Common Conveyancing Pitfalls in Queensland

Conveyancing in Queensland is complex and is affected by at least 20 different pieces of State and Federal legislation, various contract conditions, extensive case law and practice guidelines. Without proper legal advice, both sellers and purchasers can easily fall prey to the many conveyancing pitfalls that exist in the current legal environment and be held personally liable for any losses suffered as a result of an error made. But fear not, whether you are buying or selling a home, land or investment property, the assistance of an experienced conveyancer can help guide you through the process from preparing contracts and documents to advising you on the legal implications and risks involved.

Contracts for sale or purchase

When buying or selling property in Queensland, the most common form of contracts used are the Real Estate Institute of Queensland (REIQ) standard contracts which are issued for both residential houses and land, community titles schemes (i.e. both commercial and residential jointly administered lots such as units with a body corporate), and commercial land and buildings. While these standard contracts are approved by the REIQ and the Queensland Law Society, there are certain clauses and conditions you should be aware of before signing a contract for the purchase or sale of property in Queensland.

Buyers should be particularly wary of special conditions that are added to the contract. In some instances, sellers may delete certain provisions of the standard terms of contract without explaining the full significance of those deletions to the buyer.

These clauses need to be prepared carefully and clearly understood to avoid uncertainty and potential disputes later on.

Time is essential

Time is expressly of the essence under the REIQ contracts in Queensland which means you must perform your obligations strictly by the due date and time.

The contracts require that settlement must occur between 9:00am and 4:00pm on the settlement date and performance must be tendered before the final hour stipulated in the contract. Failure by either the seller or purchaser to tender performance of the contract by the due date, unless properly excused, will be a breach of an essential term of the contract and will entitle the other party to sue for specific performance or terminate the contract without further notice.

In the case of Re Ronim Pty Ltd the court was required to decide on a matter where the purchaser’s representative arrived at settlement only minutes after the hour, ready willing and able to complete. However, the court concluded that the standard terms of the contract clearly provided for settlement to occur within the hours stated and that a failure to settle within these hours, even if only minutes outside the final hour, would be a breach of an essential term of the contract.

The case above is an example of why it is important to ensure that you able to settle not just on the settlement date, but within the required timeframes as well. If you are a purchaser, you should ensure that you have arranged well ahead of time with your financier that you will have enough funds to complete the purchase. Conversely if you are a seller, it is essential that you provide your bank with the relevant discharge authority so that they may process it in time for settlement.

The significance of the deposit

Payment of the deposit is a guarantee of performance by the purchaser. The Reference Schedule in the REIQ standard contracts contains the particulars relevant to a contract including the details on the seller/s, purchaser/s, property, price and deposit. In both the REIQ Houses & Land Contract and Residential Community Title Contract, the Reference Schedule provides that the deposit (or part of the deposit) is to be payable when the purchaser signs the contract, unless another date is specified. Further the balance deposit (if any) will be payable on a further date specified in the Reference Schedule. The deposit is generally held in trust by an agent or lawyer until settlement and following settlement the deposit will be paid to the seller unless there is a default or termination.

Unless stated otherwise the term ‘pay’ is interpreted to mean that the deposit must actually be credited into the recipient’s account. Consequently it is essential that purchasers ensure the date for payment by direct debit takes into consideration the delay that usually occurs between the time of directing payment and the receipt of payment into the account of the deposit holder. Failure to pay the deposit on time may entitle the seller to terminate the contract and recover from the purchaser the deposit (or part of it which is unpaid) as a liquidated debt.

Be aware of unapproved structures

It is commonplace for homeowners to renovate by adding certain structures including garages, patios and pools etc. to their properties. However, often these structures are constructed without first obtaining formal written approval from a local government authority which is required by law. In situations such as these, an unwitting purchaser may buy property only to find out after settlement that their new home is going to cost them more than they anticipated, as they are required to obtain the necessary approvals from the local council for the already constructed structure or improvement.

Clause 7.6 of the Houses & Residential Land Contract stipulates that any valid notice issued by a competent authority or court (e.g. local council) requiring work to be done must be fully complied with:

  • if issued before the contract date, by the seller before the settlement date; or
  • if issued on or after the contract date, by the buyer.

The relevance of this clause means that as the new owner you will assume liability for any unapproved structures on your property after the contract date. If a local authority becomes aware after the contract date that a structure on your new property does not possess the requisite approval, the authority may issue a notice to you, the new owner, requiring that work be done in order to rectify this. Such work may include engaging a certifier, obtaining council approval and in some instances demolishing the structure if the local authority believes it cannot comply with the relevant regulations.

In order to protect buyers from assuming the liability for previously built unapproved structures, it is recommended that a special condition is inserted into the contract which will allow the buyer the opportunity to terminate the contract if such a structure is identified, and searches are undertaken as part of the conveyancing process to ascertain whether such structures exist.

The transfer of risk

One thing that comes as a surprise to many purchasers is that, in most cases, the property is at the risk of the purchaser from 5.00pm on the next business day after signing the contract, even though the purchaser is not yet in possession of the property. While the seller has an obligation until settlement to take reasonable care of the property, it is very important for purchasers to obtain an insurance cover note over the property as soon as they have signed the contract. It will generally also be a condition of your mortgage to ensure that the property remains insured at all times.

Conclusion

A contract to buy or sell property is often the largest and most significant transaction into which most individuals will enter. Therefore, it is important when buying or selling property in Queensland, that you seek expert advice from a qualified conveyancing practitioner before signing a contract.

At DSS Law we pride ourselves on the ability to navigate the complexities of the conveyancing process and provide advice specific to our clients’ needs. Our experienced conveyancers and solicitors can assist you in every step of way in the sale or purchase of a property.

Renee Pappagallo Renee Pappagallo & Jake Magee Jake Magee 06/06/2017

Disclaimer

DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on epost@dsslaw.com.au.