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Finance Clauses, a way out or a way in to a legal minefield

By Natalie Smyth

Buyers of property often rely on Finance clauses to give them a way out of a contract to purchase a house they really can’t afford. But for the unwary they can be nothing more than a legal minefield entangling the parties in protracted litigation.

 A recent decision in the District Court of Queensland considered, inter alia, whether a conveyancing contract for the purchase of residential property in Queensland was subject to finance, and whether the Buyer could rely on the finance condition to terminate the Contract.

Whilst the decision was inconclusive (as the matter is still ongoing), it serves as good reminder for purchasers of residential property to obtain independent legal advice prior to entering into a Contract for sale.

Relevant Facts of Mewing v Duncan [2018] QDC 52

  • The parties entered into an REIQ Contract for the sale of a particular residential property on 20 November 2016.
  • On the third page of the schedule to the Contract in the finance section of the reference schedule after the heading “finance amount” were the words “Sufficient to complete”, and after the heading “financer” were the words “Buyer’s choice.”
  • There was no date inserted after the heading “finance date.”

The Fourteenth Edition of the REIQ Contract for the sale of Houses and Residential Land contains a notation next to the finance condition in the reference schedule of the Contract as follows:- “Unless all of ‘finance amount’, ‘financier’ and ‘finance date’ are completed, this contract is not subject to finance and clause 3 does not apply.”

Clause 3.1 of the REIQ Contract provides:- “This contract is conditional upon the Buyer obtaining approval of a loan for the finance amount from the financier by the finance date on terms satisfactory to the Buyer. The Buyer must take all reasonable steps to obtain approval.”

Accordingly, as all three sections in the finance section of the reference schedule of the Contract had not been completed, prima facie, the Contract did not appear to be subject to the finance condition.

Despite the deficiencies in the Contract, did the Court decide that the Contract was subject to finance?

The Buyer argued that she had told the agent (who had prepared the Contract) that it was to be subject to finance, and that she had relied on the agent to have completed the contract in such a way as to make it subject to finance. To this, the court remarked “if the [Buyer] relied on the real estate agent to complete the contract in such a way as to render it subject to finance, the applicants may be estopped from denying that the contract was subject to finance, regardless of the written terms of the document.”

The Court further remarked that “it is at least arguable that the agent was the agent of the applicants for the purposes of making representations as to the effect of the way in which they had completed the contract form, and if such a representation were made and were relied on by the respondent, it would be binding on the applicant.”

Despite the above remarks, the Buyer had not submitted sufficient evidence to the Court to substantiate that the agent had represented to the Buyer that the Contract was subject to finance and that the Buyer relied on that representation. Noting that the Buyer in this case was self-represented, the Court adjourned the matter to allow the Buyer an opportunity to submit further evidence to substantiate her case.

We are advised that the dispute between the Buyer and Seller remains unresolved. No doubt there is a contest regarding what representations the agent is alleged to have made on behalf of the seller.

Key Takeaways

  • It is important for Buyers to remember that real estate agents are appointed by the Seller and accordingly will act in the interests of their client. If an agent has made a representation to you, whether it be with respect to the property condition, or the terms of the Contract, we recommend that such representation be reflected in the Contract as a special condition or a warranty.
  • In the event that a situation arises whereby a Buyer may seek to rely on a representation made by an agent, it may be difficult, in the absence of written documentation, to produce sufficient evidence to substantiate that the representation was in fact made and relied upon by the Buyer.
  • Whilst it may be possible for a purchaser to rely on a representation made by an agent with respect to a particular contractual term, the best course of action is to obtain independent legal advice prior to signing the Contract to ensure that any such representations have been reflected in the Contract.

Had the purchaser in the above mentioned case engaged a solicitor to review the Contract prior to signing same, the deficiency in the contract with respect to the finance particulars could have rectified, and accordingly, the parties could have avoided the dispute as to whether the Contract was or was not subject to finance.

Separate to obtaining pre-contract advice or legal assistance throughout a conveyancing transaction, it is apparent from the facts of this case, that when parties become embroiled in litigation, they will certainly benefit from engaging the services of a solicitor to assist them with preparing evidence sufficient to establish and support their case.

If you would like to read the court’s judgement in detail – you can access the case via:-  https://www.sclqld.org.au/caselaw/QDC/2018/052

Other considerations

Notably in this case, the words “sufficient to complete” were used to describe the “finance amount” required to complete the transaction. In our next blog (due out on Friday 8 June 2018)  “When sufficient to complete is simply not enough”  we examine the Court’s view on the adequacy of this frequently used phrase.

What can we do to help?

If you are considering purchasing or selling a property in Queensland, in addition to acting in the conveyance, Just Us Lawyers can provide you with pre-contract advice, review a Contract that has been prepared by a third party to ensure its accuracy, and formalise representations made by a Seller or agent into special conditions or warranties that will form part of the Contract.

