The Court of Appeal this week reversed an earlier immunity granted to developers’ put and call options with regard to termination for non-compliance with PAMDA – just in time to allow property marketers to escape contracts prior to the Thursday 30 September deadline for terminations under the “old” PAMDA rules.
Last year the Supreme Court decided that developers’ put and call option arrangements that give the option holder – usually a property marketer – the right to on-sell to an ultimate buyer at a profit, were not bound by PAMDA.
The effect of the decision was to deny an option holder (a “grantee”) the opportunity to manoeuvre a termination by reason of any earlier non-compliance if the developer exercised its “put” option to compel the grantee to settle.
On appeal, the court held that there was no policy reason why arrangements that were intended to constitute a sale, should be given judicial exemption from PAMDA. To allow such exemptions would open up more difficulties than they would solve: How for example should other arrangements that contain similar entitlements be interpreted?
Thus the court ruled that the put and call option should be regarded as a “contract”.
Because in the particular case the PAMDA process had not been followed at all, the grantee – as buyer – could validly terminate and could not be compelled to settle under the developer’s “put” option.
Just to leave things interesting however, the court left open the PAMDA compliance issue for one very narrow class of sales: where the put and call option agreement relates to multiple “parcels of vacant land”. The court declined to overrule a 2007 PAMDA case that decided a strict interpretation of the definition of “residential property” meant that an option for numerous parcels of land could not be regarded as a “relevant contract”.
Except for this very narrow window – which by no means can be assured of withstanding a further appeal ruling – put and call option agreements that relate to residential property should now be regarded as subject to PAMDA requirements.
Vale 1 P/L v Delorain P/L [2010] QCA 259
Cheree-Ann Property Developers Pty Ltd v East West International Development Pty Ltd [2007] 1 Qd R 132
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