1. GENERAL EXPLANATION OF THE CONTRACT TERMS (QLD)
(a) Method of Sale
In Queensland property is sold by the following methods:
- private treaty, where you usually negotiate the contract price and terms through a real estate agent, who acts for the seller;
- auction, where terms are set by the seller and the price determined by competitive bid, usually subject to a reserve; or
- tender, this is another form of competitive bidding.
(b) Form of Contract
There are two forms of contract recommended by the Queensland Law Society. They are:
- Houses and Residential Land (11th Edition); and
- Residential Lots in a Community Titles Scheme (7th Edition).
You should read your contract in detail. There are other forms of Contract also used in Queensland and some terms and conditions may vary.
In this section we point out contract terms important to your purchase. This advice is of a general nature only and may differ if the standard position in the Contract has been altered by the inclusion of specific special conditions. Where there is inconsistency between a special condition and a standard condition, generally any special condition will override the standard condition to the extent of the inconsistency.
(c) Reference Schedule
The reference schedule contains the particulars relevant to your contract. You must check they are accurate and tell us as soon as possible if they are not.
(d) Time Essential
Time is of the essence of the contract. This is a legal term that means you must perform your obligations strictly by the due date. For example, you must be able to settle by 4:00pm AEST on the settlement date; otherwise the seller may either terminate or seek to enforce the contract. In both cases, the seller may claim compensation from you.
The contract provides that if anything is to be done on a day that is not a business day, it must be done on the next business day. Under the contract, business days are days other than any public holiday in the place named in the contract for settlement, any day in the period 27 December to 31 December (inclusive) and Saturdays and Sundays.
(e) Default Interest
The contract provides that at settlement you must pay interest on any late payment from the due date for payment until the payment is made. Interest accrues at the Default Interest Rate noted in the Reference Schedule of the contract, or if no rate is specified at the contract rate fixed by the Queensland Law Society.
(f) Natural Disasters
If a party is not able to meet their settlement obligations because of a natural disaster (for example the January 2011 South-East Queensland floods) then in certain limited circumstances time will no longer be of the essence. The party affected must make all reasonable efforts to minimise the effect of the natural disaster on its ability to perform its settlement obligations.
When the natural disaster no longer prevents performance of settlement obligations there are notices that must be served to make time once again of the essence. If this becomes relevant we will advise you.
The suspension of time will then end and both parties are obliged to settle on the date stated in the notice.
Payment of the deposit is a sign of your intention to proceed with the contract. It is usually a substantial amount (but no more than 10%).
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. Generally a deposit is held in the trust account of either a real estate agent or lawyer. If the deposit is not held in trust there is a risk that the seller or deposit holder may go bankrupt or into receivership and that you will not recover all of your deposit.
If you terminate the contract for a valid reason, then the deposit should usually be repaid to you. If you do not pay the deposit on time or otherwise breach the contract the seller may be able to terminate the contract or seek an order from the court requiring you to settle. The seller may also keep your deposit and recover any part of the deposit not paid. If the seller is obliged to pay GST then GST will apply to the kept deposit. The seller may also be entitled to compensation, which may include commission payable to the real estate agent.
If the contract is subject to finance, you must take all reasonable steps to obtain finance approval by the finance date. This includes making a finance application shortly after the contract date and pursuing the application diligently.
When you have a letter of approval from a financier you should send it to us. We can answer questions about the finance approval, however, you must obtain the finance approval and decisions relating to the acceptability or otherwise of conditions in the finance approval rests with you.
We must notify the seller as to whether you have satisfactory finance approval on or before 5:00pm on the finance date.
If you do not obtain satisfactory finance approval from your financier, you can instruct us to terminate the contract or seek an extension of time for finance. Agreement from the seller is required to any extension and your request may be declined.
Alternatively, you may instruct us to give notice to the seller waiving the benefit of the finance condition. Waiving the benefit of the finance condition means you are bound to complete the contract regardless of whether your financier approves finance or the finance terms are satisfactory.
If we do not notify the seller that finance is approved or waived by the finance date then the contract continues and both you and the seller have a right to terminate the contract. You also have a continuing right to give notice of satisfactory finance or waiver of the benefit of the finance condition up until the time the contract is terminated by the seller.
