Buyer Beware – Purchasing a property under COVID 19 conditions

If you are intending on purchasing a property under COVID-19 Pandemic conditions, you need to carefully consider the following:-

  • The current COVID-19 Pandemic situation may mean that the time periods and obligations under the standard REIQ Contract (“the Contract”) could be impacted by further closures or unavailability of parties which may be outside the control of the parties and not be currently foreseeable.
  • Given the current circumstances, your finance approval could be at risk of being withdrawn prior to settlement. Most financial institutions will reserve the right to withdraw finance approval at any time prior to settlement for any number of reasons.  Reasons they may withdraw the approval include if your personal financial circumstances change or the value of the Property is adversely affected. That may cause your financier to decline to provide finance to complete the purchase.
  • In cases where finance is withdrawn, and the Contract is unconditional as to finance, you would still be obliged to complete the Contract.  If you do not have sufficient funds to pay the balance purchase price (including any adjustments) at settlement the Seller may terminate the Contract or seek to have you specifically perform the Contract and, in both instances, can keep your deposit and claim compensation from you (such as loss on resale which may be significant in the current volatile property market).
  • If these issues were to occur then it is highly unlikely you will have a contractual remedy to help you and you may be unable to avoid breaching your Contract, be financially impacted or suffer other loss or hardship.
  • If you are buying the property for investment purposes to lease to a tenant be aware that there may be government schemes which impact the operation of some tenancies. For example, in 2020 the Queensland government tabled regulations to change the operation of residential tenancy arrangements in response to the COVID-19 Pandemic. These changes  included:
  • a moratorium on evictions due to rent arrears for tenants experiencing excessive hardship due to the impacts of COVID-19 Pandemic;
  • an obligation on landlords to offer extensions of tenancies in some circumstances;
  • immediate termination rights for tenants who are escaping domestic violence;
  • caps on tenant break lease costs in some circumstances; and
  • limits on a landlords’ rights to inspect the property during the sale process. 
  • These regulations may affect:
  • your ability to obtain access to the property for inspections ordinarily allowed under the Contract prior to settlement;
  • some duty concessions;
  • if you are expecting vacant possession, the ability of the Seller to require the tenant to leave prior to Settlement;
  • the ongoing payment of rent under the lease; and
  • your ability to manage and enforce the terms of the tenancy agreement.

Whether the above matters will apply to your purchase at the relevant time or impact your rights may not be immediately apparent. You should seek legal advice from us immediately if any of these matters are of concern to you.

The standard residential Contract contains a standard Suspension of Time provision for a Delay Event. However, we advise this provision is likely to be construed quite narrowly (as it was not drafted with the COVID-19 Pandemic in mind) and:

  • only relates to the inability of a party or their representatives to perform settlement obligations (as defined), and not to other obligations or to dates for satisfaction of conditions;
  • does not specifically refer to a pandemic event;
  • requires the inability to perform to be ‘solely as a consequence of’ a Delay Event and will not apply if the Property is destroyed or finance is withdrawn;

Depending on the circumstances in any particular matter, the standard clause is highly unlikely to protect you during the COVID-19 Pandemic.  We therefore recommend you seek for the delay event under the terms of Contract to include a “pandemic”.

If, despite the current uncertainty and potential for delay or unforeseeable risks you wish to proceed with a purchase, we strongly recommend that you consult us as to some very important amendments we can make to the proposed Contract prior to you signing.

For example, a special condition (or other contractual solution) may be included in the Contract to deal with some of the foreseeable issues as highlighted above. You should allow sufficient time for special conditions to be drafted and contemplated before the Contract is signed. However, again we warn you that even if we are able to negotiate a special condition (or other contractual solution) this does not mean that we will be able to incorporate provisions for all unforeseeable risks.

A purchase of property at this time under pandemic conditions is a very risky enterprise!

Husband fined for purchasing cryptocurrency

In the recent case of Lescosky & Durante [2020] FamCAFC 179, a Husband was fined $54,000.00 for purchasing cryptocurrency to the value of $180,000.00.

The parties had been engaged in contested property settlement proceedings. The Husband set up two new bank accounts and transferred the sum of $180,000.00 over an 11 day period, which was utilised to purchase the cryptocurrency.

The issue with the purchase of the cryptocurrency by the Husband, was that this breached (“contravened”) a Court Order. The Court Order provided that:

  • the Husband was restrained from transferring or otherwise disposing of any asset exceeding $1,000.00 in value (save in the ordinary course of business); and
  • prior to transferring or otherwise disposing of any asset exceeding $1,000.00 in value, the Husband was to provide seven (7) days written notice of his intention to deal, to the Wife’s solicitors.

The Court proposed that “payment of the fines be made by the Husband, namely from his entitlement in the property settlement proceedings.”

This case serves as a reminder as to the powers available to the Court, where there is a contravention of a Court Order.

If you have any queries in relation to Court Orders, or require assistance with a property settlement, please call us on 07 3278 1888.

Welcome Amy Holland to Hogan Stanton Lawyers

We welcome Amy Holland to our team, as our Associate Lawyer. Amy’s interest in law was sparked during work experience at a local Magistrates Court, which led to a school based traineeship and ongoing employment with the Department of Justice and Attorney-General during her university studies. Since her admission as a legal practitioner in 2014, Amy honed her efficient and client-focused approach, within private practice.

In her spare time, you will find Amy on road trips exploring all that our beautiful country has to offer (particularly enjoying the rest breaks for Devonshire tea or a stop at a little country bakery), walking her dogs or curled up in a sunny spot enjoying a good book.

Amy looks forward to meeting you at our offices. Please call us on 07 3278 1888 to arrange a meeting.