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• PAMDA Alert: New Warning Statement required for second offer from buyer
• Sustainability Declarations – Yet another paperwork hurdle for agents
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PAMDA Alert: New Warning Statement required for second offer from buyer

Our September eNews discussed how PAMDA contract presentation requirements must be repeated when a seller presents a counter-offer.

A recent court ruling decided that the full PAMDA process must also be repeated – and a fresh warning statement signed - when a second offer on the same residential property is submitted by a buyer.

The District Court was considering a dispute that arose in connection with the proposed sale of a $7.5 million property at Hedges Ave, Mermaid Beach.

Before Ms Ray signed her opening offer on the morning of 18 February 2009, the seller’s agent drew her attention the warning statement which she signed as required by PAMDA.

The offer was however rejected by the seller, Rice.

Later the same day Ray made a second offer, again through the seller’s agent. The same documents, including warning statement, that were prepared by the agent for the first offer were used except that a new reference schedule and special conditions page were inserted. The pages were initialled but the Warning Statement was not re-signed.

Moreover, the agent did not, on this occasion, draw Ms Ray’s attention to the warning statement.

Rice accepted the second offer.

A cheque for the $250,000 deposit was dishonoured on presentation. The seller then sued the buyer for the unpaid deposit.

In her defence, Ray argued that the contract was void because seller had been obliged to comply with the s 366B (4) direction requirements when presenting the contract for the second offer to her. Further, she contended that by reason of her not signing the warning statement before signing the second contract, it was not binding.

The seller's contention was that because Ray’s attention was drawn to the warning statement at the time the first offer was made and because she had signed it then, the process did not have to be repeated the second time round.

The District Court ruled in favour of the buyer stating that, even though the documents related to the same transaction, they were two different contracts. Thus the warning statement provisions had to have been complied on each occasion. In particular:

A warning statement is not a floating document signed generally by a buyer for the purposes of any number of proposed relevant contracts for a particular property. On the contrary, it is intended to be a warning applicable to the proposed relevant contract then under consideration.

The PAMDA process was material even though the second offer originated from the buyer because it was a seller's agent who prepared it. The court quoted the relevant PAMDA provisions as follows:

If "the seller’s agent hands the proposed relevant contract to the proposed buyer the agent must direct the proposed buyer’s attention to the warning statement" (section 366B(4)) and “if the seller’s agent hands a proposed relevant contract to the buyer for signing, a warning statement is of no effect unless the buyer signs the warning statement before signing the proposed relevant contract” (section 366D(4))

The seller instituted an appeal but it has subsequently been withdrawn.

* Rice v Ray [2009] QDC 275

Send a PAMDA protest email to Hon Peter Lawlor, Minister for Fair Trading - get the PAMDA mess fixed! »

ALERT: This case emphatically illustrates that the PAMDA process must be observed every time a seller's agent is involved in the making of an offer from a buyer.

Naturally, if a seller originates a counter-offer, the PAMDA process (with a new warning statement) must also be followed when the contract is presented to the buyer.

The cancellation of the contract is only one consequence of PAMDA non-compliance. The other consequence is that the seller and its agent are liable for all of the buyer's costs.

Best practice requires that a new warning statement be used in the case of each offer (or counter-offer) and that the buyer's attention be drawn to it (and the buyer signs it) before the buyer initials or signs the contract proper.

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