Just Us Lawyers – for the best Conveyancing lawyers in Brisbane call/email Just Us Lawyers or complete our enquiry form for a quote today

 


How important are SPECIAL CONDITIONS?

Whether you’re purchasing your first family home or increasing your property portfolio, purchasing property is an important financial decision that is not to be taken lightly. It is crucial that you sign a contract in accordance with your current circumstances and needs. Typically this is achieved through Pre-Contract Advice and/or Contractual Negotiation. 

WHAT ARE SPECIAL CONDITIONS

In addition to the standard terms of a Contract, it is common practice to insert special conditions prior to execution. This provides additional protection and rights with respect to the property transaction. Special conditions are also inserted to vary or delete existing standard terms to benefit either or both parties.

Listed below are some common special conditions that can be inserted for the benefit of the Purchaser:-

  1. Body Corporate Pet Approval – if purchasing a unit or townhouse with the intention of a pet residing in or on the property, the Purchaser must ensure the body corporate will approve.
  2. Due Diligence – this allows the Purchaser to investigate the land being purchased through a range of property searches. This may be necessary to ascertain development restrictions, permitted uses, current building structure approvals and certification etc.
  3. Prior Sale – are funds from your sale to be used to assist in the purchase of the new property?  It would be beneficial to insert a condition with respect to the satisfactory settlement of your prior sale Contract.

When a Special Condition is inserted into any Contract it must be clear and concise, warranting avoidance of potential future dispute, as a condition could be void if it is deemed vague or confusing.

Once you have entered into a property transaction by way of a fully executed Contract of Sale, it is legally binding, therefore we recommend engaging Pre-Contract advice in which we can draft appropriate conditions, negotiate and provide advice with respect to terms you would be bound by.

For further information on special conditions and how we can assist in pre-contract advice please contact our Conveyancing Team based at our Wilston office.  

For the best Conveyancing lawyers in Brisbane call/email Just Us Lawyers or complete our enquiry form for a quote today

 


New Data Breach Laws and your responsibilities

BY SARAH CAMM

 

Amendments to the Privacy Act 1988 (Cth) are now in effect, introducing a mandatory notification scheme for data breaches.

 

What are the changes?

The scheme imposes notification and reporting obligations upon APP entities where they know or suspect there has been an eligible data breach, that is, a data breach involving personal information that is likely to result in serious harm to any individual affected.

So let’s unpack this a little.

 

Reporting obligations

The obligation imposed is to prepare a statement to report the breach to the Office of the Australian Information Commissioner (OAIC) and notify any individual affected. If it is not practical to notify individuals, the statement must be published on the entity’s website.

 

APP entities

Organisations and federal government agencies subject to the Privacy Act, which include:

  • NGOs, Government Agencies and Businesses with an annual turnover of $3 million;
  • Credit reporting bodies that hold credit information;
  • Health service providers who hold personal information; and
  • Tax file number recipients.

 

Know or suspect

The obligations under the amendments arise when the entity has reasonable grounds to suspect that there may have been an eligible data breach, even if there are not reasonable grounds to believe that the circumstances amount to an eligible data breach. The obligation on the entity in these circumstances is to commence and carry out an assessment within thirty days.

 

Data Breach

There are three main circumstances:

  1. Unauthorised disclosure: where an entity (including by its employee) makes information accessible or visible to a third party, whether intentionally or not.
  2. Unauthorised access: may be where a third party contractor or other person accesses information they are not permitted to access. This includes instances of hacking.
  3. Loss: for example where a phone, USB, file or hard drive is left on a bus, particularly if there is no password or encryption on the device where unauthorised disclosure/access is likely.

 

Likely to result

The risk of serious harm must be higher than a possible risk; it must be more probable than not.

This criteria is considered objectively, and the decision is whether a ‘reasonable person’ standing in the position of the entity, with the knowledge of the entity (not of the affected person) would consider that serious harm is more probable than not.

This depends on the nature of the information, and in a broad sense, the type of person the information may relate to. The entity is not however required to make external enquiries of the individuals affected.

For example, if the addresses of clients of a domestic violence victims support group are involved in a data breach, the entity would be aware that the persons involved are likely to be victims of domestic violence and therefore are likely to be at risk of serious harm where this information is disclosed.

 

Serious harm

While not defined in the Act, the phrase is likely to include physical, psychological, emotional, financial or reputational harm.

The Act contains a list of relevant matters to assist an entity in evaluating whether serious harm is likely, including:

  • The type/sensitivity of information involved;
    • Health/person information;
    • Documents used for identity fraud;
    • Location/contact information.
  • Whether there are any security measures protecting the information (such as encryption, passwords on phones and devices, codes), and the likelihood of these security measures being overcome;
  • The identity or class of persons who have obtained / might obtain the information and the likelihood that they want to cause harm;
  • The nature of possible harm; and
  • Any other relevant matters.

