Home-buyers speak out as developers back out using sunset clauses

PHOTO: Lawyers say sunset clauses to cancel contracts with house buyers are being invoked more. (File image) Photo: RNZ

People desperately trying to get on the property ladder say they are being taken advantage of through the sunset clause.

Lawyers say sunset clauses to cancel contracts are being invoked more, and buyers talk of having land deals cancelled or being called on to stump up extra “contributions” to keep a project on track.

This comes as the escalating price of land and cost of building materials amid supply change crises, makes deals inked months ago less viable or attractive for vendors.

The following four buyers* approached RNZ with their stories about developers backing out following our report last week on sunset clauses.

They each face having to re-enter a housing market where prices are up 24 percent for the year nationally, and over 30 percent in some spots.

‘The developers get away with this’

Manu* believes their “delay” was deliberate – that the developer never intended to sell to them.

He and his partner bought a $600,000 two-bedroom home in west Auckland off the plan in April 2020.

It had a November 2020 completion date and a July 2021 sunset clause.

Sunset clauses are common in off-the-plan deals; they are meant to primarily protect buyers so they can pull out at a certain date, if a project is delayed.

Manu got little communication and saw little construction.

“We could feel that they were trying to delay it because with the house prices going up, it would be so beneficial for them to cancel our contract,” he told RNZ.

Eventually, two months ago, just days before the couple had a new baby and one day after the house’s certificate of Code of Compliance (CCC) was issued, they learned the sunset clause had been invoked.

The Covid-19 period was a risky time to buy, for them and the vendor, he said.

“We wouldn’t have been too upset,” he said.

“We did sign the contract.

“But then they wasted our time – three months later [from the July 2021 date], just to enact the sunset clause at the very last minute.”

They had tried to find a deal with a sunset clause that benefited only the buyer, but no developer would agree.

They do not want to put resources into a legal fight, when what they need is a home, which they guess will now cost at least another $100,000.

“The developers get away with this – all the reward, and no bad reputation.

“Hopefully there will be regulations in the future that protect the buyers more.”