QLD Is there a Expiration for a Subject to Finance Contract for Property Sales

[R3J3]

Hi there!

We are sellers who entered into a Subject to Finance contract of sales, which states 14 days from date of contract. And Settlement in 30 days including the 14 Days Finance date. On due date of the Finance date, buyer throught their lawyer, wrote to us requesting for a 2 months extension, which we have replied with a decline and requested that they put in the deposit if they wish to continue with the contract.

Till date, the buyer is already 1 week over the 14 days, and is requesting throught the agent for another internal inspection of the properties for their finance application. The inspection were never brought up during the negotiations and we had already granted them 1 viewing right after the contracts were signed with a initial non-refunable deposit of $1500 received by us.

Agent is threatening us to oblidge or terminate the contract. It was stated in the Special Condition that unless the seller does not settle, the seller has to return any monies received. In our case, it's the buyer who has default the time frame for the Finance period.

Our questions are:
1. If the buyer has defaulted on not completing their 14 days Subject to Finance, when is the contract considered invalid?
2. How can we have a closure to this contract without having to return the $1500 which was clearly stated as non-refundable in the contract.

Thanks so much for your kind reading and advise!
alice

 

[Rob Legat - SBPL]

I'm proceeding on the basis that this is a 'standard' REIQ contract, without fundamental changes. Definitive answers aren't possible without a thorough consideration of the document and any amendments (even if it is an REIQ contract).

Time is 'of the essence' in Queensland house, land and unit conveyancing. That means if something doesn't happen by the due date, there are rights of automatic termination. When finance was due, the buyer must give notice that either: (a) approval is not obtained, and they terminate the contract, or (b) the finance condition is either satisfied or waived. You cannot assume one of those things, it has to be clearly stated.

If the buyer doesn't do either of (a) or (b) (as it appears in your case), your only remedy is to terminate the contract - unless the buyer gets in first by doing (a) or (b). This can be achieved by notice or by conduct, so the buyer continuing may be considered a waiver by conduct (depending on what they've done). By the same token, your conduct could also be seen to waive your right to terminate. In practical terms, both sides should be pushing for certainty on finance immediately when it is due.

Under clause 8.2, you must allow access once for the purpose of valuing the property, which is the likely reason for access for the finance application. Failing to do so is a breach of the contract, and may cause you to lose your rights to terminate on the finance clause.

If the finance clause is not satisfied, and the contract is terminated because of it, the deposit must be refunded - unless the buyer has not taken reasonable steps to obtain finance approval. Given your comments above, I doubt this is the case.

In answer to your specific questions:
1. The contract is not 'invalid'. It remains 'valid' until either you or the buyer validly terminate it, or settle it.
2. You would effectively need to argue the buyer has waived their finance condition (which I would say is going to be difficult in the circumstances), wait for settlement date, tender (very important - meaning actually demonstrating you are ready, willing and able to settle), and then terminate when they fail to settle by 4.00pm on the due date for settlement.

 

[R3J3]

Hi Rob!

Thanks so much for replying my thread.

We did allow a internal inspection which the buyer claimed that was needed by their bank. On the day of the inspection...apparently the bank agent came, had a look at only 1 of the properties and left...leaving behind the buyer's daughter and some designers who went around every house taking measurements and discussing loudly their renovation ideas....which my husband was very annoyed as we have tenants living in there.
So by this, we are not in breach on our part for not granting them the inspection no?

Sorry, but i'm confused...so does this mean we have to wait out till the settlement date 4pm to declare that the contract is invalid since the buyer did not perform? It is clearly stated in the REIQ form at the Special Condition, that refunds of any monies is only when seller does not settle, in this case, it's the buyer that does not settle, as well as clearly stated in the deposit monies as non refundable, so we are not oblidged to return the $1500?

Thanks again heaps!
alice

 

[Rob Legat - SBPL]

The REIQ contract only requires you allow access to the property, after reasonable notice:
- Once to read any meter;
- For inspections concerning building, pest and pool safety.
- Once to inspect before settlement; and
- Once to value the property before settlement.

They could arguable use up their "once before settlement" as there's no time frame on this.

Regarding the deposit: I was basing my comments off the standard REIQ contract. If you have special conditions, that changes the interpretation and couldn't be determined without a thorough review of the whole contract. In any case, the contract is not 'invalid' - it has to be terminated.

I suggest you talk to your solicitor about the specific terms of your contract.

 

[R3J3]

Thank you Rob!
Really appreciate your advise!