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Sunset Clause Meaning & How Can It Benefit You?

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So, you’ve decided it’s time to find a new place to live because you need to downsize, upsize or even relocate to a new location. This post is about adding a Sunset Clause which is designed to protect both the seller and buyer in such situations!

Regardless of the scenario, the decision to purchase and also sell around the same time requires choosing the right course of action to ensure a smooth transaction with as little stress as possible. Do you buy or sell first?

Sunset Clause in Contract Vs Bridging Finance or Homelessness

You could look seriously at what bridging finance options are available or risk the chance of briefly becoming homeless if transaction dates don’t coincide. Are you aware that there is another option known as a ‘sunset clause’ that may be worthwhile considering? Not all real estate agents will inform you of this option, so be sure to ask about it.

What is a Sunset Clause?

A real estate sunset clause is a special sentence in the sales contract that puts a time limit on the contract’s validity. Both parties have the right to terminate the agreement if a settlement has not been reached by the end date specified in the clause. *This means that your offer is subject to the sale of your existing property.

Seller & Buyer Sunset Clause Benefits

Few sellers will be happy to take their home off the market while you try to, hopefully, land a contract on your house. The seller’s main concern is that in doing so, chances to work with another interested buyer and/or get a higher price may be missed.
Regardless of how compelling an offer may be, the seller may decide to reject it. That’s where a sunset clause comes in rather than ending up in the supreme court if by chance things go wrong.

What Can Go Wrong if a Buyer Fails to Sell in Time?

A contract of sale falls under property law, and should it occur that a buyer fails to sell their current property before the date specified on the property contract of sale, without a sunset clause the buyer cannot simply walk away from the contract as the house is in fact sold. How Does a Sunset Clause Protect Buyers & Sellers?

While you are going through the process of getting a contract on your current house, a sunset clause will allow the seller to keep marketing their property in the hopes of finding another buyer.

Sunset Clause Explained Allowing Buyer to Rescind the Contract

A properly constructed sunset clause consists of a subject-to-sale provision with very specific time limits and the consequences clearly defined should those time limits be reached. The sunset date is the specific date by which the buyer(s) need to have a contract on their current property.

A sunset clause will ensure that the seller doesn’t lose any chances to sell their house, while also allowing buyers to sell their current home without the worry of having to physically own two properties in the process.

If the seller manages to get another offer for their property, and you still haven’t secured a contract on yours, you will be given fair notice and first options as to your preference to either going ahead or completely cancelling the contract and walking away from the property.

If the roles were reversed and you were the seller and your agent presented you with a subject-to-sale offer, you would want to make sure the contract had a well-drafted sunset provision.

What is a sunset clause in real estate? 

The sunset clause is a statement in the contract of sale that effectively puts a time limit on the contract’s validity—

Sunset Clause Examples

Sale by Private Treaty: A buyer of an existing property can agree with the seller that the settlement of the transaction must happen within 30 days, if not, the deal is off.
When Buying off the Plan Sunset Clauses / Property Developers: A buyer of a property agrees with the developer that the new property must be built by a certain date, if not, the buyer can walk away from the deal.
New Homes: The parties may agree that a buyer will have an obligation to buy a property within 60 days after receiving notice from the builder that the property is built according to specification.

Always Get Legal Advice Before Signing a Contract

Although sunset clauses are a great option for buyers and sellers in certain situations, it is always advisable to get legal advice before signing any contract regardless of if it contains a sunset clause or not. However, a professional and experienced real estate agent should be able to walk you through the advantages and disadvantages of this type of sale.

If you have additional sunset clause QLD questions, feel free to call our office on 07 4125 6692 or email me at admin@propertybrokerage.com.au. I’m always happy to assist you with your local Hervey Bay real estate needs.

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