VIC Property Law - Buyer of Property Investment Wants to Withdraw from Contract

[Yu Bai]

Hi

I have sold my property investment with a planning permit that will allow redevelopment of 4 townhouses on 24 Aug. Settlement for 3 months is due on 30/11. The contract comes with a special condition that is "subject to FIRB Approval" without a time limit. I had been told by the agent that the buyer is an overseas resident who wants to investment in the real estate industry. He wants to redevelop the property, so being "subject to FIRB" would not be an issue. That was the reason I accepted the offer.

On 24/09, the agent provided me with an FIRB approval that applied as a company and told me that the contract would be nominated to the company. An unsigned nomination form had been provided to me as well (the contact person of the FIRB approval is not the buyer, and it seems the company was built by buyer's son and a partner).

Early this month, we received an email from the buyer's solicitor who indicated that the FIRB advised the application for using the property as "owner occupied property" and that it will be denied, but the FIRB also mentioned that if the applicant applies with the purpose of redevelopment it would be approved. The buyer now wants to withdraw from the contract.

3 Questions.

1. Because there is no time limit on the special condition, does that mean that the condition would remain open until the day of the settlement?

2. The agent confirmed that the buyer wanted to nominate a company as the nominee and the FIRB had been granted by the company. Does this mean that the condition has been met? (The buyer even asked the agent to contact the tenant and ask them how much it would cost for asking them to leave the property after the settlement)

3. It is clear that the buyer wanted to redevelop the property when he signed the contract. Does that mean that, for the buyer to withdraw from the contract, he needs to be rejected by the FIRB by using the purpose of redevelopment instead of "owner occupied" under property law？

Thanks

 

[Victoria S]

1. Yes, without seeing the contract in its entirely and based on what you have said...if there is no time limit on the condition - then it would most likely remain open until settlement.

2. If the conditions have been met, then you would have a basis to argue that yes the contract is binding and that they have to follow through on settlement. You could most likely keep any deposit in this case. They may try to argue differently, however its not a clear cut issue.

If you found caselaw where a court had decided that in this particular circumstance it did not satisfy the pre-condition to the contract then you would have to roll over and let them out of the contract. However you may have grounds to take them to court to enforce the contract depending on available legal case authorities. You would need to speak with a property lawyer re this.

3. You can't read into a clause anything additional - such as prior knowledge of intent etc - what is in the contract is in the contract and the court - when deciding this issue - will determine what was the legal intention of the parties - and then see whether that was satisfied or not.