Conveyancers brace for follow-up negotiations in the wake of cyclone
The impact of the devastating weather event brings into sharp focus elements of contract law in Queensland that are in need of reform, according to lawyers and conveyancers.
CONVEYANCERS and property lawyers are bracing for behind-the-scenes adjustments and follow-up negotiations in the wake of Cyclone Alfred.
While millions hope to escape the worst of the storm as it bears down on Queensland and northern New South Wales, major disruption to the property market is expected to last long after it sweeps ashore.
The impact of the devastating weather event brings into sharp focus elements of contract law in Queensland that are in need of reform. The Queensland Law Society has reminded the profession of its ethical and collegial obligations in the face of natural disasters.
In an article by QLS Special Counsel Ethics, Shane Budden, highlighting the importance of disaster planning, lawyers were reminded of the need to act ethically at all times, including during Cyclone Alfred.
The guidance, entitled ‘What’s your cyclone contingency plan?’ urged lawyers to act before it was too late and ended by saying: “Keep in mind that during the cyclone and its aftermath, fellow practitioners may be struggling mentally, cut off by floods or dealing with storm damage to homes and offices.
“It may be that extensions and postponements are needed, and at times like these our profession will need to rely on the collegiality and understanding that lies at its heart.”
Speaking to the Australian Conveyancer, he added: “Practitioners should keep in mind both the contents of REIQ contract, which does address the difficulties presented by severe weather events, and their ethical obligations to fellow lawyers”.
“We are facing a significant weather event, which will affect us all.”
“We have an ethical duty to ensure that the system works throughout the crisis, and that we do not take advantage of the conditions created by the cyclone.”
The REIQ has produced a 21-page Disaster and Flood Relief Toolkit which has a three-page FAQ for sales agents available here
In essence, it highlights that buyers can terminate within 5 days – losing 0.25% – or cancel if the property is unfit. But risk transfers after settlement signing, so insurance is key.
The FAQs also point out that compensation may apply if the seller failed to protect the property.
And natural disasters can delay settlement until resolved, after which a Notice to Settle can be issued.
Dott & Crossitt founder Jared Zak said: “Personally I think the QLD position that the buyer bears the risk prior to settlement muddies the water a bit and creates uncertainty in these situations.
“For example, how does this principle interact with some of the legislation which almost says the opposite (like Section 64 of the Property Law Act 1974)? And how does it work in situations like in the present where the buyer is unable to steps to insure their risk (because of the insurance embargo).
“I think the cleaner position is that the seller should bear the risk until settlement.”
Colwell Conveyancing Group MD and principal lawyer Nic Gould highlighted that the cyclone raised issues about sellers or tenants unable to vacate and the fact that might mean a pre-settlement inspection might not be possible.
“If you are looking at buying a property in the next couple of days, feel free to do so,” he said.
“There are a couple of things I need you to remember though.
“Buyers do have protections like your statutory cooling off where there are five business days we can get out of the contract.
“They may also have building and pest, and a finance clause, which may work out for them in the event that there’s significant damage to the property and they no longer want to proceed.
“They may also be able to make the property at the seller’s risk for a period of time or out until settlement, and there may also be a provision there for you to be able to gain a suitable insurance within a certain period of time.”
Noting that it was the same for sellers, he added: “Obviously, make sure your property is insured. It’s maybe a little bit too late at the moment if it’s not insured, but as a buyer to always make sure your property is insured again.
“Normally there are restrictions within 72 hours of a weather event. So chat to your insurer.”
A warning zone for the cyclone extends from Double Island Point in Queensland to Yamba in northern NSW.
Cyclone Alfred’s impending impact marks the first direct cyclone threat to south-east Queensland in 50 years. The Bureau of Meteorology has classified Cyclone Alfred as a high-end category 2 storm which could transition to a low-end category 3 system before landfall.
