Many people are tempted to sign a contract to buy a property that may not yet have been built. They may like the idea of the development, have fallen in love with the plans, be particularly interested in the location and have some time to wait. In this case, therefore, they may opt to enter into an agreement known as "off the plan," which comes with a variety of restrictions and clauses. One of these regulations is known as a "sunset clause" and, while it is intended to protect the buyer, it could turn into a double-edged sword in some situations. Why do you need to look carefully at this type of clause in your case?
How It Should Work
Broadly speaking, a sunset clause is intended to offer the buyer the opportunity to void the contract and to receive a refund of their deposit if the developer is not able to deliver the project by a certain date. In other words, the builder is allowed a reasonable amount of time to finish the property and turn it over to each buyer who has agreed to purchase under an off-the-plan contract.
However, some developers have, in the past, let the clock run out simply to repay the existing buyers, get out of the contract and then resell the property at a much higher price. Of course, this is not fair to the buyer who had entered into the contract in good faith, but in this case, the value of the almighty dollar had clouded the judgement of the developer.
Some jurisdictions have brought in laws that outlaw this type of activity. Where this is the case, the developer is not automatically allowed to rescind the contract under a sunset clause, and the buyer can refuse to agree to those terms. The developer would then have to go to the state court so that they could hear both sides of the argument, and this would almost certainly prevent the type of problem previously mentioned.
If you want to enter into an off-the-plan agreement, make sure that you fully understand all of the terms of the contract that you will be signing. This is why it's important for you to get an experienced conveyancer on your side who fully understands the local laws and will translate the terms of the agreement for you.
To learn more about conveyancing, contact property solicitors in your area.