PHOTO: A row of houses under construction. (Source: undefined)
The situation has prompted lawyers to begin work on a safer contract in a market plagued by unprecedented pandemic disruptions.
Sunset clauses have typically been used for houses and apartments bought off-the-plan, primarily to protect buyers by allowing them to pull out at certain points from a project suffering long delays.
They also help protect vendors – but some are now using them to void contracts, to resell at a higher price in a rapidly rising market, leaving the buyer stranded.
One buyer, who RNZ agreed not to name, signed in April to buy a $630,000, three-bedroom home in Rolleston, with a November delivery date.
In August, the builder cancelled.
“I put my trust in the builder, put my trust to [sic] my lawyer, and then to turn out something like this,” the father of two young children said.
“It’s not fair, it’s really not fair – and then I need to spend more money for a similar house for August, compared to April.”
The family has just bought an existing house, smaller than the one they were cancelled from, for more than $800,000.
“I was too naive,” the man told RNZ.
Auckland property lawyer Joanna Pidgeon has witnessed four such ‘sunsetting’ attempts herself, and heard from four other lawyers around the country about others.
“What we’re seeing is … instead of the clause being there for the benefit of a purchaser, some vendors are cancelling agreements, taking advantage of rising prices, and on-selling properties for more money,” Pidgeon said.
“Having thought they’ve put their foot on the ladder on the property market, they [buyers] can get it ripped away.
“And they have no control over that, if that clause is in there.”
The founder of Canterbury firm, the Property Factory which matches vendors to buyers, Campbell Venning, is witnessing similar.
“Some companies … are actually out there using it as an excuse to resell the land, or the properties for significantly more in a fee-gouging or a price-gouging exercise,” he said.
It was hard to prove, but it was happening.
“We’ve seen people that have sold properties a year ago. They’re waiting for their property to be delivered. It hasn’t been delivered. And now they’re struggling to get into the market,” Venning said.
“And those are the people that we really feel for.”
Sunset clauses abound in multiple legal formats in New Zealand contracts, unlike in NSW and Victoria which have clamped down on or banned them.
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