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Property developers operate in a difficult economic climate. They use exit clauses to terminate off the plan contracts if a project is no longer economically viable. The most well-known are sunset clauses. But they are no longer effective and new exit clauses are needed.  

This article reviews the law – legislation and case studies- relating to sunset clauses in New South Wales and Queensland; and looks at new exit / termination clauses.  

What are sunset clauses and why are they used?

Property developers rely on construction financiers to fund multi-dwelling residential development projects.

Construction financiers require a secure repayment plan, which has these components:

  1. Pre-sales of 70% to 100% of the apartments or townhouses to provide the source of funds to repay the construction finance.
  2. The pre-sales must be genuine – not to related parties.
  3. A deposit of 10% of the price must be paid on the pre-sales contract, to a deposit holder’s trust account.
  4. A fixed time frame for completion of the building work (a sunset date) to cap the financier’s exposure.

A sunset date is inserted into an off the plan (pre-sales) contract in a sunset clause.

The content of a sunset clause is:

  1. The vendor must use all reasonable endeavours to have the Essential Documentation registered, on or before the Sunset Date.
  2. If the Essential Documentation is not registered by the Sunset Date, then either party may rescind this contract by written notice to the other.
  3. The Essential Documentation is the survey plan / strata plan and the occupancy permit. The approval authorities need to be satisfied that the building work has been satisfactorily completed before the plan is registered at the Land Titles Office.
  4. The sunset date is either a fixed date or a fixed period of up to 5 years after the contract date.
  5. If the vendor rescinds the contract under a sunset clause, the purchaser’s deposit is refunded, together with interest received on the investment of the deposit.

Sunset clauses in New South Wales

In New South Wales, section 66ZL was inserted into the Conveyancing Act 1919 to prevent a developer from unreasonably rescinding / terminating an off the plan contract for a residential property after the sunset date for non-completion of the property. It became law on 24 November 2015.

Section 66ZL requires the vendor to give 28 days’ notice of rescission. If the purchaser does not agree, a vendor desiring to rescind an off the plan contract must make an application to the Supreme Court for:

“an order permitting the vendor to rescind the contract under a sunset clause but only if the vendor satisfies the Court that making the order is just and equitable in all the circumstances”.

Case Study

Chong v Tasman 61 BH Pty Ltd [2026] NSWSC 837 (15 July 2026) (Richmond J) Supreme Court of New South Wales

The purchasers sought specific performance of a Contract for Sale for the purchase of a townhouse, garage and car space, purchased ‘off the plan’. The vendor asserted it had validly terminated the contract.

The vendor had extended the sunset date from 31 December 2023 to 31 December 2024 for the reason that “completion of the construction works had been delayed by causes beyond the control of the vendor, including delays due to inclement weather”.

The vendor could have, but did not, rescind the contract relying on the sunset clause after 31 December 2024 and before 6 August 2025. It lost its rights to rescind when the strata plan was registered on 1 August 2025, and an occupancy certificate was issued on 6 August 2025.

Instead, the vendor argued that it was entitled to rescind because there was a special condition in the contract which prohibited the purchaser from registering a caveat (the purchaser had registered a caveat on the property to protect its rights).  

The Court declared the vendor’s Notice of Termination of Contract to be invalid and of no effect and declared the purchasers were entitled to the specific performance of the Contract.

The sub-text in this case was that since the date the Contract was entered into (26 March 2021) the value of the property had increased by between $290,000 and $340,000 more than the purchase price of $1,160,000. If the vendor could rescind, it would re-sell at a profit.

Comment – The Court did not need to determine if it was ‘just and equitable’ for the vendor to terminate the Contract, because section 66ZL was not in issue.

In the decision of Ahmau Developments Pty Ltd v Preet [2025] NSWSC 604 (12 June 2025) Supreme Court of New South Wales, His Honour Justice Parker referred to instances when the vendor’s conduct might not be ‘just and equitable’. He said:

“a connection [must exist] between the conduct and the vendor’s power of rescission. That connection may be direct (such as where the power is exercised for an improper purpose) or indirect (such as where the conduct is used to manufacture a ground for rescission).”

Sunset clauses in Queensland

The law in Queensland is in the Land Sales Act 1984. Specifically, Division 4A Off-the-plan contracts and sunset clauses (sections 19A to 19F) which became law on 22 November 2023.

