When you buy a property off the plan, the contract will always include a sunset clause. This provides a maximum time limit for the building project to be completed, and in cases where the time limit elapses then buyers are able to have their deposits refunded and the sale becomes void. These are included in off the plan contracts to ensure the interests of both parties are protected in the event that construction time extends beyond the agreed date.
Why is a sunset clause necessary?
A sunset clause serves two main purposes. For the developer, this provides them with some breathing room to complete the project. Often these dates are set well after the estimated completion date, so this allows room for setbacks that are out of the developer’s control, such as weather conditions or delayed materials.
For buyers, the sunset clause provides some security in terms of when they can expect the property to be completed. This will assist them in planning for the future, whether it be finance, accommodation, or tenancy related – it’s good to have an idea when your property can be put to their intended use. If the agree time period for the sunset clause elapses prior to completion, the buyer’s deposit is returned and they will no longer be legally bound to purchase the property.
A sunset clause provides the buyer with security and the developer with some breathing room.How long is a sunset clause?
The length of a sunset clause varies depending on what sort of development you are buying off the plan as well as how far into the project you buy in. If you’re buying a town house, chances are the clause will be far shorter than if you’re purchasing an apartment in a high rise. Generally speaking, a sunset clause will be between 12 and 36 months.
Are there any risks involved?
There are a few risks, however these should not be viewed as any more or less dangerous than any other type of property investment. The biggest risk to buyers is if and extended sunset period wraps up and their refunded is deposited after several years and they have nothing to show for their investment. Additionally, property prices may have continued to increase in the meantime and your original deposit may no longer be enough to secure a similar property.
If the period elapses and both buyer and developer are still happy with the terms, they can resign and set a new sunset period. For more information about buying property off the plan, get in contact with 88 International today.