In July of this year, REIQ have released new editions of their commercial contracts to reflect some of the changes made to the residential contracts. We have summarised these key changes below for commercial property contracts.
Similarly to the new residential property contracts, the amended terms of the contract allow either the Seller or the Buyer to obtain an extension of the original settlement date under the contract of up to 5 business days in circumstances whereby a party is unable to settle for any reason. This can be done by notifying the other party before 4pm on the date of settlement, and you do not need to provide a reason for doing this.
In the previous version of the contract, if you could not settle by 4pm on the original settlement date, you would have to request an extension and the other party would have to agree to it (which they are not obliged to do).
Any extensions longer than 5 business days will still need to be agreed to by the other party.
If you do not wish for the extension to be an option automatically (without your agreement), please get in touch with us and we can discuss the possibility of deleting the clause from your contract. Further, if your contract is signed and you think you may need to extend the settlement date, please advise us, and we can walk you through the process.
A new Seller warranty has been added to the contract whereby the Seller warrants that they have not received any communication from a competent authority that may lead to the issuing of an enforcement notice or notice to do work on the property. The reason for adding this is that in practice, local governments correspond with owners for a considerable period without issuing a formal notice. This means that if the Seller has been corresponding with a local authority or similar in relation to a potential issue, it must be disclosed to the Buyer before signing the contract.
The contract now contains an extensive list of matters that the Seller warrants are correct in relation to any current lease(s) over the property. For example, the details of the leases, that there is no existing breach, any incentives etc. If any changes to this happen after the Contract date, the seller must notify the buyer of the change.
New Termination Rights
The contracts now provide buyers with a termination right if there:
- is an error in the boundaries or area of the property;
- is an encroachment by structures onto the property;
- is a mistake or omission in describing the property of the Seller’s title to it; OR
- are services that pass through the property which do not service the land and are not protected by an encumbrance, such an easement, disclosed to the Buyer in the contract.
Particularly in relation to item 4 above, to ensure there are no services that pass through the land, or to ensure they are disclosed to the Buyer prior to the contract being signed, it is necessary for the Seller or Seller’s agent to complete a ‘Dial Before you Dig’ search.
This is a free search which will show any underground services, such as network cables, water pipes etc. We recommend doing this search and providing it to the buyer prior to the contract being executed so that all services and unregistered encumbrances are disclosed. Failure to do this could provide the buyer with a reason to terminate the contract.
The final key change is a practical one, which has changed the definition of the ‘contract date’ to be the date that the last party signed the contract, in the event that it hasn’t been dated, as sometimes the contract date is forgotten to be inserted once all parties have signed.
Our Property Team is ready to assist if you have any questions and wish to know if the above commercial property changes apply to your contract of sale. We note that not all contracts are REIQ contracts, and some contain special conditions that may vary the standard clauses in the contract. We recommend sending us a copy of your contract to review prior to signing.
The above is not an exhaustive list of the amendments, and other minor changes have been made to the contracts.
Please contact FC Lawyers to assist and review any commercial property contract prior to you signing any documentation.
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