Delayed bank transfer periods have long created logistical issues for buyers trying to pay a deposit on their Contract of Sale. These difficulties have thrown some unsuspecting buyers in default of their contracts.
Common Difficulties with Payment of the Deposit
Queensland home buyers have previously faced similar scenarios:
A deposit is due ‘on satisfaction of finance’.
Finance is not satisfied until late afternoon on the due date.
Payment becomes due and payable before close of business the same day.
The bank transfer period is three business days.
The deposit holder does not receive it until after the due date.
The buyer is in default of their contract.
Default then gives the seller the right to terminate the contract.
In this scenario, it is not in the buyer’s interest to pay a balance deposit until finance is satisfied. It also is unreasonable to expect receipt by the seller before close of business given the standard waiting period on bank transactions.
For this reason, the Queensland Law Society has updated the standard terms of the REIQ residential contracts relating to the payment of the deposit. As of 20 January 2022, REIQ residential contracts will include a deeming provision.
New Standard Condition 2.2(3) Deeming Provision
New Standard Condition 2.2(3) is a deeming provision that applies where the buyer has:
provided the deposit holder with proof of electronic payment; and
taken no action to delay or prevent payment.
The effect of the provision is that the buyer will be deemed/treated to have paid on the date of the electronic transaction rather than the date the payment is received. This means if it is not received by the deposit holder on the due date, a buyer who has complied with the above will not be in default of the contract, preventing the seller from terminating the contract.
New Standard Condition 2.2(4) Notice
The seller is entitled to issue the buyer notice where a buyer is deemed to have paid under clause 2.2(3) and the deposit holder has not received it by the due date. If the deposit is not received within 2 business days of the notice, then the deeming provision no longer applies, and the buyer will be in default of their contract.
This change means more realistic standards for buyers. Buyers are still required to pay the deposit on time. However, the new provision buys time for the funds to reach the deposit holder’s account. This combats the issues created by delayed transaction periods by providing a grace period to buyers.