What Happens If I Am In Breach Of Contract During a Residential Property Transaction?
- RHC Solicitors
- 2 hours ago
- 5 min read
When buying or selling a residential property in Queensland, the contract of sale you sign is legally binding. Whether you're the buyer or the seller, breaching that contract can lead to serious and lasting consequences. Unfortunately, many people don't realise the full extent of those consequences until it's too late.
So, what happens if you're in breach of a contract during a conveyancing matter?
In This Article:
It Depends On What Is In Your Contract
The first thing to understand is that the outcome will depend entirely on the terms of your contract. In most residential transactions in Queensland, the standard form REIQ contract is used, which sets out specific rights and remedies if one party fails to fulfil their obligations.
Further special conditions can amend standard terms, and we would suggest that if you have an Off-The-Plan contract, or other non-standard form contract, that you obtain legal advice so you understand your rights and obligations.
Common Causes Of Breaches
In residential conveyancing, breaches of contract can occur in a range of situations. These may include simple oversights, external factors or intentionally misleading the other party. Below are some of the most common breaches we have encountered in the past:
Failure To Pay The Deposit On Time
The contract typically requires the buyer to pay an initial and/or balance deposit by a certain due date. Missing this deadline is considered a breach of contract.
Failure to Satisfy or Waive Conditions
Many contracts are subject to finance or building and pest inspections. If the buyer does not satisfy, waive or terminate the contract by the due date, and no extension has been granted by the seller, the buyer is in breach of contract
Not Being Ready, Willing And Able To Settle
In the context of a property transaction, being "ready, willing and able to settle" means that a party (the buyer or seller) has fulfilled their obligations under the contract, and is in a genuine position to complete the transaction on the agreed settlement date.
Where a party cannot settle on the settlement date, whether due to delays in finance, failure to organise settlement funds or administrative errors, they will be in breach of contract.
Failing To Provide Vacant Possession
Where the contract requires the seller to provide vacant possession at settlement, failing to remove tenants or their personal belongings from the property before settlement may amount to a breach of contract.
Misrepresentations Or Breach Of Warranties
If the seller provides false or misleading information about the condition of the property, items noted on title, or approvals of buildings and structures, this may give the buyer the right to terminate the contract or claim damages.
Undisclosed Encumbrances Or Title Issues
If there are undisclosed mortgages, easements or caveats on the title, this can constitute a breach and entitle the buyer to terminate or seek compensation.
If The Buyer Is In Breach
If you’re a seller, and the buyer has breached the contract, whether by not paying a deposit, not providing notice regarding finance or building and pest, you may be entitled to the following remedies (depending on the terms of your contract):
terminate the contract, and take back possession of the property (if necessary);
retain the buyer’s deposit (in some circumstances);
sue the buyer for damages to cover your financial losses;
sue the buyer for specific performance (an order compelling them to buy the contract);
claim costs on an indemnity basis, where the buyer may be ordered to pay your legal fees;
resell the property and claim the difference in purchase price, and any expenses related to the resale.
If The Seller Is In Breach
While much of the focus in property transactions tends to be on what happens if the buyer defaults, sellers also have strict legal obligations under the contract. If a seller breaches the contract, whether by failing to settle, refusing to hand over vacant possession or not complying with disclosure obligations, the buyer has specific remedies available to them.
Where the seller fails to meet their contractual obligations, the buyer may be entitled to:
recover your deposit, and any interest earned while it was held in trust;
claim damages for any losses you’ve suffered as a result;
sue the seller for specific performance (an order compelling them to sell the contract);
claim costs on an indemnity basis, where the seller may be ordered to pay your legal fees;
What Should You Do If You're At Risk Of Breach?
If you believe you’re at risk of breaching your contract because your finance may be delayed, you have not arranged a building and pest inspection with sufficient time, or are not ready to settle, you should:
Speak To Your Solicitor
Before panicking or telling anyone (real estate agent or otherside), immediately speak with your solicitor or conveyancer and notify them of your situation. They are here to guide you through your rights and obligations, and the options available to you.
Seek An Extension Where Possible
If you anticipate missing a due date (finance approval, building and pest etc.), your solicitor can request an extension of time from the seller to help you avoid breaching the contract. While extensions are never guaranteed, failing to request one in a timely and reasonable manner can leave you exposed to breach, termination, loss of deposit or legal action.
Remain In Communication
Failure to communicate clearly and promptly can escalate issues quickly. Remaining proactive and transparent is essential to avoid disputes and protect your position. However, it's important to remember that communicating with a real estate agent or seller directly can expose you to further issues. All communication should be done through your legal representative.
Keep Evidence
This may assist in any future legal proceedings or negotiations. Delays, mistakes or oversights may not lead to disputes, litigation or court orders, but they can if not handled correctly. Keeping emails, call logs, letters and other communications is important should they be needed later.
What Is Standard Term 6.2 Of An REIQ Contract?
Standard term 6.2 under an REIQ Contract of Sale allows either the buyer or seller to unilaterally extend the settlement date by up to five business days without requiring the other party's consent.
This clause is designed to address situations where a party is unable to settle on the original settlement date, often due to delays with financing or other unexpected circumstances.
It's important to note here that if the parties mutually agree to an extension, but do not exercise their right under clause 6.2, it can be used later. For example, if the parties agree to a one-week extension, and after that the buyer requests another extension but the seller refuses, the buyer can then use clause 6.2 to extend by up to five business days without needing the seller's approval.
The main disadvantage is that if removal trucks have been arranged, each party will be responsible for covering any associated costs independently.
How RHC Solicitors Can Protect You
Our experienced conveyancing and property law team can help you navigate your property transaction with confidence. From start to settlement, we offer services in reviewing contracts to ensure they have been prepared correctly, drafting any special conditions required to protect your interests., and negotiating extensions and advising you of your rights and obligations.
If you’re concerned about a potential breach of contract, don’t wait for the worst-case scenario to unfold. Engage a reputable and experienced team from the beginning to help ensure you are fulfilling your obligations and exercising your rights.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
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