The law requires a vendor to give 28 days’ notice to terminate the Contract and then make an application to the Supreme Court. The Supreme Court must be satisfied that it is ‘just and equitable’ to do so. Section 19F sets out these matters the Supreme Court must consider:

  1. whether a term is intended to avoid the operation of this division;
  2. whether, in the performance of their obligations under the contract, the seller acted unreasonably or in bad faith;
  3. whether matters beyond the seller’s reasonable control affected—
    1. the seller’s ability to settle the contract; or
    2. to the extent the seller’s business is related to the performance of the off-the-plan contract—the viability of the seller’s business;
  4. whether, in the circumstances, there is a reasonable prospect of the seller settling the contract;
  5. if the seller can not settle the contract, what actions the seller has taken to—
    1. settle the contract; and
    2. minimise the effect of any matter that affected the seller’s ability to settle the contract;
  6. the effect of settling the contract on the seller;
  7. the effect of terminating the contract on the buyer;
  8. the extent of the buyer’s performance of their obligations under the contract;
  9. whether the proposed land the subject of the contract has increased in value;
  10. any other matter the court considers relevant;

Case Study

Malligan v Chevron Apartments Pty Ltd; Cantavenera v Chevron Apartments Pty Ltd [2026] QSC 195 (21 August 2026) (Freeburn J) Supreme Court of Queensland.

Chevron owned land on Chevron Island on the Gold Coast on which it intended to develop a 40-storey building with over 230 residential apartment lots.

It sold apartments off-the-plan. On 7 April 2021, it sold Unit 1305 to Mr Cantavenera and Ms Solomia for $840,000; and on 19 May 2021, it sold unit 703 to Ms Malligan for $760,000. The Contracts contained a sunset clause with a sunset date 5 years after the Contract Date.

Chevron relied upon the sunset clause to terminate the Cantavenera contract on 21 April 2026, and to terminate the Malligan contract on 22 May 2026.

At the date of termination, the building looked to be complete. The remaining activities looked to be landscaping.

As the Contracts were entered into before Division 4A became law, it did not apply to this situation.

The sunset clause was:

“Subject to clause 16 and the Buyer complying with its obligations under clause 11.4(a), [Chevron] must establish the Scheme, register the Plan and effect Settlement under this Contract by the Sunset Date.”

The Court gave the clause its ‘natural and plain meaning’. The word ‘must’ means more than ‘use reasonable efforts’, it is an obligation. Chevron must have satisfied the pre-conditions – establishing the Scheme and registering the Plan to rely on the sunset clause. Nor were Chevron or the Buyers “materially prejudiced” by the increase in the market value of the units since the Contracts were entered into.

The Court concluded that Chevron was not entitled to terminate the Contracts.

New termination clauses

The analysis of the law in New South Wales and in Queensland demonstrates that Purchasers (in NSW) and Buyers (in Qld) are protected to a large extent against property developers who sell off-the-plan and rely upon sunset clauses to terminate Contracts after the sunset date. The intent is to discourage developers from delaying completion beyond the sunset date, terminating the Contract, and re-selling the property at a higher price.

But there are many legitimate reasons why a property developer might desire to terminate an off the plan Contract at an earlier date – before the sunset date.

New clauses are starting to appear in off the plan Contracts which give the property developer a whole range of termination rights exercisable before the sunset date.

This is an edited example (from a Queensland Contract):

Without limiting any of the Seller’s other Rights, the Seller may terminate this Contract at any time before the Settlement Date / Sunset Date by notice to the Buyer if:

  1. the Seller does not obtain finance for the Development;
  2. the cost of constructing the Development will not result in a reasonable return for the risks and efforts of the Seller in carrying out the Development;
  3. the Seller deciding that a change in market conditions adversely affects the profitability of the Development and it is not commercially viable;
  4. the Seller does not obtain on terms entirely satisfactory to it, any of the Approvals for the construction of the Development;
  5. if a condition of approval would require a substantial change in construction;
  6. the Seller is unable or unwilling to comply with any requirement of any Approval;
  7. the Seller is unable to construct a Building or establish the Scheme;
  8. if an Authority refuses to seal or register the Plan;
  9. if the Development cannot be completed due to a dispute with, insolvency or default of a building contractor or other party;
  10. if the Seller is of the opinion that the construction of the Scheme, a Building or a Lot will not be able to be completed before the Sunset Date;
  11. a Building or the Lot is destroyed or subsequently damaged before the Sunset Date;
  12. the Buyer is insolvent, if a person dies, is sentenced to prison for more than one year or is of unsound mind.

Comment – apportioning the risks in a property development

Sunset clauses are designed to apportion the risk between vendors and purchasers of the property development not being completed.

Multi-dwelling property developments can take 2 or 3 years to be built. This is after planning approvals are obtained, which can take 1 to 2 years. Therefore, property developers must fix a price at a sufficient premium to market value to cover the risk that approvals are delayed, building costs increase, and interest rates increase when setting prices for pre-sales to make the development project commercially viable. That is the property developer’s risk.

Purchasers must factor in the opportunity cost of waiting up to 5 years for the approvals to be obtained and the building to be completed. If owner-occupiers, the opportunity cost is that they continue to pay rent for longer than they expected. If investors, the opportunity cost is that they miss out on other investment opportunities, because they tie up their borrowing capacity to purchase the off the plan property. That is the off the plan purchaser’s risk.

The new termination clauses reduce the property developer’s risk. The response of the legislature may be to extend the sunset clause laws to cover new termination clauses which are used before the sunset date, so as to restore the apportionment of risk between property developers and off the plan purchasers.