From today, Thursday 20 January 2022, Queensland property settlements will be subject to an extension entitlement of up to 5 days if unable to complete on schedule. This significant change to the REIQ contract terms will reduce pressure on financial institutions and property purchasers who previously faced losing their deposit if settlement was unavoidably delayed, regardless of which party caused the delay or why.
The Real Estate Institute of Queensland and the Queensland Law Society have today released new editions of the Contract for Houses and Residential Land (17th ed.) and the Contract for Residential Lots in a Community Title Schemes (13th ed.). These changes have been made to accommodate new and updated legislation and most notably, to address a range of settlement issues encountered by Queensland home buyers and sellers.
With numerous significant and more minor changes provided in the new contracts, there will hopefully be fairer outcomes and smoother processes and negotiations available to protect both parties for property transactions in Queensland moving forward. The major amendments are outlined below:
Unilateral Settlement Date Extensions – Clause 6.2: In the past 18 months, due to the volume of property transactions and the unprecedented COVID-19 landscape, we have seen an increase in unforeseen delays in the settlement process caused by financial institutions.
Whilst Queensland’s REIQ prides itself on engineering the swiftest property transactions in Australia, this expediency has also been costly for many buyers. As a result, we see the new REIQ contracts released today delivering significant change to the ‘time is of the essence’ provisions, whilst still providing the shortest settlement periods of all the States.
Buyers and sellers are now able to obtain a short extension (up to 5 days) to settlement if either party is unable to facilitate the settlement due to the inaction of a financier or for any other reason.
To use this unilateral right, a party must:
- Provide notice in writing prior to 4pm of the original agreed settlement date.
- Nominate a new settlement date within the notice.
- The new settlement date must be no more than 5 business days from the scheduled settlement date.
Noting, this extension can be granted more than once as long as the settlement occurs within the period 5 days post the original settlement date. For example, you may be scheduled to settle on Monday 2nd May but are unable and instead nominate a new settlement date in writing before 4pm. You nominate to reschedule settlement for Wednesday 4th May but as the new date approaches your bank is still unable to finalise settlement and you may request a further extension to Thursday or Friday. It is important to note that if settlement is not able to be concluded by Friday 6th May in this instance, settlement is cancelled and new negotiations must occur if both parties wish to proceed with the sale/purchase.
It is also important to note the new clause 6.2 can only be used to extend the settlement date itself and does not apply to contingency deadlines such as finance, or building and pest inspections. It will however affect any conditions which are required to be completed by settlement, such as any works or compliance orders, as they will now need to be satisfied by the newly agreed settlement date.
Deposit by Direct Debit – Clause 2.2: This amendment aims to provide buyers who pay a deposit by direct debit a short grace period to minimise the impact of delays outside of their control.
- A buyer who pays a deposit through direct debit is now considered to have paid on the day they completed the electronic transaction, provided they can provide written evidence to the Deposit Holder detailing the completion of the electronic transfer, and do not take any action to defer the payment to a later date
- If funds are not received by the due date of the contract, the seller may give the buyer notice that the payment has not been received by the Deposit Holder.
- Where payment is still not received by the Deposit Holder by 5pm on the date 2 business days after the seller’s notice was issued, new leniency regarding electronic transactions will not apply and the buyer will be in default.
Other than smoother settlements, the new REIQ contracts have updated other terms in keeping with amended legislation and compliance requirements. These include things such as smoke alarms and pool safety and are outlined below.
Pool Compliance Certificate – Clause 5.3(1)(e)
- A seller is now required to provide a Pool Compliance Certificate at settlement for a non-shared pool on the land. A “Pool Compliance Certificate” means:
- a Pool Safety Certificate under section 231C(a) of the Building Act 1975; or
- a building certificate that may be used instead of a Pool Safety Certificate under section 246AN(2) of the Building Act 1975; or
- an exemption from compliance on the grounds of impracticality under section 245B of the Building Act 1975.
- Where a Pool Compliance Certificate cannot be provided, the seller must instead provide a ‘Notice of No Pool Safety Certificate’ prior to contract.
- Failure to provide either certificate at settlement will enable a buyer to terminate the contract.
Smoke Alarm Compliance – Clause 7.8
- From January 1, 2022, smoke alarms must now be installed in compliance with the Fire and Emergency Services Act 1990 and the Building Fire Safety Regulation Act 2008 by the settlement date.
- If a seller does not comply with this clause, the buyer is entitled to a 0.15% adjustment of the purchase price, provided the buyer has claimed this in writing on or before settlement.
Seller Warranties – Clause 7.4: Generally local governments will communicate with property owners over an extended period of time before issuing a formal compliance notice. However, the sale of a property (often flagged when the proposed buyer conducts a search) will usually prompt the immediate issue of a non-compliance notice. As this usually occurs after a contract is signed but before settlement, it becomes the buyer’s issue. To ensure a fairer outcome for the buyer, new seller warranties must be provided.
- Newly released REIQ contracts now require the seller to warrant that at the contract date, they have not received communication from a competent authority that could potentially lead to an issuing of a show cause, enforcement notice, or a notice to do work.
- Correspondence with a local government satisfies the definition of a ‘competent authority’ and thus a seller must disclose any communication they have had with a local government.
Services Unrelated to Land – Clause 7.5: sellers now need to disclose the existence of infrastructure on or under the land that does not directly service the land.
- A buyer now may terminate the contract if infrastructure unrelated to the delivery of services (water, electricity, gas, sewerage) to the land is not protected by a registered easement, BMS or a statutory authority.
- These encumbrances must be noted under Title Encumbrances in the Reference Schedule. If there is no disclosure, the buyer may terminate the contract or seek suitable compensation if the impact of the service infrastructure is material.
Notices to do Work – Clause 7.6: sellers now have the option to be relieved from their obligation to comply with a notice to do work issued by any competent authority by disclosing this to the buyer before contract. Upon settlement any works required will become the buyer’s responsibility. However, where this is not disclosed by the seller and they fail to comply prior to settlement, the buyer can:
- settle and claim the cost as a debt after settlement; or
- terminate if the notice meets the test of being a material defect in title.
Further minor amendments have also been included in the new REIQ contracts which are unlikely to impact settlement requirements or execution and are not included in this article. For further advice on any aspect of buying or selling and contracts, please contact our expert team.