Delays with off-plan properties and cancellation of agreements
Turner Hopkins' property litigation team has seen increased enquiries from clients involved in residential property development disputes. These predominantly concern delays in construction over the past couple of years, and a rise in cases where the sale agreements are being cancelled. Sunset date clauses or force majeure clauses are often cited.
The challenges frequently relate to market conditions such as material and labour shortages, covid delays, increasing property prices, and high demand for quality housing stock.
Instances have occurred where building materials and costs have increased, and developers have attempted to pass these costs on to their purchasers by explaining they will be unable to finish the build without further funds.
Some developers have tried to invoke a "sunset date clause" to cancel the property sale agreement so that they can re-list the property at an inflated price due to capital gains over the development period.
Our property litigation team led by Catherine Pendleton (Principal - Litigation) assists purchasers and developers in navigating these issues and advises on their legal options and appropriate strategy to resolve any dispute either before or after a cancellation.
We recently achieved success for a client at the High Court. Our client (a property purchaser) was seeking an order of the Court against a developer that had cancelled an agreement in accordance with a sunset clause. It was deemed that the developer (the vendor) did not have a strong legal case to support this action. Our team applied for an urgent summary judgement from the High Court, resulting in an out-of-court settlement for the property sale to proceed as per the original terms.
Experience tells us that every case can be different. There could be several influencing factors, including the specific terms of the property sale agreement, as well as issues related to construction completion delays.
Can I cancel my off-plan agreement?
When trying to cancel a contract, parties often rely on two clauses in off-plan agreements: a sunset date clause or a force majeure clause.
A sunset date clause states that if a specified event (usually the completion of the build, issue of title and/or code of compliance certificate) has not occurred by a specific date, then at least one of the parties can cancel the agreement by giving written notice to the other.
A force majeure clause in an off-plan agreement will potentially apply if an unanticipated event occurs beyond the parties' control.
Every off-plan agreement for sale and purchase should be reviewed carefully to determine what rights and flexibility the parties will have. Each development is different, and there is no universal off-plan agreement used by every developer. The sunset date clause and force majeure clause come in many forms, and the meanings, rights and obligations for either or both parties can vary markedly.
If you are considering entering into an off-plan agreement to purchase a property, it is vital you seek comprehensive legal advice about the potential risks. If you have an active agreement, whether you are a developer or a purchaser, we strongly recommend that you review it and seek legal advice before taking any actions that might indicate an intention to cancel.
This is a specialised and developing area of law. Obtaining the appropriate advice from an experienced and highly regarded property team could be invaluable.
Remember, the team at Turner Hopkins is here to help. If you have any questions or concerns about the topics raised in this blog, please contact our team below.