Caution Urged Over Mooted Sunset Clause Clampdown

Major reforms to prevent developers from invoking sunset clauses to terminate off-the-plan land sales contracts in a bid to take advantage of increasing property prices have been flagged in Queensland.

But the industry has warned the proposed changes come at a time “when the housing system can least afford uncertainty and instability and a clampdown on the access to funding”.

In a statement, the Queensland government indicated work was under way on amendments to legislation “to strengthen consumer protections” for off-the-plan residential property contracts for the sale of land.

It follows reports of developers tearing up contracts during the pandemic-driven boom enabling them to relist the properties as prices soared.

A sunset clause in an off-the-plan sales contract provides a party with the right to terminate if it is not settled within 18 months.

According to the statement, the proposed legislative changes come in the wake of a review and would ensure developers can only invoke a sunset clause in specific circumstances.

Attorney-General and Justice Minister Shannon Fentiman said those situations would include with written consent of the buyer, under a Supreme Court order or in another situation prescribed by regulation.

Fentiman acknowledged that since the pandemic, Queensland’s building industry had faced challenging market conditions with supply-chain issues, labour shortages and increased costs for building supplies along with rising interest rates and soaring property prices.

But she said: “While property development is a vital part of the Queensland economy, we also need to make sure Queensland buyers are protected when they purchase land off-the-plan.

“We know property law is a complex and technical area that differs between states and territories, and we have listened to home buyers and property developers to ensure these changes reflect both parties’ needs.

“Buying a home is one of the biggest decisions and investments a Queenslander will make in their lifetime, and we want to ensure they are protected, and the process is fair.”

UDIA Queensland chief executive Kirsty Chessher-Brown said it had “cautioned” the government that any changes required careful consideration to avoid “unintended consequences” on the ability of developers to obtain financing to deliver urgently needed housing stock to market in a challenging environment.

“The practical operation of sunset clauses is complex and today’s changes are now coming at a time when the housing system can least afford uncertainty and instability and a clamp down on access to funding,” she said.

“In members’ experience, sunset clauses are exercised by the seller (property developers) in extreme instances and as a last resort. When contracts are terminated, they are done so for very genuine reasons including as a result of factors outside of the developer’s reasonable control.”

Chessher-Brown said the UDIA would continue to urge the government to consider the general operation of sunset clauses in Queensland “rather than focus on isolated instances, which have manifested during a time of unprecedented market challenges”.

“In considering any changes, it’s also important to recognise the substantive consumer protections which are already enshrined in existing regulations,” she said.

“Equally, what recent instances have highlighted is the urgent need for the government to develop and rollout an education campaign, reminding consumers about the importance of seeking independent legal advice for property purchasers.

“The institute is committed to working with the Attorney-General and the department to ensure that appropriate consumer protections remain in place and that the system provides certainty for all stakeholders involved, providing a pathway for housing delivery.”