After seeking feedback from developers and buyers, the Queensland Government has introduced a bill that if passed, will severely restrict the ability of developers to terminate off-the-plan land sale contracts and options to purchase under sunset clause provisions.
Typically, off-the-plan contracts contain a sunset date clause whereby either party may terminate the contract if the plan has not been registered or settlement has not occurred by a particular date. The proposed laws will limit the developer's rights of termination (but not the buyer's), to prevent or restrict the developer from terminating contracts only to enter into new contracts with higher purchase prices, leaving the original buyers without a property to purchase (or being forced to purchase at a higher price in the then-current market).
If the bill is passed, developers will only be able to terminate under a sunset clause:
- with the consent of the Buyer;
- under an order of the Supreme Court; or
- in another way permitted by regulation. Such regulations may only be made if the Minister is satisfied that the method of termination will provide adequate consumer protection for buyers.
Interestingly, the changes at this stage do not apply to off-the-plan contracts for lots in community titles schemes.
The changes will apply to existing contracts that were entered into, but not settled, before the commencement of the new laws.
The proposed changes follow moves in other States to limit developers' rights of termination but may be extremely costly (perhaps disastrously so) for developers, who already take substantial risks to deliver long-term projects in circumstances where the property market and the market for labour and materials can change dramatically from the commencement of the project to its completion.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
