Residential Property- A Seller’s Risk

Throughout our dealings in property law, we hear many people ask “I’m only selling my house so I don’t need a solicitor, do I?” Although you would expect our answer to be “Of course you need a solicitor!” there really are a number of very good reasons why getting help from a solicitor is very important under Queensland’s current rules.

As a seller, the last thing you want is for a buyer to be able to get out of a contract you thought was a “done deal”.

The Property Agents and Motor Dealers Act 2000 QLD (PAMDA) has a very detailed and complex set of rules that must be strictly complied with for a contract for the sale of ‘residential property’ in Queensland to be binding on the Buyer.

The system is so complicated that it has been described by Justice Fryberg as a ‘book of incantations…’

“Unless the magic words are written or the magic spell is cast, the Buyer is not bound.”

Sellers need to be aware that there are many procedural errors that can allow a Buyer to terminate a contract. The alarming fact for a Seller is that this right exists any time up until settlement. It is also only the Buyer that has the right to terminate and not the Seller.

This means that a Buyer can rely on a procedural defect to terminate the contract but the Seller has no rights to terminate and no right to have the error fixed if they become aware of it after the contract is entered.

Some of the more interesting examples of breaches of PAMDA allowing a Buyer to terminate an otherwise binding contract include the following:

  1. Failure to attach a Form 30c Warning Statement to the Contract;
  2. Failure to properly attach the 30c Warning Statement to the contract. The use of a bulldog clip rather than staples or binding is not considered to be ‘attached’ and has been upheld as a valid ground for a buyer to terminate;
  3. Use of writing/font on the Form 30c which is different to the balance of the text on the document, ie other than size 14 point font;
  4. Failure to draw the Buyer’s attention to the Warning Statement… essentially a ‘warning for the warning statement’;
  5. Failure to provide a SECOND direction to the buyer drawing their attention to the warning statement when they are presented with the fully signed contracts.

It is unfortunate, but if a defect is discovered after a contract has been entered there is no provision in the legislation for a Seller to remedy the defect. This leaves the Seller exposed to risk of termination up until settlement.

You may well ask, “What is the point in knowing of the defect if there is nothing that can be done to remedy it?”

The practical benefit of obtaining legal advice is the following:

  1. If we receive the contracts from an Agent, after they have been fully signed, we are able to make necessary enquiries to advise you on the enforceability of the contract and whether the legislation was complied with;
  2. If we are preparing contracts without the intervention of an Agent, we are able to ensure that the PAMDA is complied with so that the Buyer isn’t able to terminate on grounds of non compliance;
  3. If we become aware of non compliance with PAMDA BEFORE both parties have signed the contract, the Legislation does allow for the defect to be rectified, by essentially withdrawing and resubmitting the contract;
  4. By being aware of the enforceability of your contract you are able to avoid further compounding of your damage;
  5. For example, if you are aware of a defect you will be cautious not to enter other contracts that rely on the fulfillment of your Contract for sale. You would also be cautious not to take steps that would see you suffer further loss if the Buyer does terminate the contract. In effect, you will benefit from knowing what extent you can or can not rely on the contract.

A ‘hand shake’ is no longer enough to prove a ‘deal’ and neither is a signed contract unless all the right procedures are followed. To avoid losing a sale, or suffering serious financial loss and damage we suggest you seek legal advice before entering a contract for sale of residential property.

Read more about the author Rebecca Lorimer

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