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New REIQ Contracts – Houses and Land and Residential Community Title to be released 20 January 2022

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The Houses and Land Contract 17th ed and Residential Community Title Contract 13th ed will be released by the REIQ and QLS on 20 January 2022. A number of significant changes have been made to the contracts to accommodate new case law, new and updated legislation and most significantly to provide a party faced with the inability to settle due to the actions of their financier, the ability to obtain a short extension to remedy the inability.

This alert summarises the significant changes practitioners can expect in the new drafts. More details are provided under New Developments in the Conveyancing Manual Queensland.

Significant changes

Clause 7.8: New Smoke Alarm requirements: From 1 January 2022, dwellings or residential units offered for sale must have smoke alarms installed in accordance with the Fire and Emergency Services Act 1990 and Building Fire Safety Regulation 2008

•    New clause 7.8 imposes a contractual obligation on the seller to install smoke alarms complying with these new requirements in any dwelling on the Land (or in the case of a community title scheme a dwelling on the Lot) prior to settlement. 
•    If smoke alarms are not installed the buyer will be entitled to an adjustment on the price payable at settlement of 0.15% of the purchase price. 
•    The buyer will need to claim this adjustment prior to settlement. There is no right to terminate or claim damages for a breach of clause 7.8(1). 
•    A right to access the property with notice to inspect the smoke alarms has been added to clause 8.2.

Clause 6.2: New unilateral right to extend the settlement date: New clause 6.2 allows either party to give an Extension Notice nominating a new date for settlement up to 5 business days after the Scheduled Settlement Date. 
•    The Extension Notice must be given in writing prior to 4pm on the Scheduled Settlement Date. 
•    The notice must nominate a new settlement date and time is of the essence.
•    More than one Extension Notice may be given but the settlement date nominated in the notice cannot be later than 5 business days after the Scheduled Settlement Date.

The purpose of this change to time of the essence is to alleviate the difficulties and potentially unfair result for a buyer who is unable to settle on the settlement day as a result of delays by financiers. The new clause 6.2 will allow a buyer to extend settlement for up to 5 business days to enable the financer time to be ready for settlement.

Clause 5.3(1)(e): Pool Compliance Certificates: A seller is required to hand over a pool compliance certificate for a non-shared pool on the land at settlement under new clause 5.3(1)(e). The only exception to this obligation is if a Notice of No pool Safety Certificate is given to the buyer prior to contract. In the case of a lot in a CTS, a seller will be required to hand over a certificate for a non-shared pool on the lot. A failure to hand over a pool compliance certificate under clause 5.3(1)(e) will mean the seller is not ready willing and able and the buyer may terminate the contract. Clause 4.2 is deleted.

Clause 2.2: Payment of deposit by direct debit – time of payment and grace period: Express provision is made in clause 2.2 for the payment of the deposit by direct debit. Clause 2.2(3) provides clarity in relation to when a deposit is paid by direct debit.

A buyer who pays a deposit using direct debit is taken to have paid the deposit on the day the buyer effects an electronic transaction to pay the deposit. This will be the day the buyer instructs their financial institution to pay the funds from their account. To take advantage of this deeming provision the buyer will be required to provide evidence of the payment to the Deposit Holder and must not take any action to delay the payment.

The deeming provision applies no matter when the payment is received by the Deposit Holder. 

If the money is not received by the due date in the contract, the seller may give a notice to the buyer requiring payment within 2 business days. If the payment is not received within the 2 business days stated in the notice, the buyer will be in breach and the seller may terminate the contract under clause 9.1.

Clause 7.4: New seller warranties: The warranties in clause 7.4 have been reorganised into two categories: (i) warranties accurate on the contract date (cl 7.4(2)) and (ii) warranties accurate on the settlement date (7.4(3)). Most of the warranties currently in clause 7.4(1), (2) and (3) have remained the same. 

The significant changes are:
a.    The right to terminate if a show cause or enforcement notice remain unsatisfied at the contract date is now under cl 7.4(4), not clause 7.6.
b.    A new 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.

Clause 7.5: Services passing through the land without an easement: A new right to terminate is added to clause 7.5. Under clause 7.5 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. A new definition of ‘Services’ for the purpose of this clause is included in clause 1. 

The same clause was also added to the Residential CTS contract, but any services infrastructure protected by a statutory easement under part 6A of the Land Title Act 1994 is exempted from the operation of the clause.

New definition of Contract Date – the definition of Contract Date in clause 1 is amended to accommodate signing by contracts in Realworks using DocuSign by real estate agents.  

There are also a number of other changes to the contract terms related to:

•    Clause 2.6 – adjustment of outgoings
•    Clause 5.1 – place of settlement
•    Clause 6.3 – new delay event
•    Clause 7.7 – clarification of the right of a buyer to terminate if service to the land pass through other land and are not protected by a registered easement, BMS, statutory authority, or in the case of a lot in a CTS the statutory easements under the Land Title Act 1994.
•    Clause 8.4 - a new requirement for the seller to provide the local government rate account number for the land upon request is added.
•    Clause 9.1 is redrafted for clarity. There is no intention to change the rights of the parties. 
•    Clause 10.5 is amended to include the days where the Reserve Bank of Australia is closed in both Sydney and Melbourne for a public holiday. This applies only to the settlement date for electronic settlement.
•    New clause 10.9(6) is added to assist parties with the counting of time provisions in the contract.
•    Clause 11.4 is amended to provide for a roll over of the settlement date where a computer system required for settlement is either ‘inoperative or unavailable’. This will provide a broader operation of the clause to include where a computer system may be working but not available for settlement on that day.

Sharon Christensen
By Sharon Christensen
Gadens Professor in Property Law at the Queensland University of Technology

Sharon is the Gadens Professor in Property Law at the Queensland University of Technology and consultant to Gadens. She is an expert in all facets of property law with a special focus on land contracts, leasing and body corporate law and is widely regarded as one of Australia’s leading property law academics, which is further enhanced by her solid industry experience. She is also the author of several of the leading texts in Queensland on aspects of property law.

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