In high demand areas like Brisbane and the Gold Coast, buying off-the-plan from developers has been a mainstay of the residential property market for years. While off-the-plan contracts typically involve some risks for both parties, the operation of sunset clauses in particular can be a source of nerves for buyers.
Key Takeaway Points:
- The Queensland Supreme Court has recently made clear in Brightman v Royal Pines Projects Pty Ltd [2024] QSC 149, that parties to a property transaction must comply with their implied duty to cooperate. Upheld on appeal, the decision has important implications for developer obligations in off-the-plan sales.
- This case arises after recent legislative reform to the Land Sales Act 1984 which limited sellers’ abuse of sunset dates to terminate and resell for higher prices in rising markets.
- Although these changes do not yet apply to off-the-plan community title schemes, it appears the courts are reluctant to allow termination of off-the-plan contracts where the developer’s conduct hindered completion and where there may be a whiff of attempted profiteering by a developer in the air.
What were the facts?
In Brightman v Royal Pines Projects Pty Ltd [2024] QSC 149 the dispute was instigated by the buyers of off-the-plan apartments. Prior to construction being completed, they had requested access to their respective apartments for valuation purposes. The developer did not reply and instead fixed the settlement date, with 14 days’ notice. After making repeated requests and with a week remaining until settlement, the buyers applied to the court for an urgent listing. The next business day, the developer provided a protocol to obtain access.
The issue
The developer contended that it had not been possible to provide safe access prior to their response. Their position was that the contract was not subject to finance, and therefore they were not required to ensure that the buyers could obtain finance. The basis of the purchasers’ application was that the developer was under an implied duty to cooperate in the buyer obtaining finance and securing performance of the contract.
Determination by the court
- The court held the developer had breached its implied duty to cooperate by causing unreasonable delay in responding to the buyers’ requests.
- The fact that finance was not an express condition of the contract was irrelevant. The court was entitled to infer that it was a commercial reality that the buyers would likely obtain finance, considering this is the common method of purchasing homes.
- The developer was obligated to reply promptly to allow the purchasers the entire notice period to arrange finance for the settlement date and receive the benefit of the contract (i.e. completion).
- One week was not enough time for the buyers’ valuers to inspect the apartments, prepare valuation reports and for lenders to review those reports to approve finance. An injunction was issued to prevent the developer from terminating the contracts.
This case serves as a reminder that parties to a contract must act in good faith to enable fulfillment of contractual obligations.
The case arises after recent legislative reform to the Land Sales Act 1984 which limited sellers’ abuse of sunset dates to terminate and resell for higher prices in rising markets is having the desired effect. See our recent article on QLD changes to sunset clauses in off-the-plan contracts.
Although these changes do not yet apply to off-the-plan community title schemes, it is apparent that the courts are reluctant to allow the termination of off-the-plan contracts where the developer’s conduct hindered completion and where there may be a whiff of attempted profiteering by the developer in the air.
Our Property team is happy to assist if you have any preliminary queries about how the Queensland Supreme Court’s decision may affect you / your clients.
