A matter was recently heard by the Supreme Court of Queensland concerning a purchaser's right to terminate a contract for sale as a result of damage caused by the recent Queensland floods.
The case concerns Section 64 of the Property Law Act 1974 (Qld) and relates to a riverside development completed in 2009.
The Act
Section 64 states that in any contract for the sale of a dwelling house where, before the date of completion or possession whichever earlier occurs,the dwelling house is so destroyed or damaged as to be unfit for occupation as a dwelling house, the purchaser may, at the purchaser's option, rescind the contract by notice in writing given to the vendor or the vendor's solicitor not later than the date of completion or possession whichever the earlier occurs.
Case Background
In this case, the apartment was on the ground floor of the building and included car parking and storage on one of the basement levels.
The developer and seller, Mirvac, had previously called for completion after the Community Title Scheme was established. The purchaser unsuccessfully sought an order declaring the contract void and a new completion date was established as 8 February 2011.
The Brisbane River then flooded. Both basement levels of the building were inundated. Water entered the apartment on the ground floor. Mirvac made an open offer to the purchaser to clear up and restore the apartment to its original condition at Mirvac's cost. Mirvac sought to delay settlement so that it could do this. The purchaser rejected that offer and looked to rescind the contract in accordance with Section 64 of the Act.
The Court Action
The purchaser sought a declaration that the contract was duly rescinded. The Supreme Court of Queensland noted that there were legal questions and related factual questions about the application of Section 64 including:
- the date at which fitness (i.e. fit for occupation) must be established
- the meaning of fitness and the relevance, if any, of the damage being capable of repair.
The Court found that these were matters which should go to trial and could not be determined in a summary fashion. The Court therefore found that the purchaser would be adequately protected by an order extending the date for completion. This would not prevent the Court determining whether or not the purchaser had a right to seek to rescind under Section 64 at a later trial.
Conclusion
The case is a reminder that regardless of the extensive damage caused by a flood, reliance on Section 64 of the Act (and equivalent provisions in other States) to rescind cannot be guaranteed and will be determined on a case by case basis.
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.