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The Queensland Supreme Court yesterday handed down a judgment1
that allowed buyers of an apartment purchased off-the-plan to
terminate their contract under section 27 of the Land Sales Act
1984 (Qld) (LSA) (as it stood prior to the February 2012
amendments) after they had failed to attend settlementand then sat
on their hands until the statutory period for delivery of the
apartment had run.
The buyers were able to avoid the contract under the old form of
section 27 because of expiry of the statutory period, even while
the seller was seeking specific performance orders in Court.
Our update in February 2012 "
Critical Changes to Land Sales Act", dealt with the
amendment of section 27 of the LSA to close this loophole. Norton
Rose Australia and its client, Juniper Development Group, played a
key role in advocating for the amendment.
Under the amended section 27 the buyer cannot default under the
Contract, allow the statutory period to run and then terminate the
Contract relying on the expiry of the statutory period.
Section 27 of the LSA requires that a transfer capable of
immediate registration be delivered to a buyer under an
off-the-plan contract within a set statutory period, being 3? years
or 5½ years if extended by regulation. If the seller has not
given a transfer capable of immediate registration to the buyer in
that timeframe, and that failure is not due to the buyer's
default, the buyer may avoid the contract.
Impact of market conditions
In recent times, with changing market conditions and higher
rates of buyer default, many sellers have been faced with the
buyers failing to complete contracts. The seller's remedies are
then to either terminate the contract, forfeit the deposit and
claim damages, or to seek specific performance of the contract to
compel the defaulting buyer to buy the relevant lot.
Risk to developers
Where a seller seeks specific performance, the contract remains
on foot pending the outcome of Court proceedings. In the Meridien
case, the LSA time period for delivery of a transfer passed before
the matters in dispute were determined by the Court, and the buyers
were able to terminate the contract relying on their rights under
the LSA as section 27 then stood, notwithstanding the seller's
view that the buyers were in default.
This outcome is inconsistent with the principle that a
defaulting party should not be able to rely upon its own default to
found a right to avoid the contract. However, the Court held that,
as the language of the unamended section 27 was clear and
unambiguous, the Court was required to give the section its
ordinary and grammatical meaning, even if that allowed a defaulting
buyer to terminate.
The amended section 27 effectively excludes a termination right
where the buyer's default is the reason that the seller has not
provided a transfer capable of immediate registration. This
amendment gives sellers and their financiers protection for all
currently on foot contracts where the buyer has not sought to avoid
under section 27 before the February 2012 amendments.
Footnotes
1Meridien AB Pty Ltd & anor v Jackson
(as Trustee for the Jackson Family Trust) & ors [2012] QSC
260
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