conveyancer has potential to save much heartache and expense through simple diligence.
Image: Urban Sunset by Ralsin via Flickr