QLD Property Sale - Issues After Contract is Signed?

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davia

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2 August 2018
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Hi,

My query is in relation to obligations of the seller. The property, which is in Queensland, is due to be settled in a week. The buyer had completed building and pest inspections without mention of the fault; being a garage door motor needing replacing.

The contract for sale was signed 7 Jul. Building inspection completed 13 Jul.

Real estate informed the seller that the tenants had informed them that the garage door motor was not working but were happy to close manually. The seller was made aware of this by email on 18 Jul.

The real estate (that is currently managing the property for the seller) informed the seller that the new owner (whom the real estate will now manage the property for) will want this fixed and if it is not fixed this may delay settlement as although no fault was found at time of inspection, it is implied that it would be working at settlement, and if the seller does not fix the real estate will go ahead and get it fixed (charge to the seller).

Question is if the tenants are happy to continue to close garage door roller manually until they vacate due to their own decisions to vacate does the seller have to rectify the garage door motor for the new owner and 2, can the buyer delay settlement because of this.


Thanks
 

Rod

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Quite likely the seller needs to fix the door. The property is to be in the same condition as when the contract was signed. It is the seller's responsibility to maintain the property and fix anything that breaks between signing and settlement.

Imagine the things sellers would try and get away with if they had no responsibility!

Re: Agent charging you for the door. While not necessarily legal it might be the simplest and easiest way to manage the problem.
 

Rob Legat - SBPL

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Actually, no they don't - and settlement cannot be delayed for this reason.

Assuming you're using the standard REIQ contract and there are no relevant special conditions, the seller is not required to rectify any damage to the property or a fixture in this sort of vein. The relevant reasons are:
- The property is at the risk of the buyer from 5.00pm on the first business day after the contract date (standard condition 8.1); and
- The seller must use the property reasonably, and must not do anything that may significantly alter the property or result in later expense for the buyer (standard condition 8.3(1)).

There's nothing in that that requires the seller to actively maintain the property.

So unless the door opener broke through the negligence of the seller, they don't have to repair it. If the tenant's negligence broke it, this should be covered by the tenancy agreement.
 

Rod

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Hmmm, doesn't clause 8.3(1) then impose the burden to maintain the property?

I accept the contract cannot be rescinded by the purchaser but I'm fairly sure in Vic and NSW damage has to be rectified or adjustment made to the purchase price if something like this happens. I'd have thought the same principle applies in QLD.
 

Rob Legat - SBPL

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No. The clause gives no requirement to actively maintain, merely to use reasonably.
 

Rod

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I still disagree. 3 reasons:

1. While the purchaser takes the risk on the property, there is nothing that precludes the purchaser's ability to seek compensation from anyone, including the seller, who damaged their property. The issue here is whether a failed motor is 'damage'. I'm not sure.

2. Implied term to deliver the property in the same or similar state as at time of signing the contract.

3. REIQ Cl 8.3 Seller must not do anything that may ... result in later expense for the buyer. Seller has tenants that 'broke' the door causing expense for the purchaser.

Cl 8.3 can be read 2 ways:

The seller must use the property reasonably, and must not do anything that may significantly:
alter the property or
result in later expense for the buyer.
The seller must use the property reasonably, and must not do anything that may:
significantly alter the property or
result in later expense for the buyer.​

Contra proferentem rule means purchaser gets to choose meaning.

 

Rob Legat - SBPL

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You’re reading too far into it. To respond to the specific points:

1. I agree that compensation can be sought against people who damage the property, which I acknowledged above when I raised the issue of negligence (which goes further than intentionally damaging). How this relates to the motor, I’ll cover below.

2. Is this situation not a ‘similar state’? Assuming no one intervened in the use of the motor beyond a reasonable degree, the motor was just about broken when the contract was signed. Now it’s just past broken. I understand that sounds flippant, but see my comments below.

3. Clause 8.3(1)’s actual wording (for clarity) is:

The Seller must use the Property reasonably until settlement. The Seller must not do anything regarding the Property or Tenancies that may significantly alter them or result in later expense for the Buyer.”

There is no evidence that the tenants broke the door. That infers an intentional act or negligence (again, see my earlier post). If the motor simply wore out in normal use then the tenant did not break it – it wore out. Two different things.

The second sentence above is to be read in terms of the first, inferring it to be “the Seller must not do anything unreasonable regarding the Property….”. If the motor was used in a reasonable manner, then the situation is not caught by the condition.


The issue here is more along the lines of ‘fair wear and tear’ than anything else. If the property is used reasonably, per the contract, then any ‘damage’ that may be caused will be as a result of either something unforeseen (and therefore probably an insurable event) or fair wear and tear. The latter is a natural progression of things, and assuming it is not a particularly lengthy contract then the state of the item will be very close to what it was when the contract was signed. Therefore the buyer is not getting something substantially different from what they bargained for.
 
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Rod

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OK, I'll change my opinion to: It depends.

And to be clear, neither case allows for termination of the contract, and should not be a reason for a delay in settlement.
 

Rob Legat - SBPL

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'It depends' is usually the correct opinion to have.