If you want to give notice of satisfactory finance or waiver of the condition you will need to give us instructions to give notice to the seller. Notice will not be effective unless received by the seller before the seller terminates the contract.
If you do not have sufficient funds to pay the balance purchase price (including any adjustments) at settlement the seller may terminate the contract or seek to have you specifically perform the contract and in both instances can claim compensation from you.
Once notice of finance approval is given to the seller under the contract, it cannot be withdrawn. You should however be aware that most financial institutions will reserve the right to withdraw finance approval at any time prior to settlement for any number of reasons. It is important that you consider very carefully any conditions attaching to a finance approval and your ability to satisfy all requirements (now and up to settlement) relevant to the advance of funds before instructing us to give any notice about finance under the contract.
(i) Building and Pest Inspections
If the contract is subject to satisfactory building and pest inspection reports you must take all reasonable steps to obtain the reports – although you may elect to only obtain one of the reports. You must use licensed inspectors for the reports and the reports must be in writing, otherwise you will not be able to terminate the contract on the grounds that you are not satisfied with the building or pest inspection. You should provide us with a copy of the building and pest reports.
We must give written notice to the seller’s lawyers on or before 5:00pm on the inspection date as to whether you are not satisfied with your building and pest reports and wish to terminate the contract.
If you do not have a report by the inspection date you can instruct us to seek an extension, however, the seller may not agree to the extension.
If you are satisfied with the report, you should instruct us to give notice to the seller that the building and pest condition is satisfied.
If, acting reasonably, you are not satisfied with the results of the building and pest reports then you may instruct us to terminate the contract by giving notice before 5pm on the inspection date. If either of the reports contain issues that are not satisfactory to you, contact us as soon as possible to discuss whether you would be ‘acting reasonably’ if you terminated the contract in the circumstances.
If the lot you are purchasing is a lot in a Community Titles Scheme, the reports must relate to the lot itself. If the contract has not yet been signed, you may wish to instruct us to request extending the effect of the building and pest inspection clause in the contract to cover any larger structure containing the lot and the common property of the scheme.
If you terminate the contract, the seller is entitled to request a copy of the reports from you and you must provide them without delay.
Your other option is to waive the benefit of the condition in which case the contract will no longer be subject to this condition and you will be obliged to complete the contract. In either of these cases, you do not have any recourse against the seller under this condition for issues which are raised in the building and pest reports.
If you do not instruct us to give a notice to the seller before 5:00pm on the inspection date, the contract continues and both you and the seller have a right to terminate. You can also give notice that you have received a satisfactory report or alternatively elect to waive the benefit of the building and pest condition.
If you decide to waive the benefit of the building and pest condition you must instruct us to give notice to the seller, as your waiver will not be effective unless notice of waiver is received by the seller before the seller terminates the contract.
There are no rights to terminate for unapproved structures in the contract, unless a show cause or enforcement order exists.
(j) Cheques for Settlement
The contract only requires you to pay for bank cheques for the seller and the seller’s financier. If the seller requires additional bank cheques the seller must pay the cost of those cheques at settlement, unless you agree in writing before settlement to draw trust cheques for those amounts. If the seller requests additional cheques to be drawn as trust cheques and you or your bank draw them as bank cheques then you will be responsible for their cost.
(k) Settlement Funds
If you are not borrowing all of the funds required for settlement you are responsible for providing the balance amount as cleared funds. You may be able to make arrangements to either:
- transfer the funds to your financier (if your financier is willing to accept additional funds from you), and instruct your financier to attend at settlement with all the settlement money;
- provide us with bank cheques as instructed by the seller. You will need to ask us about the exact cheque details; or
- deposit the funds to our trust account as cleared funds at least one day before the day of settlement. Note that an ordinary bank transfer is not cleared funds and we cannot draw on those funds. The amount needs to be deposited in cleared funds by:
- telegraphic transfer; or
If you need to do this please contact us as soon as possible as we will need to discuss timing issues and we will need to provide our trust account details to you.
