SPECIAL MEMBER ALERT
COVID – 19 – ADDITIONAL SPECIAL CONDITION TO RESIDENTIAL SALE CONTRACT (OPTIONAL)
Whilst the full impact of COVID-19 remains to be seen, it is becoming clear that COVID-19 as a pandemic is expected to have far-reaching implications on existing and future contractual obligations of Vendors and Purchasers.
We understand that many Vendors and Purchasers have asked, what if we are all forced into the unlikely event of a compulsory lockdown or contract COVID-19 and are unable to settle on time due to no fault of our own? In fact, we have seen a number of cases already in the past week where parties expect a special condition to be added to their contract before they sign.
To support you, we asked Commercial & Legal to consider these concerns that you may be experiencing, and to prepare a suggested “one-size fits all” special condition which can be inserted into a residential sale contract should you and your clients agree to it. This new Annexure Special Condition is now attached for your use and will be added to our online forms shortly.
Whilst the use of this new COVID-19 Special Condition is entirely optional and may depend on a case-by-case basis, as a profession we would recommend the inclusion of it with all contracts during this time of crisis. It follows the decisions of the Australian Government on multiple fronts to provide some level of flexibility and support to all types of people and transactions in the market who are affected by COVID-19, and we consider sale contracts will need the same support to avoid unnecessary situations of default for those who suffer from the virus.
How the Special Conditions operate
The special condition has been drafted by way of two main parts:
1. COVID-19 Event; and
2. Time Extensions
These two clauses work together, but you do have the option of deleting either clause depending on the needs of your clients or the transaction itself.
Special Condition 1: Covid-19 Event
This clause allows for the Vendor and Purchaser, in the event of a COVID-19 Event, to extend the Settlement Date without penalty for a period of not more than 14 days. This time period is in line with Government direction in respect to self-isolation and quarantine periods.
There are some conditions to exercising the extension in order to ensure it is not misused, and to ensure properties are not handed over with risk of the buyer catching the virus.
Special Condition 2: Time Extensions
This clause seeks to extend the time periods to comply with defaults in order to allow some leeway in the current crisis situation.
First, it increases notice periods of default before settlement, from 3 business days to 10 business days.
Second, it increases the period of a notice to complete after settlement from 10 business days to 20 business days. Note that default interest is to continue to apply as per normal, the time extension purely delays the right to terminate.
As mentioned above, the two clauses have been drafted to work together. However, in the event that the Vendor and/or Purchaser do not wish to make the contract subject to a COVID-19 Event, then clause 1 can be deleted and clause 2 relied on only, and vice-a-versa.
Notwithstanding, we suspect that given the current crisis, most Vendors and Purchasers would deem it a reasonable position to include both clauses and as a profession we consider it reasonable to encourage that they do so.