A sunset clause is a clause that you include with any other conditions (like a property valuation, building inspection, or a LIM) in your sale and purchase agreement when buying a house. It is a clause that puts an ‘Expiry Date’ on the offer.
Why Use a Sunset Clause
There are a number of reason sunset clauses are put into sale and purchase agreements - the most common being to put pressure on the vendor to make a decision about your offer, or to ensure you can continue to house hunt, and put offers on houses, if an offer you have submitted is not accepted or rejected within a reasonable timeframe i.e. about 2 days.
If you don’t have a sunset clause your offer remains current until accepted or rejected by the vendor. This can be painful as you may miss out on other opportunities – or you could find yourself having multiple offers accepted if you continue to make offers on other houses assuming old offers were rejected.
When to Use a Sunset Clause
Putting a sunset clause on a sale and purchase agreement is not often done but is a good idea when you want an answer to your offer quickly for whatever reason and especially in tender situations – where your offer may be kept ‘on hold’ until negotiations with someone else are finalised.
How Long Should a Sunset Clause Be?
A good amount of time to make a sunset clause for is approximately 2 working days – with the clause expiring at 4pm on the second day – allowing for paperwork to be processed before close of business if the offer is accepted at the last minute.
If you are making an offer late in the week, try to make sure the sunset clause expires before the open home crowd descends on your potential home on the Sunday – you may not want the competition!
Leveraging the Sunset Clause
The sunset clause gives you some degree of control over the timing of the offer acceptance or negotiations. If the sale and purchase agreement expires – it is not the end - you can always offer again, or extend the sunset clause on the same (or amended) agreement if you want.
If the agreement is accepted after the sunset clause expires, the offer has expired, and no legally binding agreement has been entered into. In this case it is up to you whether or not you want to proceed. You can choose to accept the original agreement or you can resubmit the offer with some changes suitable to you.
Vendors and Sunset Clauses
Sometimes the vendor may put a sunset clause in the sale and purchase agreement – if this is the case – it really pays to get your lawyer to look over it and to explain the implications of the clause.
Sunset Clauses - Get Your Property Lawyers Advice
Don’t forget - like any clause you put in your sale and purchase agreements – whether it is being put in by you or the vendor – get it checked over by your property lawyer!
The Propertytoolbox Home Buyers Guide
After some more great home buying advice – don’t forget to check out our home buying guide!