The real estate market is rapidly changing as a result of the current COVID-19 pandemic. Consideration of potential disruptions that may be caused by the pandemic should be made for any new property contracts entered into.

For buyers or sellers who have entered into contracts for the sale and purchase of land, the uncertainty caused by the COVID-19 pandemic and government responses has raised questions regarding the ability of the parties to comply with their contractual obligations and to complete contracts.

It is important the terms of each individual contract are reviewed, especially if the settlement date on your contract is within the next six months, or if you have any concerns about your or another party's ability to complete. Below are a number of matters that both sellers and buyers should consider.

Measures to mitigate risk

There are a number of risk management measures both sellers and buyers can implement to mitigate the impact of COVID-19:

  1. Work together during any due diligence processes, including the sharing of any relevant searches, rates certificates and expert reports in relation to the property.
  2. Obtain any clearance certificates or rates certificates required for settlement as soon as possible.
  3. Review any termination or delay provisions in your contract now and adapt as appropriate.

Buyers should also consider:

  1. If finance is required, obtain any required approval as soon as possible and, ideally, prior to entering into the contract or well in advance of the settlement date.
  2. Engage in discussions with sellers if any extensions to the settlement date may be required.
  3. If new contracts are being negotiated, request a tailored force majeure clause be inserted which includes public health pandemics.

New Contracts

Before entering into any new contracts, please consider inserting special conditions governing delay or termination of contract as a consequence of the COVID-19 pandemic. Consideration should be given to circumstances where mortgagees shut down or suspend services, or any relevant local government or other authority shuts down or suspends service.

Foreign buyers

All foreign buyers will now require Foreign Investment Review Board (FIRB) approval. Thresholds for all property classes have been reduced to $0. All contracts entered into with foreign buyers after 29 March 2020 will need to include an appropriate FIRB approval condition. These reduced thresholds are intended to be a temporary measure and are anticipated to return to normal once the economic situation stabilises. Expected approval times for FIRB applications have increased from 30 days to up to 6 months.


As most settlements in Australia can now occur electronically via the PEXA platform, property settlements, for the most part, are not currently affected by government responses to the COVID-19 pandemic. However, going forward it would be prudent to ensure that you can settle on PEXA if required.

As further restrictions are put in place, settlements may be affected by the shut down or suspension of service of bodies such as the land title offices in each State and Territory. At this stage these bodies are functioning, if only by post in some States. If a land title office was to completely close or its electronic systems were to fail, it may be prudent to ensure that settlement can still be undertaken in the traditional manner (where possible), rather than electronically.

Termination and rescission

Generally, property contracts do not allow for termination or rescission except for material and detrimental changes to the property between entry into the contract and settlement.

Most contracts only contain clauses allowing one or either party to terminate for the other party's death, insolvency or lack of capacity.

Where contracts contain force majeure provisions, the ability of a party to rely on such a clause depends on how the force majeure event is defined and the specific circumstances it is expressed to cover. The burden of proving its application rests with the party wishing to rely on the clause, and any ambiguity in this respect will be read against that party.

Doctrine of Frustration

Absent any specific provisions in contracts, it is possible in the current COVID-19 environment that parties may attempt to rely on the doctrine of frustration to terminate a contract and renegotiate more favourable terms. Under the common law, frustration may be relied upon to discharge the obligations of the parties where unforeseen circumstances arise, through no fault of the parties, which make performance of the contract impossible.

However, this remedy has a very narrow scope, and importantly, will not apply where the change is only temporary, the circumstances were foreseen, or the event is expressly addressed in a force majeure clause. At this stage, it is unlikely most property contacts will be able to rely on this remedy.


Whether a party can refer to the COVID-19 pandemic to delay the fulfilment of its obligations will depend on the contract and will differ in each State and Territory.

For example, under the Queensland Law Society standard contract conditions, time is generally of the essence for settlement and there is limited ability to terminate. In particular, the COVID-19 pandemic does not fall directly within the list of events that would entitle delay. The only relevant event refers to compliance with any lawful direction or order by a government agency. We also note that the standard contract provisions expressly excludes the operation of the delay event provisions where the inability to settle is due to 'diminution in value of the Property or other property of the Seller or Buyer' or 'termination of any agreement between a party and another person ... relating to the provisions of finance ...'.

Time is not of the essence under New South Wales contracts. Conversely, there are also no delay events allowing any postponement of settlement in the Law Society standard contract conditions. Small delays to settlement can be accommodated under the notice to complete period (generally 14 days from the date the notice is issued), which is required before a party that is ready, willing and able to complete can terminate the contract.

Buyers should note that default interest for late settlement may be payable depending on how the default provisions are drafted in the contract (generally payable for any delays other than delays caused by the seller). When entering into new contracts, buyers should carefully consider default provisions and aim to update them to exclude delays caused by COVID-19 related matters.

Off the plan contracts

If you are currently a party to an off-the-plan contract, you should consider whether any potential interruptions to the normal operation of government agencies and other authorities, as well as the construction industry, will result in any delays to your settlement period, or allow the extension of any sunset dates under the contract.

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.