Queensland solicitors have been warned to take special care to avoid financial risks posed by flood induced delays to critical action dates in property transaction settlements and court actions.

In an email bulletin on behalf of the Queensland Law Society, solicitors were cautioned to request extensions for the time within which to comply with critical contract dates and to give advice to clients “of all options and risks of not being able to settle or take a necessary step that may be due”.

“Practitioners should not assume that storm or flood damage automatically overrides contractual rights or court timeframes”.

Real estate and other commercial contracts invariably invoke obligations upon a party to perform something by a specific date. Failure to perform such obligations within the required time can, for example, lead to the forfeiture of a deposit in the case of a residential house sale contract.

Law firms should counsel customers to “think laterally”, the email bulletin states.

The circular also reminded solicitors that for residential transactions currently in train, unless the home has become uninhabitable and subject to insurance, the buyer must usually wear the damage. Only in the case of more serious pre-settlement damage does Property Law Act s 64 entitle the buyer to terminate .

Solicitors were also reminded of REIQ residential contract clause 6.2 that suspends time in the case of natural disasters, for the settlement of residential property purchases.

This provision, introduced in late 2011 upon reflection upon the practical difficulties posed to legal transactions the preceding summer, lets off a would be defaulting party if they are unable to front up for settlement with bank cheques in hand as “a consequence of a tsunami, flood, cyclone, earthquake, bushfire or other act of nature”.

However the suspension of time only applies if the buyer or seller has taken “reasonable steps to minimise the effects of the natural disaster on its ability to perform its settlement obligations” and the inability to attend is “solely as a consequence of” the natural disaster.

The clause does not excuse or extend other time-critical contract events like finance approval or building inspections.

Only time will tell whether the Australia Day weekend floods of 2013 produces any landmark legal interpretations of the phrases “reasonable steps to minimise” or “solely as a consequence of”.

Will for example, power outages, be treated by a court as having occurred “solely as a consequence of” tropical storm Oswald ?


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