A financial advisor says buyers of new builds can easily avoid being burnt by a sunset clause, by ensuring developers cannot benefit from it.
An apartment building under construction in Wellington Photo: RNZ / Angus Dreaver
The so-called 'sunset clause' is meant to protect buyers from unreasonably long delays in completing a project.
However, they had been increasingly used by some developers to cancel off-plan property contracts, usually to get a better price from another buyer, amid rising prices to cover building supplies and project delays.
"If you are buying off-plan and the contract includes a sunset clause favouring the developer, you should insist it is removed. If the developer won't remove the clause, run a mile," Advice Hub director Dylan Mann said.
Mann, who also owned a Harcourts Franchise in Auckland, said a real estate agent should not allow a sunset clause favouring a developer to proceed.
"A good lawyer, who is experienced in handling off-plan property purchases, will cross it out."
Mann said a recent case involved a developer who agreed to remove the clause, but then attempted to invoke it after there were delays in completing the project.
"The client told them to carry on building because they do not mind waiting."
Mann said it was unethical for developers to cash-in on a sunset clause because property prices had increased since the contract was first signed.
"Most developers have every intention of finishing on time. They have costed their development and are acting in good faith."