Kurralta Park townhouse developer accused of exploiting ‘sunset clause’ amid property boom

Home buyers who had their contracts cancelled after years of delays have taken up their fight in court, and have a warning for other prospective owners.

Home buyers who had their contracts cancelled after close to three years of delays at a Kurralta Park townhouse development have taken up their fight in court, and are warning others of the rising risk of so-called “sunset clauses”.

Prameykant Kakkad and Arun Vashishta are also calling for changes to the state-based legislation that governs sunset clauses.

Such clauses are commonly used in off-the-plan residential contracts to enable a developer or homebuyer to pull out of the contract if a project is not completed by a pre-specified deadline, known as the sunset date.

In their statement of claim filed in the District Court, Mr Kakkad and Mr Vashishta say they entered contracts to acquire two townhouses in the Anzac Highway development in September 2020, agreeing to a sunset date of December 29, 2022.

With construction yet to be completed by that date, the developers terminated the contracts a couple of weeks later on January 10.

Prameykant Kakkad, wife Tejal Kakkad and daughter Dhairya Kakkad outside the Kurralta Park development. Picture: Dean Martin

However Mr Kakkad and Mr Vashishta have accused the developers of deliberately stalling construction in order to trigger the sunset clause, allowing them to resell each townhouse for a price much higher than the $399,000 they’d negotiated, following a boom in property prices.

In the proceedings brought against developers Ameronix Pty Ltd and Treana Holdings Pty Ltd, and real estate agent Prohomes Realty, Mr Kakkad and Mr Vashishta are seeking orders that they be given the right to acquire the townhouses, or alternatively damages for breach of contract, misleading and deceptive conduct and/or unconscionable conduct.

Mr Kakkad said he was “fighting for my justice”, and securing ownership of the townhouse remained the priority.

“I was a lawyer in India and this sunset clause is not in favour of the consumer,” he said.

“If they (developer) cancel the contract what can the consumer do? This was our first dream house – it is not fair and it must be in the consumer’s favour, not the developer’s favour.

“My family is emotionally attached to the house because we live in the same area, me and my wife both work nearby and I wanted to send my daughter to Adelaide High. I need this house – that is my priority.”

Mr Vashishta said his family had been left “in shock and depression” after being left without a new home after years of anticipation.

“We’ve waited so long – it is going to be three years since we signed the contract,” he said.

“This sunset clause is simply to safeguard them (developer). If Covid and other things mean there’s changes then they (developers) should mark up the cost and take a genuine cost from us. A little bit more extra profit – but not like this. Not terminate the contract after two and a half years.”

In its defence, the developers say the Kurralta Park project was not completed by the sunset date due to the unavailability of materials and labour, and they remain willing to refund each $19,950 deposit paid by the two purchasers.

Prohomes Realty, in its defence, denies there were any unfair terms in the contracts or that it engaged in unconscionable, misleading or deceptive conduct when negotiating the sales of the two townhouses.

It says the purchasers were made aware of the special conditions within the sunset clause, and their signing of the contracts proved they were aware of their rights, and the rights of the developers, to pull out of the contracts under those conditions.

State governments in NSW, ACT and Victoria have introduced legislation that prevents developers from exploiting sunset clauses by unreasonably terminating contracts part-way through construction.

Mark Gustavsson of Mark Gustavsson & Associates, who’s acting for the two families, says the risk to consumers is higher during times of rising house prices, and he’s calling for similar changes to protect South Australian home buyers.

“Other states provide stronger protection through tighter regulation on sunset clauses,” he said.

“South Australia needs to take better steps to protect consumers to construction contracts.”

However a state government spokeswoman said any changes were unlikely in the short-term.

“While there have been concerns about the use of these clauses in eastern states, the number of complaints received by CBS has been relatively small,” she said.

“At this stage, there are no plans to change the regulation of sunset clauses in South Australia, however the situation will be closely monitored.”