Significant changes are being made to the REIQ Houses & Residential Land (17th Edition) and Residential Lots in a Community Titles Scheme (13th Edition) Contracts, with the new contracts to be released later in January 2022.
The changes are intended in part to deal with problems that have arisen due to financiers being unable to settle on time, allowing contracts to be terminated and deposits forfeited with the sellers going on to sell at a higher price in the rising market.
Significant changes include (but are not limited to) the following matters – with comments based on our understanding of changes without seeing the final versions of the contracts :
From 1 January 2022, all dwellings or residential units offered for sale have to have compliant smoke alarms installed. By the proposed contract, if this is not done by settlement, then the contract will provide for the buyer to be entitled to deduct 0.15% of the purchase price before settlement to cover the cost of installation, provided certain requirements are met. As a result, it will be critical for the buyer to inspect before settlement to ensure that the compliant smoke alarms are installed.
Deposit by Direct Debit
In Queensland Contracts, time is of the essence of various obligations including the payment of deposit. If a deposit is not received on the day that it is due, then the buyer can be in breach and the seller can terminate and take whatever part of the deposit has been paid. An issue arises however, when a deposit is paid by a direct debit (ie., an electronic transfer) and does not show up in the account of the stakeholder by the due date. The changes proposed provide for a mechanism giving a grace period for the money to show before the breach provisions are triggered if certain provisions are met.
Pool Compliance Certificate
If there is a pool on the property (including on body corporate common property in the case of a unit sale), then under the changes the seller has to hand over a copy of the Pool Compliance Certificate at settlement. If this is not done, and if the seller has not given a Notice of No Pool Safety Certificate before the contract is entered into, then the buyer may have a right to terminate.
Right to Extend Settlement Date
It is proposed that either the seller or the buyer can – at any time up until 4.00pm on the settlement date – extend the settlement date by giving a Notice nominating a new date which is no later than 5 business days after it was scheduled. Multiple notices can be given, as long as the total time is no more than 5 days. This is a fairly extraordinary new right in Queensland conveyancing terms and could give rise to significant problems – for example if there were back to back contracts and the second contract did not have a similar right. Furthermore, there could be enormous inconvenience with removalists on standby or tenants intending to move into properties leading to further issues.
Warranties concerning building matters
Further rights will be given to buyers relating to situations where the local council has raised potential issues with the seller but has not yet issued any formal notice.
Unregistered Easements and Services
A new right will be given to buyers to terminate if there is, going through the land, infrastructure for the delivery of services (eg., gas, electricity, water or sewerage) that are not disclosed or protected by registered easement. This might be the case if – for example – there is a water line servicing an adjoining property travelling through the subject property.
With these changes, there is even more reason to engage a lawyer pre-contract to ensure that these matters are dealt with before the parties are bound..