New standard conditions allowing for unilateral settlement extensions causes a stir
As of 20 January 2022, the Queensland Law Society released new REIQ residential contracts. The new contracts include key updates to the standard Terms and Conditions, changing the rights and obligations of contracting parties. These changes are not legislated and come in response to industry recommendations made to the Queensland Law Society.
What Has Changed?
Right to extend settlement by five business days
The new Standard Condition 6.2 provides that either party may unilaterally elect to extend the settlement date by up to five business days from the scheduled settlement date
This means that one party can extend the settlement date without needing to ask the other party
The extension must be made by way of notice to the other party before 4:00pm on the scheduled settlement date
Right to multiple extensions not exceeding a total of five business days
Multiple extensions can be made
However, these extensions cannot exceed a total of more than five business days from the scheduled settlement date
This means five extensions of one business day each can be made, but two extensions for five business days each cannot
However, this doesn’t prevent the parties from agreeing to more and/or longer extensions between themselves
Only applies to REIQ contracts from 20 January 2022
There is no contractual right for parties to unilaterally extend settlement if the contract is dated prior to 20 January 2022
No impact on the right to extend for a ‘Delay Event’
This change won’t affect the ability of settlement to be extended per the existing conditions of the contract regarding a ‘Delay Event’ (for example, an act of nature or government restrictions).
Why Has This Change Been Made?
This condition is reminiscent of the industrywide struggle from banks to meet settlement dates. The skyrocket of the Queensland property market in the last 18 months, paired with the staffing and workflow issues created by COVID-19, has seen banks grunting to meet demand.
Many Buyers and Sellers have been left in default of their contract after their bank fails to meet settlement. This update will relieve stress on banks by allowing parties to elect to extend settlement in the event they are unable to meet the scheduled settlement date.
What is the Meaning of ‘Scheduled Settlement Date’?
Scheduled Settlement Date refers to:
the settlement date noted on the contract;
the settlement date made by mutual agreement between parties; or
a date made pursuant to a ‘Delay Event’ or ‘Computer System Unavailability’ (see Standard Condition 6.3 and 4 respectively).
If parties have agreed to move settlement or the settlement date has changed pursuant to Standard Condition 6.3 or 11.4 of the contract, the date may be unilaterally extended by five business days from the date agreed.
Can This Condition be Avoided?
This condition may cause issues for parties that are relying on a contemporaneous settlement with another property or relying on a specific date for settlement. For this reason, some Sellers are opting to include a special condition in their contract that overrides this change.
This change only applies to residential contracts. It doesn’t apply to contracts for commercial land or business sales.
Moving forward, both parties should check the standard and special conditions before signing a contract and consider their ability to meet their settlement obligations.
Should you have any outstanding concerns about the settlement date on your REIQ contract, contact Salerno Law Conveyancing Solicitors for a complimentary contract review and walk through prior to signing.
*REIQ contracts are the standard Contract of Sale used for residential and commercial property sales in Queensland, published by the Real-Estate Institute of Queensland Limited.