Everything You Need To Know About Legal Contracts
The Contract includes a number of technical and legal contracts terms that have been considered by the Courts and may be specific to Queensland conveyancing. Contracts can change the meaning of words and phrases from what they may ordinarily mean which can lead to misunderstanding, miscommunication, and loss. We, therefore, provide the below explanation. Please […]
Everything You Need To Know About Legal Contracts
The Contract includes a number of technical and legal contracts terms that have been considered by the Courts and may be specific to Queensland conveyancing. Contracts can change the meaning of words and phrases from what they may ordinarily mean which can lead to misunderstanding, miscommunication, and loss. We, therefore, provide the below explanation. Please contact us if you are unsure of any of the Contract’s terms.
Nature of Contract
The lot you intend to buy will not exist at the time that you enter into the Contract which makes this transaction different from the conveyance of an existing lot. You should be aware of the following:
- The standard REIQ contract is not suitable for the sale of Lots “off the plan” and instead an “off the plan” form of legal contracts and disclosure statement has been prepared by the Seller’s solicitors for the sale of the Lot. If this is not the case, we have outlined this in our Contract and Property Report.
- As the Lot has not yet been constructed, it is difficult at the point of entry into the Contract to confirm any representations made to you about the Lot such as, for example, its area, location, or view but if you are materially prejudiced by a change you may elect under the Body Corporate and Community Management Act 1997 (Qld) to terminate the Contract.
- During the development and construction of the project, circumstances may arise which require the Seller to make changes to the lot or the scheme.
- Under the legal contracts, the Seller usually gives limited warranties and reserves the right to make changes to deal with various issues that might arise and you agree to accept and not object to certain changes (e.g. minor changes or changes that may not be minor but are authorised under the Contract).
- You do have certain statutory rights but your rights are limited.
- Whether you have a right to terminate the Contract if changes occur to the lot or the scheme will generally depend on whether you have been materially prejudiced and we would need to have regard to the provisions of the Contract and the disclosure material that was given to you.
- Generally speaking, you would be materially prejudiced if the area was 5% less than that shown in the Plan of the proposed Lot annexed to the Contract or disclosure statement.
- You are unlikely to be able to terminate the Contract unless it can be shown that the lot or the scheme (as constructed and established or changed) is substantially different from that described in the Contract.
Form of contract
There are no standard terms and conditions for an “off the plan” contract, although the contract will generally be prepared for and will be particular to the development. The main terms and conditions of the specific contract will be summarised in our Contract and Property Report.
Please read all of your legal Contracts.
While it may be possible to seek to limit the risks associated with buying a lot “off the plan” by requesting amendments to the legal Contracts (assuming you have not yet entered into it),Request Evaluation
the Seller may be reluctant to make changes in the interests of maintaining a consistent approach with all buyers and to preserve flexibility to deal with issues arising during the development and construction of the project.
Please also read our review of your Contract.
Community titles scheme
You are buying a proposed lot in a Community Titles Scheme (“CTS”).
A CTS contains individually owned lots and common property (for example driveways, pedestrian accessways, and landscaped areas) and is administered by a body corporate.
The body corporate members are the owners of lots in the scheme.
Each body corporate member has the right to participate in general meetings of the body corporate where major decisions affecting the scheme will be made. The day-to-day administration of the scheme is generally conducted by a committee.
A scheme may be a basic scheme or it may be part of a layered arrangement. A basic scheme is one where land is subdivided into lots and common property to create a scheme with a single body corporate. A layered arrangement is a grouping of community titles schemes under a principal scheme. Both basic schemes and layered arrangements may be developed in stages. If there are stages of the development after your purchase, you may experience some disturbance as a result of further development works.
Time is Essential
Unless we tell you otherwise, time is of the essence of the Contract. This is the term of a legal contracts that means you must perform your obligations strictly by 5.00 pm (or other time specified) on the due date. For example, you must be able to settle 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.
Payment of the deposit is a sign of your intention to proceed with the Contract. If the contract becomes unconditional and you later default then the Seller may be entitled to forfeit the deposit and sue you for damages.
An “off-the-plan” contract may provide for a deposit of up to 20% of the purchase price to be paid without offending the law against penalties. This is different from the position that generally applies to the sale of existing lots where a deposit of more than 10% of the purchase price is likely to be considered a penalty and the Seller may be prevented from forfeiting the deposit. In addition, a deposit of 20% under an off-the-plan contract will not have the effect of making the Contract an installment contract. Please see paragraph Error! Reference source not found. for more information.
The stakeholder (who must be a solicitor or real estate agent) holds the deposit in trust until completion, upon which it will be paid to the Seller (usually less the agent’s commission) unless there is a default or termination. If you were to terminate for valid reasons in accordance with the Contract, then the deposit would be repayable to you.
If the deposit is not paid on time or you are otherwise in fundamental breach of the Contract the Seller may be entitled to terminate, forfeit the deposit and either sue you for damages or seek an order from the Court that you specifically perform the Contract or both. If the Seller is obliged to pay GST then GST will be payable on the forfeited deposit.
Finance (if applicable)
If the Contract is subject to finance, you must take all reasonable steps to obtain finance approval by the approval date. Please provide us with a copy of your letter from your financier confirming your finance approval or otherwise before we are expected to notify the Seller as to whether you have obtained finance or not.
If you fail to take reasonable steps to obtain finance approval, you may be prevented from relying on the finance condition to terminate the Contract. The Seller may request evidence of your reasonable steps.Request Evaluation
Once the notice of finance approval is given to the Seller under the Contract, it cannot be withdrawn. However, 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 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.
We will need to notify the Seller as to whether you have approval on or before 5:00 pm on the finance date. If you do not obtain satisfactory finance approval from the financier specified in the Contract, you can instruct us to terminate the Contract or seek an extension of time for finance. Agreement from the Seller is required for 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. This means you are bound to complete the Contract regardless of whether your financier approves finance or the finance terms are satisfactory. (This will not affect any other rights you may have to terminate the Contract.)
If we do not notify the Seller in writing that finance is approved, waived, or not approved by the finance date then, the Contract continues and both you and the seller have a right to terminate 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.
When advising us of the satisfaction or otherwise of this condition you should notify us in enough time so that we are able to prepare and give the requisite notice under the Contract in time to protect your interests.
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 agrees), and instruct your financier to attend at a 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
- Real-time gross settlement (RTGS).
If you need to do this, please contact us as soon as possible as we will need to discuss timing issues and provide our trust account details to you.
You will need to liaise with your financier and with us to ensure that logistically all settlement funds and any other payments are available when required. This includes ensuring that any deposits to our trust account are cleared with sufficient time for us to draw cheques and are made available at the place nominated for settlement. If your financier is applying for a government grant on your behalf, you must find out whether the grant will be available for settlement.Request Evaluation
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, keep the deposit and sue you for compensation.
Certificate of Classification (“CoC”)
We recommend you instruct us to order a building search for a CoC. The issue of a CoC usually demonstrates that the local authority is of the view that the conditions of development approval have been satisfied. You must check the building classification of the unit to ensure that the CoC is of a classification that allows for your intended use.
If an appropriate CoC has not been issued the Seller may not be entitled to call for settlement of the legal Contracts.