COVID-19 Residential Contract delays

COVID-19 Settlement Delays

The impact of COVID-19 has been profound.  Most residential contracts in Queensland are governed by the terms of the REIQ/QLS Contract (“the REIQ Contract”). The effects of COVID-19 may prevent a party from complying with that party’s obligations under the terms of the Contract and cause delays.

There is no “force majeure” clause in the REIQ Contract, which might relieve a party of their obligations under a contract due to some catastrophic external event beyond control of the parties.

Whereas contracts for property other than land may be terminated by reason of a concept called “frustration”, meaning that the contract is unable to be completed by reason of external events, such a concept does not typically apply to land contracts.

The REIQ Contract does allow for Suspension of Time in respect of Settlement Obligations for parties in certain events called Delay Events. Arguably the Delay Events covered under the REIQ Contract do not presently deal with the COVID-19 situation.

This could mean that a party who is unable to settle by circumstances beyond their control arising from COVID-19, may be in breach of the terms in the Contract leading to possibly significant consequences. This could happen for example if their bank was not ready for settlement or their lawyers were unable to attend settlement.

If parties wish to provide for an extension of time due to the effects of COVID-19, one consideration is whether such an extension should be indefinite or limited to a set period, say 14 days.

Below is a Special Condition which the parties may choose to use in order to allow the extension of time due to the effects of COVID-19, but not to have such an indefinite extension.

By way of caution, the mere existence of a Delay Event (even if that term is extended to include COVID-19) does not give rise to a suspension of Settlement Obligations. The Delay Event must be the sole cause of that party’s inability to comply with his/her Settlement Obligations.

Example of Special Condition clause:

Delay Event

1. Clause 6.2(8)(b) of the Standard Terms of Contract shall be amended so that a “Delay Event” shall include a “Public Health Emergency” under the Public Health Act (Qld) 2005.

2. In the event that Settlement does not occur within 14 days from the Settlement Date by reason of Clause 6.2 (as amended by this Special Condition) being invoked, either party may terminate this Contract.

Should you have any queries, please do not hesitate to contact a member of our team.

Mark Lillicrap

Mark Lillicrap DBL Solicitors