As a purchaser of a Lot in a community title scheme “off the plan” there is usually a provision that once the plan has been registered the Seller can then nominate settlement to be within a relatively short period after, usually just 14 days.

Though the contract may not be subject to finance or finance has been previously approved and therefore unconditional, the financier may want, say, an updated valuation and that is required within the notification period, what is the obligation on the Seller?

A recent decision of the Queensland Court of Appeal has confirmed that in circumstances where finance is contemplated by the contract and it is necessary for the Seller to do something to assist the Purchaser to obtain finance approval for settlement, the Seller cannot simply stand by its notice provision and still require settlement by the date nominated.

The Court of Appeal decision concerned Lots in a community titles scheme which were not subject to finance but included some clauses in the contract anticipating that finance might be sought. 

The notice to settle was given by the Seller in accordance with contact and gave 14 days as per the contract. However, despite no subject to finance clause, the purchaser did want to arrange finance and asked for a valuer to enter and inspect. By the time the seller wrote back agreeing, about 7 days of the 14 days had passed such it was virtually impossible for finance to be approved for the settlement date. The Seller insisted on its appointed settlement date and was intending to terminate the contract on the basis it said the Purchaser was not able to settle on the date for settlement.  

A single Judge of the Supreme Court and then the Court of Appeal held that since obtaining finance was contemplated and it required some action on the part of the seller there was an implied duty on the seller to co-operate to give effect to the contract i.e., to settle. The Seller was obliged to enable the valuer to enter in time for finance to be approved. An injunction was ordered against the Seller from requiring settlement on its appointed date for settlement.  This was so even though it was not subject to finance because there were clauses in the contract which contemplated that finance might be sought or a financier may be involved.

For purchasers, this highlights that Purchasers can face an insistent Seller of its right to terminate. Having a solicitor act in the conveyance can help protect your rights. For developers, it can be seen that it is important to obtain legal advice on contracts to be used, to avoid such unforeseen results.

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This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.

Roly O’Regan

Director