21 Oct 2015It’s happening more and more. People put down a deposit on an apartment for a future home or investment property, and then a year down the track find the developer has dumped their contract and resold the apartment for a far higher price.
It’s happening because property prices have shot through the roof and developers realise they can make a bigger profit selling the apartment by delaying construction until the sunset clause kicks in, then selling it again.
And it’s happening because the current NSW conveyancing law has a big loophole that allows them to do it. The law was meant to protect both buyers and sellers in off-the-plan developments so that either side could get their money back if for some reason the development wasn’t completed or the buyer didn’t complete their payment.
But apartment block developers have been inserting sunset clauses in contracts with off-the-plan buyers that allow the developer to rescind the contract, give back the deposit and then resell the apartment once the deadline day is passed.
In one case a developer rescinded the contracts of 37 first-home buyers after the five year completion deadline passed. The developer returned deposits then sold the apartments for twice as much.
The buyers took the developer to court arguing the delay was deliberate. However the buyers lost as it could not be proved the developer deliberately delayed building. Meanwhile the buyers face having to find twice as much money to buy in today’s market.
“Clearly there is a fault in the law which is supposed to be fair to both parties. These home buyers believed they had secured a property and were relying on it for a future home or property investment,” said Stacks Law Firm lawyer Anneka Frayne.
Some buyers were finding developers resold their property within hours of the contract being rescinded.
“This problem seems to be confined to NSW as other states have laws which say sunset clauses only apply to the buyer. This is to protect consumers who have bought something which doesn’t yet exist,” Ms Frayne said.
“Some developers’ contracts are deliberately written to be as confusing as possible and contain dangerous sunset clauses buried deep in the detail. I can’t recommend enough the importance of consulting with a specialist property lawyer before signing any off-the-plan contract.”
The NSW government is currently reassessing conveyancing laws to ensure people who have bought a property off-the-plan can’t have it ripped away from them by a developer who delays construction to profit from the higher market.
