The South Australian Government is proposing changes to South Australia’s property laws aimed at strengthening protections for people buying homes off the plan, particularly where developers seek to use sunset clauses to cancel contracts.
The State Government will consult on legislation that would restrict developers from terminating an off-the-plan contract under a sunset clause without the buyer’s consent or an order from the Supreme Court.
Sunset clauses allow either party to terminate an off-the-plan contract when a development has not been completed by an agreed date. The government says there have been cases where developers have delayed projects until a sunset date, cancelled contracts and then sought to resell properties at higher market prices.
Under the proposed changes, a developer seeking to terminate a contract without the purchaser’s agreement would need to obtain a Supreme Court order establishing that the termination was just and equitable in the circumstances.
The court would consider factors including whether the vendor had acted in bad faith, the reasons for delays and any increase in the value of the property.
Developers who apply to the court would also be required to cover the buyer’s legal costs in the proceedings unless they can demonstrate that the purchaser unreasonably refused to consent to the termination.
The proposed reforms would apply retrospectively to existing off-the-plan contracts that remain current when the changes take effect. The government said this approach is consistent with reforms introduced in other Australian jurisdictions.
The proposed legislation would also place additional information requirements on developers. Buyers would receive more timely information about the expected timing, delivery, costs and viability of a development.
The government is further proposing new rights for purchasers where material changes are made to a project after a contract has been signed.
Developers would be required to notify buyers within 14 days of a material change, including changes to the design or draft plan. Purchasers would then have 14 days to decide whether to accept the change or rescind their contract.
The measures are intended to give buyers greater certainty when committing to an off-the-plan property, while retaining sunset clauses as a mechanism that can protect both parties where projects cannot proceed within agreed timeframes.
Michael Brown said the government had seen cases where buyers were left exposed when sunset clauses were used to cancel contracts.
“People invest their life savings into buying a home only for developers to run out the clock and cancel their contracts in order to sell the same property for a higher price,” he said.
Brown said the government wanted stronger consumer protections alongside efforts to increase home ownership in South Australia.
“Sunset clauses have a place to protect both the buyer and the seller but we have seen clear cases where this has been misused by developers looking to make a quick buck and that is completely unacceptable,” he said.
The proposed changes will now be subject to consultation before legislation is progressed.
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