New versions of the REIQ Contracts for House and Residential
Land (7th edition) and Residential Lots in a Community Titles
Scheme (3rd edition) were introduced on 1 July 2010. The amendments
to previous versions of the REIQ Contracts are primarily due to the
new national unfair contracts laws and are aimed at addressing any
"imbalances" in the parties' rights and obligations
under the previous versions.
An amendment to the Trade Practices Act 1974 (Cth)
introduced prohibitions against unfair contract terms in consumer
contracts from 1 July 2010. Consumer contracts include contracts
relating to the sale of land to individuals who acquire it wholly
or predominantly for personal, domestic or household use or
consumption where a "standard form contract" is used. The
new requirements therefore impact upon the REIQ contracts as
"standard form contracts".
The significant changes in both the REIQ Residential House and
Land and Residential Community Title Scheme contracts include those
listed below. Other amendments have also been made, for example as
to new legislation such as the Sustainable Planning Act
Clauses have been inserted to allow the Buyer and the Seller to
terminate the contract for a breach of an "Essential
Term". A breach of an "Essential Term" is where:
the buyer fails to pay the deposit correctly or on time, or
fails to pay the balance -purchase price on settlement;
the seller fails to provide the required items or vacant
possession on settlement;
either party fails to settle on the settlement date, or fails
to meet any other time requirement (other than the settlement time
on the settlement date).
Finance (clause 3)
If a buyer's finance has not been approved, the buyer must
also notify the seller that it "terminates the contract".
The previous contract versions did not require that the buyer's
notice use these specific words.
Building and pest inspection reports (Clause 4)
The buyer must notify the seller if the building and pest
inspection is unsatisfactory and they terminate the contract.
Again, those specific words must now be used. Buyers are no longer
"deemed" to be satisfied with a building and pest report
if they do not provide notice to the seller.
The seller may terminate the contract if it does not receive
notice from the buyer as to its building and pest inspection
report. These clauses now align with the notice provisions as to
finance (clause 3).
Parties Default (Clause 9)
The buyer now has the same rights as the seller to terminate for
breach of contract.
The buyer has the same remedies as the seller if the buyer
affirms the contract including a claim for damages, specific
performance or both.
If the buyer terminates the contract, it may recover from the
deposit and any interest earned, or sue the seller for damages.
If the seller terminates the contract and resells the property,
the seller can no longer claim the expenses connected with the
contract (for example, agent's commission and legal fees
associated with the initial sale). The seller can only claim the
expenses connected with any repossession, if the resale settles
within two years of termination of the contract.
Changes specific to the REIQ contract for Residential Lots in a
Community Titles Scheme
Seller's warranties and statements (clause 7.4)
The clause requiring that the seller warrant there will be no
valid notice or order by an authority or court requiring work to be
done or money spent in relation to the lot or the common property
for the scheme or its subsidiary, has been removed.
Instead the seller must warrant at contract date and at
settlement that there are no current claims or threatened claims,
notices or proceedings that may lead to a judgment, order or writ
affecting the property. Note this does not include the common
Requirements of authorities (clause 7.6)
Any valid notice or an order by an authority requiring work to
be completed or money spent on the lot must be fully complied with
by the seller, if the notice was issued before the contract and by
the buyer if the notice was issued after the contract date.
The buyer may claim against the seller for reasonable costs for
work performed by the buyer, which is the seller's
responsibility. The seller also has the same rights to make a claim
against the buyer, if the work is the buyer's
These provisions are now consistent with the House and Land
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The article discusses the legislative requirements and then provides some comments on common mistakes made by caveators.
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