 

Any individual affected

As discussed above the entity is not required to look into the particular circumstances of the persons whose information may be compromised, however it is expected to make general enquiries to determine the matters outlined above. All of these matters, including the type of information, how long it was available and who accessed it are relevant.

The more people whose information was accessed and who may be affected by the breach, the higher the likelihood that one person will suffer serious harm.

 

Are there any exceptions?

There are a number of exemptions, most importantly that notification will not be required if the entity takes action to prevent serious harm before it is caused.

 

What are the penalties for non-compliance?

Failure to comply is considered an interference with the privacy of an individual and substantial penalties apply for entities who fail to comply with their reporting obligations. The OAIC can investigate complaints and, in the case of serious or repeated instances of non-compliance, apply to the Court for civil penalties of up to $2.1 million.

 

Is your business ready for the new Data Breach Notification laws? Do you need help evaluating a breach or drafting a compliant Statement to notify the OAIC and affected individuals? Just Us Lawyers can help your business organisation put policies into place to reduce the likelihood of Data Breaches and to help you evaluate and respond to a Data Breach if it occurs.


Get to know Just Us…. Skye Nicholson

SKYE NICHOLSON – LEGAL ASSISTANT

Any favourite line from a movie?

“Get to the choppaaa!” – Arnold Schwarzenegger.

 

Do you have a favourite quote?

“If you’re going through hell, keep going” – Winston Churchill.

 

If you could change one thing about working here, what would it be? 

Casual Fridays and a printer on my desk for when I get lazy haha.

 

If you could interview one person (dead or alive) who would it be?

Cooper Cronk – he has played such a pivotal role in NRL throughout recent years and I would like to see what he has instore following his retirement (since no other reporters can get it out of him).   

 

Tell us three things most people don’t know about you…

  1. I love what I do;
  2. I love my NRL; and
  3. I broke my leg in 2015… unfortunately while I was working at an office that was in a high-rise building. I had to get authorisation to use the chair lift.

 

What does a typical day look like for you?

Emails, emails, emails, drafting correspondence to clients and/or other firms and often I will also spend time either researching or reading relevant conditions and clauses.

 

 What is the first thing you would buy if you won the lottery?

Send my parents on a holiday, buy an investment property, a boat and a jet ski ie. “The dream”!

 

What food/drink do you wish had zero calories?

Beer and ice-cream.

 

You’re happiest when?

 I’m with friends and family either at the beach or simply enjoying the outdoors of this beautiful country.

 

Skye is part of the Kelvin Grove branch team. Presently she is assisting our solicitor, Natalie Smyth, in various areas including Commercial Law and Binding Financial Agreements.  If you have any queries  – call/email Just Us Lawyers or complete our enquiry form for a quote today.


What will happen to my pet after I die

By Sarah Camm

Working out what will happen to your estate and who will benefit from it can be a bit like a checklist:

  • Spouse – check
  • Children – yep
  • Parents – sorted
  • Siblings – okay
  • Pet?

For many people, their pet might actually be their most dependent dependant. Have you thought about what will happen to your furry friend after you pass away?

Where will they go?

Many people don’t like to think of pets as property and humans as owners, but in the eyes of the law these particular family members are treated as chattels, and will go to your beneficiaries.

Can I give them my property?

No, unfortunately your pet pup cannot actually own your house, or your jewellery or even your cash. This is probably a good thing because I doubt they would know what to do with it. Luckily you can leave a portion of your estate “for the benefit of” your bestie.

Who should I leave the property to?

There are a couple of options.

If you have only one pampered pet in your life, you might leave a fixed sum to a person that you trust who will use these funds for the benefit of your pet. This should be the same person as you actually name as the new carer for your pet. You obviously trust them with your pet’s wellbeing, just be sure you trust them to use the cash correctly.

If you have a few pets, or you want separate people to help with care and finances you might consider setting up a trust for your beloved companions. A trust gives you a bit more control, and may even generate its own income, meaning your property can provide for your pet for some time to come.

Important things to remember

  1. Make sure your Will is valid and binding – a dispute over the validity of your Will could cause costly litigation and delay, meaning your pet’s future may be uncertain.
  2. Make your intentions clear – your Will should clearly state who is to look after your pet after you die, and what (if any) property you are leaving for their benefit.
  3. Leave your pet to one beneficiary, but name a backup just in case.
  4. Make sure your pet’s new owner has agreed!!

Dogs, cats and all other furry friends thrive on consistency and don’t like to move around a lot. Taking the time now to make their futures certain can make a confusing time in their life a little more comfortable, and give you the peace of mind that they will be well looked after for years to come.

A Wills & Estates solicitor can assist you to work through a number of best – and worst – case scenarios to ensure that your Will is as certain as possible. At Just Us Lawyers we have experience in drafting Wills for clients with a wide range of circumstances. Contact Just Us Lawyers Wilston office to enquire about drafting a new Will that reflects your wishes.


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