Sunset Clause Off the Plan Purchase: What You Need to Know

Welcome to our blog post about the sunset clause off the plan purchase. If you're considering buying a property off the plan, it's important to understand the implications of the sunset clause. As an Australian mortgage broker, we want to provide you with all the information you need to make an informed decision. In this blog post, we'll cover the key points you need to know about a sunset clause off the plan purchase, and explain what you need to consider before making such a purchase. So, let's get started!

What is a Sunset Clause & How Does It Work?

A sunset clause is a contractual provision within an off the plan purchase that outlines the date by which the property must be settled. This is to ensure that the purchaser is completing the purchase in a timely manner.

When entering into an off the plan purchase agreement, the purchaser will agree to a sunset clause that will stipulate the date by which the purchase must be settled. This clause is normally included in order to protect the vendor (seller) from any delays in settlement. Failure to settle by the specified date can result in the termination of the contract and the seller being able to keep any deposits made.

When considering an off the plan purchase, it is important for the purchaser to be aware of the sunset clause and ensure that they can settle the property by the specified date. It is important for the purchaser to understand any potential risks associated with the sunset clause and consider all available options.

It is also important for the purchaser to understand their rights and obligations under the contract. This includes being aware of any cooling off periods, as well as any additional costs associated with settling the property after the sunset clause date. The purchaser should also consider whether they have sufficient funds available to settle the property before the date or if they require finance to do so.

In Australia, it is important for the purchaser to be aware of any state or territory-specific legislation that applies to off the plan purchases. This legislation may impose additional restrictions and requirements on the sunset clause and the purchaser’s obligations when settling the property.

When considering an off the plan purchase, it is important for the purchaser to understand the implications of the sunset clause, and ensure that they can meet their obligations by the specified date. Understanding the risks associated with the clause and being aware of any applicable state or territory legislation can help the purchaser make an informed decision when entering into an off the plan purchase agreement.

Benefits & Risks of a Sunset Clause Purchase

Sunset Clause Off the Plan Purchase: What You Need to Know – Benefits & Risks

When deciding whether to purchase a property off the plan, it is important to understand the benefits and risks associated with a sunset clause purchase.

Benefits

The primary benefit of a sunset clause purchase is the ability to secure the property at a fixed price without the risk of the property increasing in value before settlement. This can be especially advantageous in an uncertain or volatile market.

A sunset clause also provides the buyer with the ability to get out of the contract if the developer fails to meet the agreed timeline for completion. This is important as it may mean the buyer can avoid being liable for additional costs such as stamp duty or interest that may arise if the property is not completed in the agreed timeframe.

Risks

The primary risk of a sunset clause purchase is the potential of the property increasing in value before settlement. Buyers should be aware that depending on the market, they may end up paying more than the market value for the property at the time of settlement.

Another risk is the developer not meeting the timeline for completion, which could result in additional costs for the buyer. Buyers should ensure they understand the timeline for completion and the consequences of the developer missing the deadline.

It is also important to be aware of any potential changes to your financing circumstances. If the buyer is unable to obtain finance for the purchase at the time of settlement, they may be liable for the full purchase price of the property.

Overall, a sunset clause purchase can be a great way to secure a property at a fixed price and mitigate the risk of the property increasing in value. However, it is important to be aware of the potential risks and ensure you understand the timeline for completion and the consequences of the developer missing the deadline.

How to Research a Property with a Sunset Clause

Researching a property with a sunset clause can be a tricky process, but it is important to do your homework in order to make sure you make the right purchase.

Firstly, it is important to understand exactly what a sunset clause is. A sunset clause is a condition in a contract that sets a fixed date at which a particular clause will become null and void. In the case of an off-the-plan purchase, this means that the buyer gains the right to purchase the property within a certain period of time, after which the contract expires and the buyer loses the right to the property.

When researching a property with a sunset clause, it is important to understand the terms and conditions of the contract. Make sure to read through the contract thoroughly to ensure that you are aware of any restrictions or obligations imposed by the sunset clause. Pay particular attention to the date of the clause, as this will determine how long you have to complete the purchase.

It is also important to research the local area and the surrounding properties. This will help you to understand the local property market and assess the likely future value of the property. Consider factors such as the condition of the area, the proximity to amenities, and the expected population growth of the area.

When researching a property with a sunset clause, it is also important to consider the financial implications of the purchase. Make sure that you have the funds available to complete the purchase, and that you can meet the repayment terms of the loan if taking out a mortgage. Also bear in mind that a sunset clause could affect the lending terms of a loan, so you should speak to a financial advisor or mortgage broker for advice.

Finally, when researching a property with a sunset clause, it is important to seek legal advice. An experienced legal professional can help you understand your rights and obligations under the contract, identify any potential risks, and advise you on the best course of action.

By doing your research and seeking advice from qualified professionals, you can ensure that you make an informed decision when it comes to purchasing a property with a sunset clause.

How to Finance a Sunset Clause Property Purchase

When it comes to financing a sunset clause property purchase, there are a few things to consider. Firstly, it is important to understand that a sunset clause property purchase is essentially just like any other property purchase. The main difference is that the sunset clause means that the purchase agreement will expire within a certain timeframe.

For most purchasers, this will mean that they need to secure finance before the purchase agreement expires. As such, it is important to ensure that you have applied for and been approved for finance before the sunset clause kicks in. This can be done through a number of lenders, however, it is important to note that not all lenders offer finance on sunset clause purchases.

When applying for finance for a sunset clause purchase, it is important to remember that the loan must be approved and the funds must be released before the purchase agreement expires. Furthermore, it is important to note that the lending criteria for a sunset clause purchase may be different to that of a normal property purchase. As such, it is important to ensure that you meet the criteria of the lender to ensure successful finance approval.

It is also important to remember that regardless of the purchase type, getting pre-approval for a loan is always recommended. This will give you peace of mind that you can move forward with the purchase, even if the sunset clause is approaching.

Finally, it is important to remember that a sunset clause property purchase may be subject to stamp duty and other fees. As such, it is important to ensure that you have taken these into account when budgeting and applying for finance.

In summary, when financing a sunset clause property purchase it is important to ensure that you have applied for and been approved for finance before the purchase agreement expires. It is also important to remember that the lending criteria for a sunset clause purchase may be different to that of a normal property purchase. Additionally, it is always recommended to get pre-approval for a loan and to remember that a sunset clause property purchase may be subject to stamp duty and other fees.

We understand you and we want to help

At Ello Lending, we understand that buying property off the plan can be a complex process. We are here to help you every step of the way, so if you have any questions or would like to discuss your options further, please don’t hesitate to contact us. We’d love to help you make the most of an off the plan purchase, and ensure that you are well informed before taking the plunge.