REIQ’s “Day after Tomorrow” solution lacks Sky-net defence
The December update of the REIQ residential land contract includes a half-hearted attempt to avert opportunistic terminations and forfeited deposits that can occur because of innocent contract breaches resulting from un-natural climatic catastrophes.
A natural disaster – no matter how serious – does not automatically excuse delay in the prompt performance of any contractual requirement including fronting for settlement – fully loaded with the required funds – at the specified time.
Productive of much anxiety and confusion among buyers, sellers, agents and law firms earlier this year, it resulted in cancelled sales and potential lawsuits for failing to perform settlements even though doing so was impossible in the flood-affected circumstances of the lawyers concerned.
New standard condition 6.2 “suspension of time” applies ” if a party is unable to perform a settlement obligation solely as a result of a natural disaster”.
The REIQ solution lets off a would be defaulting party only in the event of “a consequence of a tsunami, flood, cyclone, earthquake, bushfire or other act of nature” and only if they have taken “reasonable steps to minimise the affects of the natural disaster on its ability to perform its settlement obligations”.
The clause does not excuse or extend other time-critical contract events like finance approval or building inspections.
It only applies to “natural disaster” and because it does not extend, as such clauses commonly do – to war, strike, riot, cyber-attack and foreign hostilities – it is not a true force majeur provision.
Other entirely unpredictable events beyond the control of the parties that occur frequently enough in Queensland to be a concern have not been addressed: power outage, telephone & internet disruption and bat virus quarantine orders.
The “reasonable steps to minimise” qualification is not a requirement to take prevention measures to ensure, for example a disaster-proof operations contingency for agents and lawyers involved in settlements.
Lastly, the “solely as a consequence of” test appears somewhat restrictive and the purpose may be better served by expressing the prerequisite as “substantially as a result of the onset of”.
All of which just goes to show the torrent of considerations that need to be balanced and that in most cases it should be up to a buyer and seller to get settlement done, hell or high water.
The REIQ version is a fair response to the issue – albeit well after the horse had bolted – but one has the feeling that agents and lawyers will begin to enlarge, by use of a special condition, the suspension of time indulgence to cover a potentialy catastrophic cyber-attack and unforseen communication or power outages.
Having the plug pulled could prove equally disastrous – in financial terms – as any hurricane.