Section 84 of the Property Law Act in Queensland
provides that a mortgagee may not exercise the power of sale unless
a notice under section 84 has been served on the mortgagor and the
specified default is not remedied within 30 days from service of
Ordinarily a mortgagee will wait for its section 84 notice of
exercise of power of sale to expire before taking possession or
before entering into a contract of sale as mortgagee.
Is there a prohibition in Queensland on a mortgagee taking
possession or entering into a contract of sale as mortgagee before
the expiry of the section 84 notice?
This issue can be relevant where, for example, the mortgagee
wishes to commence marketing or enter into a contract of sale so as
not to lose a potential buyer. Circumstances may also occur where
an earlier notice purported to be served under section 84 is
invalid or has not yet expired.
In Boston Peak Pty Ltd v Houghton  QSC 48 the
Court said, it is clear that "a mortgagee may take steps to
exercise its power of sale by entering into a contract prior to the
mortgagee obtaining the right to sell provided the contract is
conditional upon the power of sale being exercisable at the end of
requisite default period".
It is apparent from this decision that a mortgagee in Queensland
can enter into possession and carry out marketing prior to the
expiry of the section 84 notice. It is also permissible for the
mortgagee to enter into a contract before the expiry of the section
84 notice provided the contract is conditional upon the power of
sale being exercisable at the end of the period stipulated in the
section 84 notice.
A further decision
More recently in St George Bank Limited v Perpetual Nominees
Limited & Anor  QSC 57, there was a dispute between
mortgagees regarding the validity of a land sale contract and a
business sale contract entered into by the first mortgagee.
On 23 November 2009 the first mortgagee entered into the
contracts of sale prior the service of the notice of exercise of
power of sale. On 9 December 2009 the first mortgagee served a
section 84 notice. On 23 December 2009 the seller and buyer varied
the contracts of sale by inserting a clause making the contracts
subject to first mortgagee's power of sale being
The mortgagees all accepted that a mortgagee may take steps to
exercise its power of sale by entering into a contract prior to
obtaining the right to sell, provided the contract is conditional
upon the power of sale being exercisable at the end of the
requisite default period.
The subsequent mortgagees argued that the first
mortgagee's contracts were not subject to such a condition
when the contracts were made and that the contracts could not be
varied at a latter date in a way which would satisfy section
The Court did not consider that there was any relevant
distinction between a contract originally subject to such a
condition and one that is varied so that it becomes subject to such
a condition, so long as the variation takes place sufficiently
in advance of the completion of the contract.
In this particular case, the date for completion of the
contracts was fixed by reference to the fulfilment of a number of
conditions, and it was not suggested that the variation of the
contracts on 23 December 2009 was not sufficiently in advance of
the date for completion to allow the 30 day period under the
section 84 notice to expire.
Implications for mortgagees
A mortgagee's contract of sale should include a
condition that the contract is conditional upon the
mortgagee's power of sale becoming exercisable at the end
of a section 84 notice of exercise of power of sale.
The contract should also include other conditions that provide
the mortgagee with flexibility to enable the mortgagee to comply
with section 84 and at the same time ensure that the mortgagee does
not lose the sale.
Before taking enforcement action, a mortgagee will still need to
comply with any requirements stipulated in the loan agreement or
mortgage and comply with the requirements under the National Credit
Code (where applicable).
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guide to the subject matter. Specialist advice should be sought
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