REIQ Residential Contract Updates
The Real Estate Institute of Queensland (REIQ) recently updated the standard residential property contract. Most Queensland property owners use this contract to sell their house or land. Real estate agents and buyers and sellers must stay alert to changes to the standard terms of the template contract. The 2022 updates amend contract terms relating to settlement date extensions, pool safety certificates, smoke alarms, deposits, warranties and disclosure requirements. This article explains the importance of the REIQ residential contract updates in Queensland.
Where and when do the REIQ Residential Contract Updates apply?
The REIQ released the new standard contract template on 20 January 2022, but the amendments do not apply to every sale after this date. Parties to a sale may use an older version of the REIQ contract or a non-REIQ sale contract. In every case, the contract terms dictate the rights and responsibilities of the seller and buyer.
REIQ Residential Contract Updates: Extension Of Settlement Date
The new sale contract includes a settlement date extension clause. In most Australian states, the sale contract allows a two-week grace period if either party cannot meet the property settlement deadline. Under the previous REIQ contract, both seller and buyer had to settle by 4 pm on the settlement date. Unfortunately, if one party was running behind, the other party gained certain privileges. The compliant party could terminate the sale contract, seize the deposit and sue the other party. This is particularly an issue in a rising property market when sellers can seize the deposit from the terminated contract and immediately find a new buyer. The seller can often sell the property for a higher price in the rising market.
In 2021, a Queensland couple arranged to purchase a $900,000 home in Jindalee. The buyers’ bank (Westpac) missed the settlement deadline and was not ready to settle until the day after the settlement date. The buyers lost their $75,000 deposit when the sellers subsequently terminated the contract. This case resulted in significant media and community interest in the strict rules on settlement dates in Queensland.
Another case in 2021 involved a 13-minutes delay in settlement. A buyer contracted to buy a $580,000 house in Brisbane. The Commonwealth Bank was not ready to settle at 4 pm (as required under the strict terms of the contract) due to a minor oversight in the paperwork. Subsequently, the seller refused to grant an extension and terminated the contract. The buyer lost her $29,000 deposit due to missing the settlement deadline.
The REIQ amendment changes the “time of the essence” clause to allow for circumstances when a buyer is unfairly affected by delays outside their control. The update addresses this issue by granting both parties the right to give notice extending the settlement date for up to five days after the agreed settlement date. Parties can issue multiple extension notices, but the extended settlement date cannot exceed five business days in total.
REIQ Residential Contract Updates: Deposits
Under the new contract, there is an express provision for a grace period for electronic transfer delays on deposit payments. Under this amendment, buyers have three days for the funds to clear in the relevant trust account. Buyers must be able to provide evidence of the electronic transfer delay.
Amendment: Smoke Alarms
Under the updated contract, a seller must install compliant smoke alarms in the house. If the seller does not comply with this requirement, the buyer is entitled to a price adjustment at settlement.
Amendment: Pool Certificate
At settlement, a seller must provide the buyer with a valid pool safety certificate for any non-shared pool on the property. Otherwise, the buyer has the right to terminate the contract. There is an exception if the seller provides a Notice of No Pool Safety Certificate to the buyer before the parties sign the contract.
Other REIQ Residential Contract Updates
Under this amendment, sellers must disclose relevant communications from local government authorities about the property. For instance, a local authority may have contacted a property owner about an impending show cause, enforcement notice, or notice to do work. The property owner must now inform the buyer of all relevant communication about the property. Previously, if the council wrote to the owner about clearing noxious waste from the property, the seller had no obligation to disclose this unless the council issued a formal notice. The new clause intends to rectify this issue and encourage greater transparency during the property settlement. Under the new rules, the buyer or seller may be responsible for correcting these issues. Responsibility depends on when the council issued the notice, the compliance date, and whether the seller disclosed the notice to the seller before contract.
The amendments to the standard REIQ contract also include a services infrastructure clause. Under these changes, the buyer can terminate the contract if they discover infrastructure unrelated to service provision (water, gas, electricity or sewerage). There is an exception for registered easements and state authority infrastructure disclosed to the buyer.
These changes, and other amendments to the REIQ residential contract, significantly impact buyers, sellers and real estate agents in Queensland. If you have any queries or concerns over these updates, please contact our property law experts on 1300 038 223.