Sunset Clause
A clause in an off-the-plan or new-build contract that sets a deadline by which the development must be completed, allowing either party to cancel if the deadline is not met.
What is a Sunset Clause?
A sunset clause is commonly found in contracts for off-the-plan apartments, townhouses, and other new developments in New Zealand. It sets a long-stop date by which the developer must complete the project and settle the sale. If the development is not completed by the sunset date, either the buyer or the seller (or both, depending on the contract) may cancel the agreement.
Sunset clauses are designed to protect buyers from being locked into a contract indefinitely if a development stalls. However, they can also be used by developers in a rising market to cancel contracts and resell at higher prices — a practice that has attracted regulatory attention in Australia and is a concern in New Zealand.
The terms of sunset clauses vary significantly between contracts. Some allow only the buyer to cancel, while others allow either party. The notice requirements and timeframes also differ. Always have your lawyer review the sunset clause carefully.
Why It Matters for Due Diligence
If you're buying off-the-plan, the sunset clause is one of the most important terms in the contract. Understand who can trigger it (buyer only, or both parties), what notice is required, and what happens to your deposit if the clause is triggered.
Be cautious about sunset clauses that allow the developer to cancel. In a rising market, the developer may have an incentive to delay completion, trigger the sunset clause, cancel your contract, and resell at a higher price. Ask your lawyer about protective wording.
How to Check
The sunset clause will be in the sale and purchase agreement for the off-the-plan property. Your lawyer must review this clause carefully and explain the implications. Ask specific questions: Who can cancel? What is the deadline? Is the deposit refundable? Can the developer extend the sunset date unilaterally?
Frequently Asked Questions
What happens to my deposit if the sunset clause is triggered?
In most cases, your deposit should be refunded if the sunset clause is triggered due to the developer not completing on time. However, the specific terms of the contract govern this — always check with your lawyer.
Can the developer extend the sunset date?
Some contracts allow the developer to extend the sunset date by a specified period. Others require buyer consent. Your lawyer should identify any extension provisions and advise you on the risks.
Related Terms
Sale and Purchase Agreement
GlossaryThe legally binding contract between buyer and seller that sets out all the terms and conditions for a property transaction in New Zealand.
Deposit
GlossaryAn upfront payment made by the buyer when purchasing a property, typically 20% of the purchase price, held in trust until settlement.
Settlement
GlossaryThe day ownership of a property officially transfers from the seller to the buyer and the purchase price is paid in full.
Unconditional
GlossaryThe status of a sale and purchase agreement once all conditions have been satisfied or waived, making both parties legally committed to the transaction.
Code Compliance Certificate (CCC)
GlossaryAn official council certificate confirming that completed building work meets the requirements of the building consent and the Building Code.
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