Changes to REIQ residential contract from 20 January 2022.
On 20 January 2022, the Contract for Houses and Residential Land was amended and now includes new standard terms to accommodate new court decisions and updated legislation. The following clauses have significant impact on the sale and purchase of residences.
Clause 7.8 Compliant Smoke Alarms
The clause requires a seller to install smoke alarms in any domestic dwelling on the land in accordance with legislation by the settlement date.
Where the seller fails to comply, the buyer may claim an adjustment at settlement equal to 0.15% of the purchase price. This is the only remedy available to the buyer in such circumstances. The right to access the property with notice to inspect the smoke alarms has been added to clause 8.2.
Buyers are advised to check compliance prior to settlement and are responsible to install smoke alarms after settlement where the seller has failed to.
Clause 2.2(3)-(5) Deposit by direct debit
Under the new standard contract, when a buyer effects an electronic transaction on the day, provides written evidence to the deposit holder that the deposit has been paid, and the buyer does not take steps to delay payment, the payment is taken to be received by the deposit holder. This occurs even when the payment is made on a later date beyond the buyer’s control.
If the buyer has complied but the seller has not received payment, the seller may give the buyer notice that the payment has not been received and if the payment has not been paid into the account of the deposit holder by 5pm on 2 business days after the seller’s notice, the buyer cannot rely on the clause and will be in default and the seller may terminate the contract under clause 9.1 and recover from the buyer as a liquidated debt any part of the deposit which is not paid when required.
These changes were made to highlight the impact of delays in the deposit of money to accounts when using direct debit. It allows time for money to be credited after payment by the buyer and for the seller to take action if it is not received.
Clause 1.1(w) and 5.3(1)(e) Pool Compliance Certificate
The contract now requires the seller to deliver to the buyer at settlement a current copy of the Pool Compliance Certificate (unless the seller has already provided it before settlement or has given notice of no pool safety certificate to the buyer before entering the contract).
“Pool Compliance Certificate” under the contract means:
- a Pool Safety Certificate;
- a building certificate that may be used instead of the Pool Safety Certificate under the Building Act 1975 (Qld); or
- an exemption from compliance on the grounds of impracticality under the Building Act 1975 (Qld).
The requirement for a Pool Compliance Certificate does not apply to a shared pool on common property. Nonetheless, the disclosure obligations imposed on the seller continues under the Building Act 1975.
Failure to hand over a pool compliance certificate under this clause will mean the seller is not ready, willing and able, allowing the buyer to terminate the contract.
Clause 6.2 Right to extend settlement date
Clause 6.2 is the most significant change to the contract. It allows either party to extend the settlement date at any time up to 4pm on the settlement date for up to 5 business days after the scheduled settlement date.
To allow for a unilateral extension, the following is required:
- written notice prior to 4pm on the scheduled settlement date;
- a nominated new settlement date in the notice; and
- the settlement date in the notice must be no more than 5 business days after
the scheduled settlement date.
Time will be of the essence of the nominated settlement date.
This unilateral right does not prevent the parties from agreeing to a longer extension date.
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.
Time for settlement clauses have been updated to alleviate the difficulties and unfair outcomes for the buyer where they are unable to settle on the settlement day due to the delays by financiers.
Clause 7.4 Seller warranties
The warranties under the contract have been reorganised into two categories:
- warranties accurate on the contract date; and
- warranties accurate on the settlement date.
The changes of interest include:
- the right to terminate if a show cause or enforcement notice remains unsatisfied at the contract date (clause 7.4(4)); and
- a new warranty that the seller will disclose all communications from local government and authorities as at the contract date that may result in a show cause or enforcement notice or a notice to do work on the land (clause 7.6).
The purpose of the new warranty is to protect buyers in situations where local government corresponds with owners for a considerable time about a non-compliance issue without issuing a formal non-compliance notice. The notice is usually issued once local government realises the property is being sold, and under the current clause, is the buyer’s responsibility. This new warranty intends to overcome an unfair result.
If the seller breaches this warranty, the buyer may terminate the contract by notice to the seller before settlement.
Clause 7.5 Services unrelated to the land
A new termination right has been added to clause 7.5 where the buyer may terminate if infrastructure unrelated to the delivery of services (e.g. gas, electricity water, sewerage) to the land pass through the land and are not protected by a registered easement, building management statements or statutory authority that has been disclosed to the buyer.
However, where the buyer elects to complete the contract, the buyer’s only remedy against the seller is for compensation which must be claimed in writing on or before settlement.
Clause 7.6 Notices to do work
The responsibility for notices to do work has changed in the following ways:
- the seller is required to comply with notices to do work in relation to the property issued prior to the contract unless the notice is disclosed to the buyer in the contract or in writing prior to signing;
- the buyer is entitled to claim the reasonable cost of complying with the notice from the seller as a debt after settlement if the seller fails to comply with the notice;
- a buyer must comply with notices for work issued after the contract unless the notice requires compliance prior to settlement. In this case, the seller must comply with the notice and can claim the reasonable costs incurred from the buyer as an adjustment at settlement;
- the seller is not required to comply with a notice in (c). above if the buyer requests the seller not to comply and indemnifies the seller against all liability incurred for failing to comply.
Clause 1.1(j) definition of contract date
The definition of “Contract Date” in clause 1 has been amended to accommodate for signing of electronic contracts. If no date appears in the reference schedule, the Contract Date will be the date the last party signed the contract electronically.
How we can help
At Cohen Legal, our conveyancing team is always up to date with legislative changes and understand the process of buying or selling a house can be stressful. Our experienced team will ensure you fully understand your contractual obligations and make buying or selling easy. Talk to us. We’re here to help.