FAQs from the REIQ Contracts Webinar

[Morvanna]

The Real Estate Institute of Queensland (REIQ) introduced new residential contracts, effective 20 January 2022.

Notable amendments include:

• A revised definition of “Contract Date”
• The unilateral right to extend the settlement date
• Express provision for paying a deposit by direct debit and a grace period allowed to address the impact of delays in the deposit of money to accounts when using direct debit

We’re working proactively with members in Queensland to help industry navigate these changes.

As part of this, we hosted a webinar with Professor Sharon Christensen, Consultant for Gadens, Professor of Property Law at Queensland University of Technology and member of the Queensland Law Society Property Law Committee.

It was wonderful to see so many of our members join us on the day – please see below Q&A from attendees with responses from Professor Sharon Christensen.

Do the new provisions only apply to a contract signed after 20 January 2022? What about if the parties have signed the previous version of the contact?  Can they still get the benefit of the new provisions?

The new provisions apply only if the parties sign the 17th ed Houses and Land or 13th ed Residential Lots in a CTS contracts. You cannot imply them into previous versions of the contract. To obtain the benefit of these new provisions the parties would need to vary the contract.

Do the smoke alarm provisions apply only to the contact signed after 1st January 2022 or apply to the contact which are signed before that date but have not settled.

The new smoke alarm requirements in the Fire and Emergency Services Act 1990 and Building Fire Safety Regulation 2008 apply to all contracts ‘entered into’ from 1 January 2022.  Refer to s 104RBA(2) Fire and Emergency Services Act 1990.   Broadly this requires smoke alarms in certain rooms and interconnected.

Contracts signed prior to 1 January 2022 are not subject to these new requirements even if the contract settles after 1 January 2022.

What is the position under clause 6.2 in the following situation?

1. The settlement date is 25 January 2022;
2. Either party give a notice under clause 6.2 to extend the date of settlement by 5 business days ie. up to 2nd February 2022.
3. On 2 February 2022 the parties mutually agree to extend the date of settlement to 10 February 2022.
4. On 10 February 2022 if either party is unable to settle, can that party again use the benefit of Clause 6.2?

No, under clause 6.2(1) an extension notice can be given by either party nominating a new date which is no later than 5 business days after the Scheduled Settlement Date (SSD). SSD is defined in clause 6.2(4) as “the Settlement Date specified in the Reference Schedule as extended: (a) by agreement of the parties; or… but excludes any extension of the Settlement Date as a result of the operation of this clause 6.2”

The effect of the clause is that the Scheduled Settlement Date is either:

1. The original settlement date; or
2. The original settlement date as extended by agreement, clause 11.4 or cl 6.3.

A change to the settlement date by an extension notice does not create a new Scheduled Settlement Date for the purpose of clause 6.2(4).

In your example, the effect of the extension notice nominating the date of 2 February is to change the settlement date to 2 February, but this does not create a new Scheduled Settlement Date, which remains 25 January 2022.

When the further agreed extension occurs on 2 February to 10 February there is also no change to the Scheduled Settlement date of 25 January because the parties have not agreed an extension to the ‘settlement date specified in the Reference Schedule’. This means that on 10 February no further extension under cl 6.2 is available as the date is more than 5 business days after the scheduled settlement date of 25 January.

Can you clarify my understanding of clause 6.2(4)(a)? It is typical for an email from a buyer’s solicitor to a seller’s solicitor requesting an extension of the settlement date to be worded along the lines of:

Dear Colleagues,

Our client requests an extension of the settlement date to X February 2022, with time remaining of the essence.

Regards

Buyer’s Solicitor

My understanding of clause 6.2(4)(a) is that if the above wording is utilized, this would be an extension as agreed to between the parties. Therefore, regardless of whether the date in the above-mentioned email is within 5 business days of the original settlement date, this requested date would actually become the new Scheduled Settlement Date – resulting in either party having a right to extend settlement pursuant to clause 6.2(1). In other words, it would appear that if emails backwards and forwards from solicitors do not refer to clause 6.2(1), then this is considered to be an extension agreed to between parties – with each party having the continuing right to exercise clause 6.2(1). Is our understanding correct?

An extension pursuant to clause 6.2 is a unilateral extension where one party nominates a new settlement date. The agreement of the other party is not required. In the example given, the buyer is ‘requesting’ an extension to a new date which implies the need for the seller to agree. If the seller agrees to the new date, it will be an extension by agreement and not an extension under clause 6.2(1). The impact of an agreed extension of the original settlement date is that the agreed date will be the Scheduled Settlement Date and an extension under cl 6.2(1) would be possible if a party was not ready on the agreed extended date.

To ensure there is no uncertainty about whether an extension is by agreement or under clause 6.2, clear communication that clause 6.2 is being relied upon should appear in the letter nominating the new date. For example:

Pursuant to clause 6.2(1) the buyer nominates a new Settlement Date of 4 February 2022, time to remain of the essence.

The example 2 you provided today was a little confusing. Our reading of the new provision is that a max period of 5 business days is only allowed if a notice is invoked under 6.2. Thus, if a notice is first issued under 6.3 as a delay event as defined, is it the case that 6.2 can still apply? Meaning if a notice is given under 6.3, once the delay event or the Suspension Period ends, and a party gives a Notice to Settle under 6.3, if a party is unable to settle on that new settlement date given under a 6.3 notice, they can then invoke a notice under 6.2 to extend the settlement date?

Under clause 6.2(1) an extension notice can be given by either party nominating a new date with is no later than 5 business days after the Scheduled Settlement Date (SSD). SSD is defined in clause 6.2(4) as “the Settlement Date specified in the Reference Schedule as extended by: (a) agreement of the parties ; or (b) clause 6.3”. The effect of giving a notice under clause 6.3 will be to extend the date in the Reference Schedule and create a new SSD.

If on the date nominated under clause 6.3 either party is unable to settle, either can give an extension notice under clause 6.2. The maximum time for the extension notice will be 5 business days after the SSD (in effect the date specified in the notice under clause 6.3).

If so, then that may clarify for us the wording of 6.2(4) which excludes any extension of the settlement date under 6.2 from the definition of “Scheduled Settlement Date”. Meaning, a scheduled settlement date can only be one of 3 dates:

1. Agreement by the parties without invoking clause 6.2;
2. Invoking clause 6.3;
3. Under 11.4,

BUT NOT 6.2, correct?

Yes that is correct. In the case of an agreed extension, it must be an agreed extension changing the settlement date in the Reference Schedule.

Clause 6.2(1) provides either party may give a notice and under 6.2(3) more than one extension notice can be given up to 5 business days in total. If the buyer gives a notice first under 6.2 of say 3 business days, then the buyer can give another notice of 2 business days (capping it at 5 business days. Then can a seller give their own notice on that last business day requesting an extension date for say 5 business days? In other words, if a notice is given by 1 party, can the other party equally give a notice which by virtue of doing so, extends the first party’s extended settlement date?

No, the clause does not give each party a right to extend for 5 business days. In your example, if the buyer gives a notice of 3 business days and then a further notice of 2 business days, the total of 5 business days under clause 6.2 is used. The seller cannot give another notice under cl 6.2.

If a party can give more than one notice, but capped at 5 business days, then I assume that technically a buyer could, for eg, give a notice each day prior to 4pm on such date, invoking a 1 business day extension 5 times?

Yes that is possible.

I have had a question from one of my agents, as to how the 5 days extension of settlement will affect interstate buyers.

If the interstate buyers sign an REIQ contract their rights and risks are the same.