How do you use Sunset Clauses?

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A sunset clause is useful in two types of property transactions; purchasing an established property with a subject to sale clause or buying a development off the plan. Though the clause is the same, the meaning in each can vary.

What does it mean for established property?
A sunset clause can be used in the purchase of an established property to protect the seller and allow a buyer to submit an offer subject to the sale of their property. This means that a seller can accept a subject to sale offer without the worry that comes with not knowing how long it will take for the subject property to sell.

Applying a sunset clause to this type of contract will allow the seller to continue to market the property and accept offers at their discretion. If another offer is submitted, the seller can give three days’ notice to the original buyer to allow them to either match the offer or pull out.

A certain time period is usually specified in this case and if the property is not sold by this time, it can be renegotiated or the contract will become null and void.

What does it mean for off the plan property?
Sunset clauses have been utilised in the purchase of off the plan developments for quite some time. This is designed to protect both the buyer and the developers, but has been a topic of controversy in recent years with some developers using them unethically.

Using a sunset clause in buying off the plan involves setting a time frame for the property to be built, giving the buyers security to be able to pull out of the purchase if it is not finished on time. The completion date generally is set for a longer time than the actual expected completion date to allow for any unexpected hold ups including bad weather or industrial disputes. If this time frame is not met the buyers deposit is refunded in full and there is no more legal obligations for either party.

This has been exploited in the past with some developers purposely allowing the sunset clause to lapse, releasing the buyers from the contract. In many cases this leaves the buyers unable to afford what they wanted in the changed market. In some cases, developers have also allowed the contract to lapse to try and make the buyers resign a new contract at an inflated price. This is why it is always important to do your homework and engage a solicitor to look over the contract before signing, especially when dealing with an off the plan purchase.

Once the contract of sale is signed, the date is set. After this it is possible to get an extension on the sunset clause date, providing you can come to agreement with the developer. To have this ability, it is always best to include a clause in the contract of sale stating that you may extend the sunset clause date on agreement if needed.

In both cases, it is recommended that you engage the services of a solicitor or your real estate agent to find out if a sunset clause is required for you.

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