Changes to the REIQ Residential Contracts

New versions of the REIQ Contracts for House and Residential Land (7th edition) and Residential Lots in a Community Titles Scheme (3rd edition) were introduced on 1 July 2010. The amendments to previous versions of the REIQ Contracts are primarily due to the new national unfair contracts laws and are aimed at addressing any “imbalances” in the parties’ rights and obligations under the previous versions.

An amendment to the Trade Practices Act 1974 (Cth) introduced prohibitions against unfair contract terms in consumer contracts from 1 July 2010. Consumer contracts include contracts relating to the sale of land to individuals who acquire it wholly or predominantly for personal, domestic or household use or consumption where a “standard form contract” is used. The new requirements therefore impact upon the REIQ contracts as “standard form contracts”.

The significant changes in both the REIQ Residential House and Land and Residential Community Title Scheme contracts include those listed below. Other amendments have also been made, for example as to new legislation such as the Sustainable Planning Act 2009 (Qld).

Essential Terms

Clauses have been inserted to allow the Buyer and the Seller to terminate the contract for a breach of an “Essential Term”. A breach of an “Essential Term” is where:

• the buyer fails to pay the deposit correctly or on time, or fails to pay the balance purchase price on settlement;
• the seller fails to provide the required items or vacant possession on settlement;
• either party fails to settle on the settlement date, or fails to meet any other time requirement (other than the settlement time on the settlement date).

Finance (clause 3)

If a buyer’s finance has not been approved, the buyer must also notify the seller that it “terminates the contract”. The previous contract versions did not require that the buyer’s notice use these specific words.

Building and pest inspection reports (Clause 4)

The buyer must notify the seller if the building and pest inspection is unsatisfactory and they terminate the contract. Again, those specific words must now be used. Buyers are no longer “deemed” to be satisfied with a building and pest report if they do not provide notice to the seller.

The seller may terminate the contract if it does not receive notice from the buyer as to its building and pest inspection report. These clauses now align with the notice provisions as to finance (clause 3).

Parties’ Default (Clause 9)

The buyer now has the same rights as the seller to terminate for breach of contract.

The buyer has the same remedies as the seller if the buyer affirms the contract including a claim for damages, specific performance or both.

If the buyer terminates the contract, it may recover from the deposit and any interest earned, or sue the seller for damages.

If the seller terminates the contract and resells the property, the seller can no longer claim the expenses connected with the contract (for example, agent’s commission and legal fees associated with the initial sale). The seller can only claim the expenses connected with any repossession, if the resale settles within two years of termination of the contract.

Changes specific to the REIQ contract for Residential Lots in a Community Titles Scheme

Seller’s warranties and statements (clause 7.4)

The clause requiring that the seller warrant there will be no valid notice or order by an authority or court requiring work to be done or money spent in relation to the lot or the common property for the scheme or its subsidiary, has been removed.

Instead the seller must warrant at contract date and at settlement that there are no current claims or threatened claims, notices or proceedings that may lead to a judgment, order or writ affecting the property. Note this does not include the common property.

Requirements of authorities (clause 7.6)

Any valid notice or an order by an authority requiring work to be completed or money spent on the lot must be fully complied with by the seller, if the notice was issued before the contract and by the buyer if the notice was issued after the contract date.

The buyer may claim against the seller for reasonable costs for work performed by the buyer, which is the seller’s responsibility. The seller also has the same rights to make a claim against the buyer, if the work is the buyer’s responsibility.

These provisions are now consistent with the House and Land Contract.