Developers of residential off the plan projects in New South Wales could now need permission from the Supreme Court to enact a sunset clause.

New legislation passed the NSW Parliament last week which now requires developers to gain consent of the purchaser if they wish to rescind an off the plan agreement by use of a sunset clause.

If consent is not given, the developer will have to justify their position to the Supreme Court before the agreement can be terminated.

Previously, sunset clauses could be enacted by either party if work on the project was significantly delayed, and the government had expressed concerns rapid capital growth was encouraging developers to deliberately slow construction to allow them to rescind agreements and resell the developments at a higher price.

“The NSW Government has listened to the community’s concerns and acted swiftly to provide home buyers with greater certainty,” NSW Minister for Innovation and Better Regulation Victor Dominello said.

“Any developers who are thinking of acting unethically should know that their behaviour will no longer be tolerated,” Dominello said.

Dominello said a developer appealing to the Supreme Court for permission to enact a sunset cause will have to prove that it is being used in a “just and equitable” situation.

The new laws are backdated to come in effect from 2 November, but Dominello said they also apply to agreements entered into before that date as well.