Special conditions requiring the seller of a residential property to provide a pool safety certificate prior to settlement are quite common. In Latimore Pty Ltd v Lloyd  QSC 136 The Queensland Supreme Court has recently ruled on whether such a special condition was complied with on time by the seller and whether the buyer had a right to terminate the contract.
The parties entered into a contract for the purchase of a residential property using an REIQ contract (which is the most common form of residential conveyance contract in Queensland). The contract had a special condition inserted into it which read: “Notwithstanding anything else in this contract, the Seller agrees to provide a Pool Safety Certificate to the Buyer 7 days prior to Settlement. The parties agree that this is an essential term of the contract.”
By 5.00pm on the day which was 7 days prior to the settlement date, the seller had still not provided the pool safety certificate. At 5.03pm on that day, the buyer’s solicitor sent an email to the seller’s solicitor terminating the contract under the special condition. About an hour and a half later the seller’s solicitor emailed through the pool safety certificate to the buyer’s solicitor.
The buyer maintained that the contract was validly terminated and they did not have to proceed with the purchase. The seller argued that it had until midnight on that day to comply with the special condition and the buyer had no right to terminate the contract.
Was the Buyer Entitled to Terminate the Contract?
The court re-stated the established rule of interpreting contracts. That is, the contract term is to be construed objectively, having regard to what a reasonable person in the position of each of the parties would have understood it to mean, and having regard to the language used by the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction.
The court then determined that the requirement to provide a pool safety certificate was not the same as the giving of a notice under the standard terms of the REIQ contract. If it was a ‘notice’ then, as it was given by email after 5.00pm, it would be deemed to have been given at 9am on the next business day.
However, as it was not a notice of something having been done or satisfied, but rather a requirement to actually do something (provide a safety certificate), the court decided that the notices provision in the standard terms did not apply and the seller had until the end of the relevant day to comply. In other words, the seller had until midnight that night to comply with the special condition. As the seller had until midnight to comply, the buyer had no right to terminate the contract.
The court ordered that the buyer must proceed with the purchase and must also pay interest to the seller on the purchase price that should have been paid at the original settlement date as well as the seller’s legal costs.
This is an expensive lesson for the buyer resulting in paying thousands of dollars in default interest and no doubt tens of thousands of dollars in their own and the seller’s legal fees.
We always recommend buyers, sellers and even real estate agents seek legal advice on the wording of special conditions before a contract is signed.
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