It Depends – Contract advice before signing a REIQ Contract

In this edition of ‘It depends’, lawyer Cass Palmer-Field talks about whether you should get legal advice before signing a contract to purchase property.

Video transcript

Hi, and welcome to It Depends. Today we are going to discuss, if you should get legal advice before signing a contract to purchase property.

Do I still need advice if it’s a standard REIQ contract?

Currently in Queensland, properties are sold on the basis of buyer beware meaning for the most part the obligation is on the buyer to satisfy themselves of the property through their own searches and enquiries. Whilst there are some protections for buyers in the form of warranties under the contract, an adverse search result doesn’t always entitle a buyer to a termination right. It is for this reason that we recommend buyers seek legal advice prior to signing the contract so that they know their position and termination rights under the contract before they’ve signed.

Should I insert special conditions?

For buyers with particular concerns about the property, for example, whether all building approvals have been obtained or whether or not a development approval can issue for the property, special conditions can afford the buyer a termination right. These special conditions can be drafted and tailored to suit each buyer’s needs and whether or not the property can be used as intended or if there’s unfavourable search results allowing them a termination right.

Won’t I have the ability to terminate under cooling off?

It depends. Most standard REIQ residential contracts entitle the buyer to a five business day cooling off period, during which time a buyer can terminate for whatever reason. If a buyer terminates under the cooling off period, a seller can impose a termination penalty of 0.25% of the purchase price. However, many sellers request that buyers waive that cooling off rights when signing the contract. If the cooling off period is waived, the buyer loses the opportunity to terminate under cooling off.

What if I am buying from a related party?

Even if buyers are purchasing from a related entity such as an associated company or a family member, it is still recommended that they seek legal advice prior to signing the contract. This enables the buyer to get advice on the tax and transfer duty implications of the transaction, which may impact overall financing and costs.

What if I am buying at auction?

Generally, auction contracts are drafted to provide limited scope for a buyer to terminate the contract. Seeking legal advice prior to attending an auction can enable buyers to undertake pre contract due diligence, which means investigating matters before the contract is signed. This can include, for example, whether there are easements that affect the property, whether the property is in a flood prone area or not, or the legal or financial position of the body corporate.

Do you think the way we contract in Queensland will ever change?

It depends. Currently, the Property Law Bill of 2023 is in its consultation stage and is expected to be enacted later 2023. If enacted, the changes to conveyancing practice will be extensive. For example, there will be a seller disclosure regime requiring sellers to disclose to buyers various issues such as unregistered encumbrances and zoning. At the moment, this is still in the wait and see stage. If you are looking to buy or sell a property, and would like someone to talk through it with you before you sign, please don’t hesitate in contacting me or someone else in the property team here at Cooper Grace Ward. Thank you for watching this edition of It Depends.