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Commercial Property Alert: Simplified warning system for residential contracts proposes to close termination loophole - 14 Feb 2013

The Queensland government has taken a significant step towards meeting its pre-election commitment to cut ‘red tape’ and streamline buyer warning requirements for the sale of residential land by releasing the draft Property Occupations Bill 2013 for discussion.

This Bill, along with three other draft industry-specific bills, are proposed to replace the current Property Agent and Motor Dealers Act 2000 (PAMD Act). The current buyer warning requirements in the PAMD Act have been the subject of extensive litigation as buyers exploited termination rights to avoid contracts due to (sometimes minor) non-compliance with overly prescriptive requirements.

Partner Tony Baldwin and associate Janelle Metcalf outline the proposed warning requirements and address some concerns with the Bill as drafted.

Key points

  • The Property Occupations Bill 2013:
    • requires a warning paragraph to be contained in the contract itself (rather than by a separate warning statement document); and
    • does not give a right of termination for non-compliance.
  • The draft bills are open for public consultation. Submissions may be made to the Office of Regulatory Policy before 5.00pm on Monday 11 March 2013.

Proposed warning requirements

The Bill requires that a contract contains a warning paragraph immediately above and on the same page as each place the buyer signs the contract to indicate their intention to be bound by the contract. The words required (or words to a similar effect) are:

“Except if the property is sold by auction or the buyer has waived the cooling-off period, the contract is subject to a 5 business day statutory cooling-off period. It is recommended the buyer obtain independent legal advice about the contract before signing.”

This requirement does not apply to amendments made by a seller as a counteroffer, unless the change is to the property description or a party to the contract.

Non-compliance by the seller (or the seller’s agent) no longer gives the buyer a right to terminate, but sees the seller (or the seller’s agent) commit an offence punishable by a maximum monetary fine of $22,000. The party who gave the contract to the buyer (either the seller, or the seller’s agent) is liable for their contravention of the requirements.

Are the problems in the PAMD Act fixed?

There is the potential for further debate as to the required placement of the warning paragraph proposed by the Bill, as it must be inserted immediately above and at each place the buyer signs to indicate their intention to be bound by the contract.

Some issues to be addressed include:

  • Immediately above and at each place: Limited space in the contract may make inserting the warning paragraph difficult. 
  • Signing: Will initials (as opposed to a signature) or a shortened form of signature (eg made next to amendments) trigger the requirement? 
  • Intention to be bound: Will every signature and initial made by the buyer be an indication of their intention to be bound, and will the intention be a subjective or objective test?

Hopefully these areas can be addressed and clarified during the public consultation period. However, as there is no right of termination for non-compliance, it is likely that non-compliance will not be pursued as feverishly as under the PAMD Act.

Transitional provisions

The provisions of the Bill will only apply to contracts entered into after the commencement of the new legislation, while the PAMD Act provisions will continue to apply to contracts entered into but not yet settled at the commencement.

For more information on the Property Occupations Bill 2013, please contact HopgoodGanim’s Commercial Property team.