Now a “Who’s Who” in the contract clause “zoo” would be incomplete without a quick coverage of the other big addition to most residential sale contracts. The “peas” to the finance conditions metaphorical “carrots” if you will. Of course, I am referring to the Building and Pest condition, or Clause 4. Similar to the Finance condition, the contract being subject to the results of Building and Pest inspections is dependent on the inspection dates being completed in the reference schedule. Clause 4.1 requires the buyer to obtain a written report from a building inspector (and pest inspector, although often they are in the same report) on terms satisfactory to the Buyer. The Buyer is required again to act reasonably, but subject to this requirement, may terminate the contract should the report be unsatisfactory. A few points to note on this. Unlike some other contract forms (read: the ADL sale contract) the REIQ sale contract does not require the provision of the report in order to activate any purported termination by the Buyer. However, it should be noted that if the seller actively requests the report, it is required to be provided to them.
The second noteworthy issue with the Building and Pest clause that deserves mention, and indeed, another point of difference between these two contracts is their approach to white ants. With ADL contracts, the risk of white ants is insufficient to terminate the contract. The REIQ version however is silent on this point, the suggestion being that a buyer acting reasonably, may be able to terminate on the same grounds. Another issue that often arises is the Building Approvals, or rather, the lack of building approvals. It is important to note that as a general rule, finding out that a property contains unapproved structures (for example, a shed without the appropriate council approvals) will not be grounds to terminate under the Building and Pest condition. Whilst I have seen some exception to this where a very diligent building inspector (already, you can see the rare terrain we are navigating here) has raised this in their building report, this is often not the case. Even raised under the report, grounds for termination as a result of the note is tenuous at best. The better option to avoid disappointment, and potentially costly litigation, would be to include a separate condition making the contract subject to an inspection of the council records (otherwise known as a “due diligence” clause).
Notwithstanding the above distinctions, it is clear that a recurrent thread bleeds through both the Finance and the Building and Pest clause, and that is the overarching requirement to act reasonably or in good faith. Neither of these clauses should be used as a veritable ‘wild card’ to escape your contractual obligations.
Finally, in the new age where Electronic Conveyancing or PEXA is fast becoming the platform of choice for effecting settlements (every solicitor’s dream), one cannot look past the clause that makes it all possible, Clause 11 or the Electronic Settlement Clause. As I promised brevity at the start (and am fast approaching a word length that really blows that promise out of the water) I will refer you to my learned colleague’s detailed article on PEXA that you can read on our Blog. But for now, I will say this. PEXA has a host of amazing benefits not the least of which include:
No need to sign paper documents including a Transfer;
Faster access to your funds,
Instantaneous (or veritably instantaneous) lodgment of documents;
No bank cheques (my personal favourite); and
All completed online (in a post-COVID world, a true blessing).
In an increasingly uncertain time, it is important to insert some stability in your life where you can. How can this be achieved you ask? First and foremost, ensuring you are using a contract that provides for Electronic Conveyancing platforms. In the REIQ sale contract, that is covered in Clause 11. However, as with everything in Law, this is not the end of the story. Clause 11 provides that reliance can only be activated, by agreement between all parties: that is, buyers, sellers and both banks, where required. This means that in order to take advantage of this great platform, you need to ensure agreement can be guaranteed. To achieve this end, I recommend including a special condition that mandates the operation of clause 11. Of course, this is only recommended where you know your solicitor and bank can comply with such a requirement.
The second point worth noting in relation to Clause 11 is the waiver at 11.5 which allows a party to withdraw from the Electronic Settlement with 5 Business days notice to the other party. Obviously, this can be incredibly inconvenient and costly, especially close to settlement. To avoid this last-minute change (and cost) I recommend including in your special condition, a clause to remove the application of this provision from the contract.
At Perspective Law, we understand the importance of contract review prior to signing. This will give you the opportunity to discuss anything that might be of concern at the property. The standard contract clauses are incredibly beneficial, especially to the buyer. But as I hope this article has shown, Law is a fickle mistress. What may work well for one situation, may not be suitable for you. Perspective Law takes a horses-for-courses approach. We tailor the solutions to suit your problems and approach each matter as if it where our own. If you need any assistance regarding REIQ contracts, feel free to email us at Katherine.firstname.lastname@example.org.