If the REIQ contract is subject to finance, the Buyer is required to take all reasonable steps to obtain finance approval.
Buyers must be aware that the Courts have held that if a Buyer terminates a contract under the grounds of failure to obtain finance, evidence must be provided that all reasonable steps were taken to secure finance by the finance date if requested by the Seller (Hauff & Anor v Miller [2013] QCA 48). The Court held that a failure to take reasonable steps amounts to a breach of contract and activates the seller’s right to affirm or terminate the contract.
The financial institution will issue a letter of approval to the applicant advising the terms of the loan if the buyer obtains finance approval. The Buyer will need to provide instructions to their solicitor that they are satisfied with the finance approval and the solicitor will notify the Seller. The contract will be unconditional in that regard and is required to complete settlement on the due date of the contract (subject to any other conditions of the contract).
The Buyer’s solicitor must notify the Seller’s solicitor as to whether they have obtained satisfactory finance approval on or before 5:00pm on the finance date as time remains the essence of the contract. If the Buyer does not receive satisfactory finance approval by the finance date of the contract then the Buyer will need to instruct their solicitor to do one of the following:
- Terminate the contract; or
- Request an extension of time for Finance. A written agreement from the Seller to an extension is required and the Buyer’s request can be denied.
If the Seller does not receive notification the Buyer has obtained satisfactory finance approval then the contract continues and both the Buyer and Seller have a right to terminate the contract. Therefore, the Buyer is exposed to termination of the contract.
Buyers must be aware that once written notice of finance approval is provided to the Seller, it cannot be withdrawn. Financial institutions under the terms of the loan can withdraw finance approval prior to settlement for a range of reasons.
Buyers should be aware that finance approval is usually valid for a period of three months. If the settlement date is scheduled beyond that time frame then the Buyer will need to have the loan re-approved. Buyers should obtain advice from their financial institution if settlement is scheduled beyond the finance approval period and avoid anything that may change their financial position (i.e. obtaining a personal or car loan and salary sacrificing) as it can put the Buyer in a position where they cannot complete the contract, which could possibly put the Buyer in breach of contract.
Please contact our Everton Park or Oxley office or complete our property enquiry form if we can be of any assistance.
