It is common practice in Queensland to utilise REIQ contracts for the sale of residential property, and consequently, minor details are often overlooked that can lead to not so minor contractual disputes.
Stick to your nominated financier
Buyers generally enter into contracts subject to obtaining satisfactory finance approval. The REIQ contract requires the following three conditions to be stipulated:
- finance date;
- finance approval amount; and
- nominated financier.
The simplicity of the three conditions make it easy to overlook the fine print of the finance clause, which states that ‘if any of the three finance conditions are lacking, the finance clause does not apply.’ Therefore, not only must buyers ensure that all three fields are complete, but they must understand the consequences of the terms they are legally bound to.
Once buyers have nominated a financier, they are bound by their choice. In Hauff & Anor v Miller, the buyer nominated ING as the financier and purported to terminate the contract due to a lack of finance approval, as another financier, The Rock Building Society, was not able to approve a loan application within the time specified by the contract. The court held that buyers must act reasonably in seeking finance, and as no loan application had been made with the nominated financier in ING, all reasonable steps had not been taken in attempting to obtain finance. The buyer was not able to terminate the contract on the purported basis, and was liable to the seller for breach of contract.
Avoid conditional deadlines
It is vital to have the terms of a contract reviewed by a solicitor prior to entering into a contract to eliminate the risk of ambiguity in the critical dates. In Habi Pty Ltd v Global Group Enterprises Pty Ltd (‘Habi’), the parties were in dispute over the settlement date, which was stipulated to be “within 14 days of finance approval”. Although this is a common term to use, this conditional deadline presents a multi-faceted problem.
Firstly, the term finance approval is not defined under the standard REIQ contract and upon construction can mean the day of the buyer’s actual receipt of approval or date of notice of approval given to the seller. Secondly, as a result of the ambiguity of the meaning of finance approval, it is difficult to ascertain when the 14 day period begins, and at what time within the 14 days settlement should occur.
When time becomes no longer of the essence
Another key term in a REIQ contract is the time is of the essence clause. Parties are in material breach of the contract if contractual obligations are not performed by a specific time and date.
Parties to a REIQ contract must exercise caution to not unintentionally waive this term by setting indefinite deadlines. In the case of Habi, the court held that time was no longer of the essence because there was no set date for settlement. The correspondence between the parties suggested that settlement was to take place at a date convenient to both parties, when they were willing and able to perform, and the parties were merely proposing dates subject to the other party’s consent in their communications. As a result, ongoing correspondences without clear and definite deadlines may result in the parties waiving the essentiality of time and consequently, their termination rights under the contract.
It is important to take all of the above into consideration when entering into a REIQ contract to ensure a seamless and problem free settlement. We can provide quick and efficient advice to eliminate the risk of any contractual disputes before you enter into your contract.