- Time is (mostly) of the essence in the new Queensland REIQ residential land contracts
Time is (mostly) of the essence in the new Queensland REIQ residential land contracts
12 May 2022
Time to read: 2 MIN
Parties should always consider whether there is any need to include any special conditions to change any of the terms of the REIQ Contracts to suit their needs.
Sale of land contracts in Queensland usually require settlement to occur at a specified time. If a buyer does not settle at that time, it will be in breach of the contract in a material way and the Seller will usually obtain a right to terminate the contract and keep the deposit (amongst other rights, of course). This is because times and dates by which obligations must be performed are "of the essence" of the contract in Queensland (ie. of paramount importance).
Several residential conveyancing matters involving sellers terminating contracts and buyers losing deposits as a result of their financiers being unable to provide funds in time for settlement have been widely reported across Queensland over time, and as recently as late-2021. This always generates a lot of community interest and discussion about the conveyancing process and the terms of the industry-standard REIQ residential contracts (REIQ Contracts).
In response to growing concern about this perceived injustice, the Real Estate Institute of Queensland and the Queensland Law Society have updated the terms the REIQ Contracts and published new editions of both.
The changes to the REIQ residential land contracts at a glance
The newest editions of the REIQ Contracts implement a variety of changes, both minor and major.
Most relevantly however, the seller and the buyer now have the right to unilaterally extend settlement, for any reason, by up to 5 business days after the scheduled settlement date (including the right to extend settlement on multiple occasions, for example by extending settlement by 1 business day on 5 separate occasions).
This right may be exercised by either the seller or the buyer or by both of them, but the settlement may not be extended beyond the 5 business day limit.
Why the new settlement extension provisions are so noteworthy
This change is a move towards the standard contract position in other jurisdictions, where time is not strictly of the essence in relation to settlement. For example:
- in NSW and the ACT, if a buyer is unable to settle on time, the seller will usually be required to provide a notice to complete allowing the buyer a reasonable time to settle before the seller is entitled to terminate the contract;
- in Victoria, if a buyer is unable to settle on time, the seller will usually be required to provide a default notice allowing the buyer 14 days to settle before the seller is entitled to terminate the contract; and
- in Western Australia, there is usually a grace period of 3 business days for each party and then if a buyer is unable to settle on time, the seller will usually be required to provide a default notice allowing the buyer to remedy the default within 10 business days after notice is provided (or within any longer period specified in the default notice) before the seller is entitled to terminate the contract.
What you need to do if you're in a residential property transaction
It will be important for parties to residential property transactions to:
- understand which version of the REIQ Contract is being used for the transaction. It is not compulsory in Queensland to use the most recent version of an REIQ Contract and there may be previous versions in use; and
- if using the newest editions of the REIQ Contracts, consider how the above changes may impact on commercial and legal risks and, in particular, factor in the now very real likelihood of settlement being extended under the new settlement extension clauses by up to 5 business days.
Most importantly, the REIQ Contracts are a set of standard contract terms which can be amended by special conditions. Parties should always consider whether there is any need to include any special conditions to change any of the terms of the REIQ Contracts to suit their needs.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.