The Queensland Law Society and Real Estate Institute of Queensland have introduced some of the most significant changes to the standard commercial land and community titles scheme (CTS) contracts we have seen in some time. The updated contracts (9th Edition and 8th Edition) took effect from 21 July 2022 and contain several changes that impact contracts for sale of commercial property.
We look at some of the key changes to the contracts and the impact they will have on buyers and sellers.
What are the Changes?
Extension of Settlement Date
As seen in recent changes to the residential contracts, the new commercial contracts introduce a right for either party to extend the settlement date by up to five business days from the original settlement date. It is important to note that the extension right can only be exercised up until 4pm on the settlement date.
Grace Period for Deposits
Where a buyer is paying a deposit by way of electronic funds transfer, the changes allow a grace period for the buyer before the money must arrive in the deposit holder’s account. Previously, there was some uncertainty as to whether a seller could terminate the Contract where the deposit had been paid but was not clear funds in the deposit holder’s account. The purpose of this change is to address the impact of delays in the deposit of money to accounts when using direct debit.
To ensure compliance with this change, a buyer needs to provide evidence to the deposit holder evidence that payment of the deposit has been made and the delay is not caused by the buyer.
Sellers should be aware that failure to pay the deposit will not necessarily amount to a termination right until such time as required notices have been given and failed to be complied with.
Disclosure obligations
There has been an increase on the obligations of the seller to provide greater disclosure to the buyer prior to entering the Contract and prior to the Settlement Date. The standard contract terms now include a seller warranty that it has not received any communication from an authority that may lead to the issue of a show cause or enforcement notice (notice). It is important to note that it is not relevant if a notice has been issued, but rather communications received that may lead to notice.
A termination provision has been included for the buyer if the seller fails to disclosure any service (e.g. gas, electricity, water, sewerage) infrastructure that runs through the property and does not deliver that service to the property. The disclosure must be provided to the buyer prior to the contract date and the buyer may only terminate if they have been materially prejudiced by the failure of the seller to provide the disclosure.
What does this mean for you?
Whether you are purchasing or selling a property, it is important to understand your obligations under your contract and negotiate any amendments to the standard terms to cater to your specific circumstances before signing.
The Redchip Property team can provide you with the right advice to ensure your property transaction proceeds smoothly and hassle-free.
If you would like to discuss anything commercial property related, please contact our experienced Property Team on 07 3223 6100 or email redchip@redchip.com.au for an obligation-free discussion.
