Sunset clauses are an incentive for developers to crash apartment contracts. Action is needed now

In the midst of a well publicised housing shortage, cost of living crisis and uncertain future for interest rates, a gaping loophole in property law is making a dire problem worse. Here’s what needs to happen

In the midst of a well publicised housing shortage, cost of living crisis and uncertain future for interest rates, a gaping loophole in property law is making a dire problem worse.

Buyers of hundreds of apartments currently under construction on the Gold Coast, who signed contracts before an unexpected pandemic property boom, are now at risk of losing them.

A single line in their contracts with developers, which allows either party to cancel a contract if construction has not completed by an agreed date, has already cost some buyers their dream of home ownership or a comfortable retirement.

In the context of apartments whose value has soared as much as 88 per cent, these “sunset clauses” are a perfectly legal multi million-dollar incentive for developers to delay construction and cancel contracts.

Builders collecting tools and equipment, being watched by security, and leaving the Midwater building site at Main Beach, where buyers fear sunset clauses will cost them. Picture: Glenn Hampson

While excellent for developers, the impact on the pre-sale buyers they relied on in the first place is devastating.

Retirees, who planned their whole lives for an apartment near the beach, now face renting in an expensive and uncertain market.

Young couples and families who saved for years, missing holidays, going without so they could scrape together a deposit, are finding themselves completely priced out.

The same apartments, back on the market at 50, 70 or 90 per cent higher prices, in turn put upward pressure on prices generally, while the buyers who missed out are back to househunting, further straining demand.

It’s one thing for the comments section peanut gallery to preach about never buying off the plan but the simple fact is most of these projects wouldn’t progress beyond an artist impression without deposits and commitments from these buyers – the banks just aren’t that risk tolerant.

And who could blame developers for making a perfectly legal business decision to almost double their revenue?

A development by Draycon at Chevron Island on the Gold Coast has been all but abandoned near completion.

Luckily this problem – which can only be expected to intensify as sunset dates fall due for 2021-22 contracts in the next 12 months – has an easy fix.

In fact, it’s been done before.

The Queensland Government did change the rules around sunset clauses for pre-sales in November last year – but only for land purchases.

Contracts for land may now not be cancelled unless both parties agree in writing, or an order is made in the Supreme Court. But why did they stop at land?

Cost escalations have certainly had a significant impact on profitability for builders and developers, and reasonable variations to initial contracts are to be expected.

But in a State Election year, locals will be looking to who is willing to close this loophole before more people are burned.