New editions of the Contract for Houses and Residential Land and Contract for Residential Lots in a Community Title Scheme are set to be released on 20 January 2022.
There are a number of changes being made to the Contract, the most significant being the inclusion of clause 6.2, which allows either party to extend the settlement date by up to five business days.
If you have been keeping up with the news, you may already be aware of what has prompted such a change. Late last year a young Brisbane couple lost their $75,000.00 deposit after their bank failed to meet the settlement deadline. In Queensland, the settlement date is deemed to be an essential term of the Contract of which “time is of the essence”. This means that, prior to the introduction of the new clause 6.2, if a buyer was unable to settle by 4pm on the agreed settlement date, the seller would typically have grounds to terminate the Contract and forfeit the buyer’s deposit monies paid under the Contract. In this case, this is exactly what happened.
The inclusion of the new clause 6.2 has been introduced by the Queensland Law Society in response to the ongoing difficulties faced by solicitors in the property sector where circumstances outside of the solicitor’s, and client’s, control have resulted in the client being unable to meet the settlement date. Interestingly enough, the new clause allows a party to extend the settlement date simply by giving notice to the other party without any requirement to produce supporting evidence detailing the reasons for the extension. While buyers may welcome the changes to the Contract, there is certainly room for parties to exploit the use of the new clause where their own actions have resulted in their failure to complete settlement, and sellers will not be able to strictly rely on receiving the sale proceeds on the originally scheduled settlement date.
As mentioned, there are a number of other changes which are also being introduced, including:
- The inclusion of clause 7.8 which ensures the seller will have a contractual obligation to install smoke alarms in compliance with the new smoke alarm requirements which came into effect this month, and if the seller fails to do this, the buyer may retain 0.15% of the purchase price as an adjustment at settlement;
- The inclusion of clause 2.2(3)-(5) which allows a grace period for a buyer making payment of a deposit by way of electronic money transfer where the funds may not actually reach the deposit holder’s account until after the due date, provided the buyer can show evidence that the electronic payment was effected on or before the due date;
- A new “seller’s warranty” is included: the seller warrants as at the contract date that they have not received communication from a competent authority that may lead to the issue of a show cause or enforcement notice or a notice to do work referred to under clause 7.6. This will require a seller to disclose communications with the local government about work to be done on the property, even where a formal notice has not yet been issued; and
- A new right to terminate has been added to clause 7.5, where a buyer may terminate if services infrastructure unrelated to delivery of services (gas, electricity, water, sewerage) to the Land passes through the Land and are not protected by a registered easement, BMS or statutory authority that has been disclosed to the buyer.
Updates or no updates, if you intend to enter into a contract to purchase or sell residential property in QLD, we always recommend carefully reviewing the terms of the contract with your solicitor prior to signing.