You need to liaise with your financier and with us to ensure that logistically all settlement funds and any other payments you need make at or before settlement are available when required. This includes ensuring that any deposits to our trust account are cleared with sufficient time for us to arrange for cheques to be drawn and made available at the place nominated for settlement.
Please note that if all the required cheques are not available at settlement in the correct amounts, payee names and form of cheque then we may not be able to settle which may place you in breach of the contract entitling the seller to terminate the contract, keep the deposit and sue you for compensation.
(l) Fraud, Identity Theft and Hacking
There has been a recent increase in the number of attempted frauds relating to real estate.
It is essential to the conveyancing process that you provide us with a range of private information. Much of that information can be obtained by fraudsters and identity thieves from publicly available records or by hacking, phishing or trolling through unsecure email transmissions.
Parties to a conveyance are targeted as the conveyancing process often requires the transfer of large quantities of money.
We will take efforts, such as obtaining personal identification from you, to assist to minimise the risk that fraud is committed.
We recommend that you should also take efforts to minimise the risk that your personal information is fraudulently obtained by being cautious about all communication. Steps could include:
- verify that all requests for transfers of money have been legitimately requested by our law practice or your bank – despite how legitimate the request may appear;
- do not transfer any money to any account other than our trust account (at our request – details of which are in the To-Do List) or to your existing bank or mortgage accounts (at your bank’s request) – without first verifying with us that the transfer is necessary for your transaction;
- if you are contacted by someone you don’t immediately personally recognise representing themselves to be from our law practice, your bank or somehow linked to the transaction, ask the representative some historical questions about the transaction that you can be certain will verify that they are who they say they are;
- try to avoid at all costs sending personal and sensitive information such as bank account numbers via email; and
- where instructions are requested or advice is provided via email, independently confirm them by another form of communication.
The property is at your risk from 5:00pm on the first business day after the Contract Date. Despite this, the seller has an obligation until settlement to take reasonable care of the property. Where you are purchasing vacant land, public liability insurance may be required under a special condition term of the Contract.
If the property is damaged between the Contract Date and settlement (for example, due to fire or vandalism) you will be required to settle in accordance with the contract despite the damage (unless a residence is so destroyed or damaged as to be unfit for occupation).
If damage occurs, you may in some circumstances be able to gain the benefit of the seller’s insurance. We do not recommend that you rely upon this right as:
- the seller may not take out insurance;
- the seller may choose to cancel its insurance;
- the event that causes the damage may not be covered; or
- other factors may preclude recovery.
We recommend that you take out insurance as advised below.
You can arrange insurance by contacting an insurance broker or home insurance company directly.
If the lot you are purchasing is a residential house, not in a Community Title Scheme
As the property is at your risk, we recommend that you arrange property insurance cover for house, contents and public liability.
(b) If the lot you are purchasing is a lot in a Community Titles Scheme with common walls
The body corporate is responsible for insuring the building for replacement value and public liability for the common property and any relevant body corporate assets. We recommend obtaining insurance information as part of our searches and you will need to satisfy yourself the insurance is adequate. We recommend that you arrange insurance cover for the contents of the unit (which will include things such as carpets, curtains and internal blinds) and public liability insurance for the interior of the lot.
(c) If the lot you are purchasing is a lot in a Community Titles Scheme with no common walls
The body corporate is responsible for public liability insurance for the common property and any relevant body corporate assets. The body corporate may insure the building with the agreement of all lot owners.
We recommend that you arrange insurance cover for the building (perhaps by way of a cover note), the contents of the unit (which will include things such as carpets, curtains and internal blinds) and public liability insurance for the interior of the lot.
The building insurance should cover you until you are able to discover by search whether the body corporate has common insurance for the building.
If the body corporate has not insured the building then your insurance of the building will be relevant, and you should pay the applicable premium. If you are satisfied with the body corporate insurance you can cancel your building insurance, but we recommend you still maintain insurance of the contents and public liability within the unit.
(d) Insurance if obtaining finance
If you are obtaining finance it will be necessary for your bank to be noted on the policy as mortgagee. You should arrange for your insurance broker or home insurance company to attend to this for you.