Can Developers Cancel My Contract? Sunset Clauses Explained
- Ryan Smith
- Aug 11, 2022
- 4 min read
Updated: Aug 5
Sunset clauses are widely talked about, but often misunderstood. So, what are they, and how do they affect you?
This is a common concern, especially among first-home buyers and early-stage investors.
You’ve probably heard a story about a developer cancelling an off-the-plan contract after months of waiting. And yes, it happens. But it’s not as simple (or sinister) as it might seem.
If you're buying a property that hasn’t been built yet, it’s critical to understand how these contracts work and how to protect yourself.
Let’s start with the most misunderstood clause: the sunset clause.
What Is a Sunset Clause?
Depending on how the clause is written, a sunset clause gives either party the ability to cancel the contract if the development isn’t completed by a certain date.
It’s designed to protect buyers and developers alike when timelines get stretched, due to delays with:
Council consents
Procurement and supply chain issues
Labour shortages
Project funding
Pre-sales requirements from lenders
In most cases, sunset clauses aren’t a trap; they’re a standard part of the development process.
The Role of Pre-Sales and Funding
To get funding from a bank or non-bank lender, most developers need a minimum number of “qualifying pre-sales.” These are sales that meet specific terms:
On standard (not “builder’s”) terms
With a 10% deposit held in a trust account
Sold to individuals (not companies)
With a sunset clause of at least 2 years
Yes - at least two years. Why? Because that’s what banks typically require to reduce their risk.
In most cases, off-the-plan build timelines are roughly 12 months from when sales commence to completion, so a two-year sunset clause allows for one year of contingency on the build being finished.
This is where confusion often starts: buyers mistake the sunset clause date for the expected completion date. But the two are different.
The sunset clause is the final longstop, not the delivery date.
Long Sunset Clauses Can Be Safer
It may feel counterintuitive, but short sunset clauses (e.g., 3–6 months) can be riskier for buyers.
Why? Because if the developer hasn’t finished within that short window, they may be able to cancel the contract quickly, and resell at a higher price if the market has moved.
Longer clauses (e.g., 1.5–3 years) give both parties more certainty that the contract will hold through the normal bumps in the road during construction.
Watch the Wording: Who Has the Power?
One of the most important things to check is who can activate the clause.
Is it only the vendor?
Only the purchaser?
Or can both parties cancel?
Some developers will push for sunset clauses that favour them, while others are fair and balanced. This is exactly where your lawyer earns their fee.
Final Word
Sales & Purchase Agreements can be long, complicated documents, so it's important to stay on top of all the key clauses. You can read more about these clauses via our article here.
Sunset clauses aren’t inherently dangerous. But poorly worded ones can be.
Make sure you understand:
What triggers the clause
Who holds the power
And how it fits into your timeline and risk tolerance
Working with an advisor, a mortgage broker, and a property-literate lawyer will make all the difference.
If you’re looking at off-the-plan investments and want a second set of eyes, we’re here to help.
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