Off-the-plan in Victoria: the developer can't simply cancel under a sunset clause

What is a sunset clause?

A sunset clause sets a deadline — the "sunset date" — by which the plan of subdivision must be registered or an occupancy permit issued. If the deadline passes, the clause allows the contract to be rescinded. The Sale of Land Act 1962 (Vic) defines it as follows:

“sunset clause means a provision of a residential off-the-plan contract that provides for the contract to be rescinded if— (a) the relevant plan of subdivision in respect of the lot has not been registered by the sunset date; or (b) an occupancy permit has not been issued in respect of the lot by the sunset date”

— Sale of Land Act 1962 (Vic) s 2(1)

Sunset clauses exist for a legitimate reason: a buyer should not be locked into a contract for a development that never gets built. The problem was that some developers used them in reverse — deliberately letting a project run past the sunset date in a rising market, cancelling the contracts, and reselling the same lots at higher prices. The Sale of Land Amendment Act 2019 was passed to stop exactly that.

The developer now needs your written consent

Sections 10A to 10F of the Act now strictly control how a vendor (the developer) may rescind a residential off-the-plan contract under a sunset clause. The starting point is section 10B(1): a vendor must not rescind under a sunset clause except as provided in the Act. The core protection is in section 10B(3):

“Before rescinding a residential off-the-plan contract under a sunset clause, the vendor must obtain the written consent of each purchaser to the rescission after giving each purchaser, at least 28 days before the proposed rescission, written notice setting out— (a) the reason why the vendor is proposing to rescind the contract; and (b) the reason for the delay in the registration of the plan of subdivision or the issuing of the occupancy permit; and (c) that the purchaser is not obliged to consent to the proposed rescission.”

— Sale of Land Act 1962 (Vic) s 10B(3)

Three things follow. First, the developer must give you at least 28 days' written notice before any proposed rescission. Second, the notice must explain both why they want to cancel and why the project is late. Third — and this is the part many buyers do not realise — the notice must tell you expressly that you are not obliged to consent.

You are allowed to say no

Consent is genuinely voluntary. Section 10F goes further: the sunset clause itself must state that you have the right to consent but are not obliged to, with penalties of up to 240 penalty units for an individual and 1,200 for a company if the clause omits these statements (for contracts signed after that section commenced). If you refuse consent, the contract stays on foot — the developer's only remaining path is the Supreme Court.

The developer's only other option: the Supreme Court

Under section 10E, a vendor who cannot obtain consent may apply to the Supreme Court of Victoria for an order permitting rescission. The Court will only make the order if satisfied it is just and equitable in all the circumstances, and the Act directs the Court to consider, among other things:

• whether the vendor has acted unreasonably or in bad faith;
• the reason for the delay, and the likely date the plan will be registered or the occupancy permit issued;
• whether the lot has increased in value — the very incentive the reform targets;
• the effect of the rescission on each purchaser.

Two further features tilt the field toward the buyer. The Court may order reasonable compensation for the purchaser as a condition of allowing rescission. And under section 10E(5), the vendor is liable for the purchaser's legal costs of the proceeding unless it can show the purchaser unreasonably withheld consent.

A cancellation that breaks the rules is a breach of contract

Section 10D puts it plainly: a purported rescission in contravention of these provisions is taken to be a breach of the contract. That opens the usual contractual remedies for the buyer — which is a very different position from before 2019, when a developer could often point to the clause and simply refund the deposit.

Does this apply to older contracts?

Largely yes. The transitional provision (section 54) applies the section 10B restrictions to residential off-the-plan contracts entered into before the amendment commenced, so long as the contract was still in force at commencement — subject to an exception for court proceedings already on foot at that time.

Your own exit rights as the buyer

The reform restricts the developer, not you. Under section 9AE(2), if the plan of subdivision is not registered within 18 months of the day of sale (or the longer period your contract specifies), you may rescind the contract and recover your deposit. Consumer Affairs Victoria also confirms that an off-the-plan deposit is capped at 10% of the contract price.

Received a rescission notice? Do this before signing anything

• Do not sign the consent form reflexively — consent is optional, and once given it is very hard to undo.
• Use the 28 days. The notice period exists so you can take advice.
• Test the stated reason for delay: ask for evidence of the registration or occupancy-permit timeline.
• Check the market: if the lot is now worth more than your contract price, that fact works in your favour, both in negotiation and before the Court.
• Consider the whole position — some buyers are better off taking a negotiated settlement; others should hold the developer to the contract.

Our property and construction team acts for off-the-plan purchasers across Melbourne in both English and Mandarin. If you have received a sunset-clause notice — or want your contract reviewed before you sign — we can assess your position quickly.