Major backlash over new REIQ contract, with changes for home buyers

Legal experts say a change to property contracts designed to protect buyers from a nightmare scenario could spark even worse chaos on settlement day.

Legal experts say a change to contracts used in residential purchases could spark settlement day chaos for home buyers in Queensland.

Under the terms of the new standard contract issued by the REIQ – which forms the basis for most contracts used in residential property transactions in Queensland – buyers or sellers will be able to unilaterally extend the settlement date for up to five business days.

Either party would have until 4pm on the day of settlement to give notice of their intention to extend.

The amended contract, which was released on Thursday, comes in the wake of a number of high profile cases in which buyers lost out on homes and forfeited deposits because their banks were not ready to settle by the time due.

In one instance a Brisbane woman said her attempt to purchase a home fell through when her bank missed the settlement deadline by 13 minutes.

Legal experts told the Bulletin that while change to the contracts would help prevent such cases from occurring in future, the amendment would cause fresh problems.

“Most people, when they get to settlement day, they have everything ready to go,” one said.

“They’ll have packed up, they’ll have everything in a removalist van, sitting on the driveway.

“Then the other side, because they’re not organised, at the last minute they call up and say they’re extending until tomorrow.

“It’s not a really good fix to this problem. It’s going to lead to a lot of really unhappy people.”

Another source told the Bulletin the new clause was “badly drafted” and they would be deleting it from every contract they could to protect clients.

REIQ CEO Antonia Mercorella.

REIQ CEO Antonia Mercorella said the amendment to the standard contract was “a significant change in the Queensland real estate landscape” and the issues raised were “valid concerns”.

Ms Mercorella said there was a difficult balancing act involved in amending contracts to address the issue of people missing out on homes because of tight deadlines, while also recognising the potential for other issues to occur.

“This has been a very challenging issue for us to navigate,” Ms Mercorella told the Bulletin.

“On the one hand the community has expressed surprise at the lack of flexibility that was previously permitted.

“We did see community backlash for instance where we saw purchasers in breach because they couldn’t follow those very strict time limits.

“Equally with this reform, with this change to the contract, we are encountering feedback.

“It was a concern. It was something we absolutely had to take into consideration because if a party thinks there’s an agreement on a settlement date, of course they will arrange removalists, end their tenancy agreements, they’ll take action.

“It will cause significant inconvenience and potentially expense if all of a sudden you’ve got the removal van there and you discover the settlement isn’t happening.

The new contract is a double-edged sword for buyers and sellers alike.

“... We absolutely took that into account and that’s the very difficult balancing act we had to perform when we were consider this issue.”

Ms Mercorella said the REIQ would closely watch the impact of the change.

“We will continue to monitor the way that things play out arising from this change,” she said.

“We understand that we’ve got to keep a watching brief. It may be that in six months time that we might take another look at it and reconsider whether it’s working well and whether we need to make further changes.

“It’s one of those very difficult juggling acts. If we hadn’t done anything about it and left the contract as it was, there would equally have been criticism there.

“Our job is to try and create a really fair and balanced contract and that’s what we’ve tried to do with this change.”

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