Picture this: it’s Saturday evening. You are waiting nervously next to your phone with a glass of wine to take the edge off; waiting anxiously, after seeing your dream home at an inspection that morning. Why so serious? You have submitted an intention to make an offer to the Seller and the next call you want is from the agent with your offer, on contract, ready to sign. But before you embark on the road towards the Australian dream, whether for the first time or the fifteenth, it is important to check the wording. I aim to unpack three of the big clauses that will feature in the favoured contract used by Queensland Agents – The REIQ contract of Sale.
As a golden rule, I’ll start with the Finance Clause or, known in the legal world, as “Clause 3”. This is a heavy hitter. It can help all your dreams come true or could potentially be the subject of your worst nightmare. So what are the basics? In a nutshell, your contract will be subject to finance when all three components of the “finance” section in the contract reference schedule are completed. This is critical. I have seen the disastrous effects of an incomplete finance clause and you do not want to be on the pointy end of that knife. So that seems easy enough. Three blank spaces, three simply entries, right? Wrong! As a buyer (or agent for the buyer) completing this clause, you want to keep the clause general to ensure you don’t unintentionally hitch your wagon to the wrong horse. In the recent case of Hauff & Anor v Miller the contract specified ING as the financier (instead of the more popular entry of financier of “buyer’s choice”). The buyers instead, applied to Rock Building Society, on the presumption that this application would be more successful. When the finance approval had not been received within the time frame stipulated in the contract, the buyers commenced steps to terminate the contract. Without getting into the finer details, the key takeaway was that as the Buyers had not applied to ING as noted on the contract, the court considered that all reasonable steps where not take, and therefore there termination was not lawful.
This leads us to the next point. Clause 3.1 provides that the contract is conditional on the buyer obtaining approval for finance on terms satisfactory to the buyer providing the Buyer takes all reasonable steps. The Finance clause has often been seen as an easy way to exit the Contract. Often, this is not legitimately used, to the success of the Buyer to terminate a contract. However, the test is two-fold as the cases establish. There must be a reasonable attempt. Firstly, use generic terminology in the reference schedule. We suggest for the amount “sufficient to complete” and “buyers choice” for financier. Although your banker or finance broker says to allow two weeks for finance approval, this will more likely mean 3 weeks. My advice is to err on the side of caution and add the extra time. You can always satisfy your condition early if you need to. Do not delay in your application. Whilst you may not necessarily need to show you were “declined” for finance, you must show that you have acted reasonably (and in other contracts such as the ADL, you may need to show an actual decline letter). The subject to finance clause is wonderful, albeit essential if you do not have the funds required to complete the purchase. But as with most things in law, there is an ongoing requirement to act in good faith and always check the terms you have agreed to. Be sure and contact us before you sign the contract even though you like the virtual inspection. If you need any assistance regarding REIQ contracts, feel free to email me at Katherine.email@example.com or call direct on 07 3317 4306.
 Hauff & Anor v Miller  QCA 48