After establishing the concern of Vendors and Purchasers around COVID-19 and their property settlements, we were engaged by these industry bodies to prepare a “one-size-fits-all” special condition which can be inserted into a residential sale contract, should all parties agree to it.
How the Special Condition Operates
The special condition has been drafted by way of two main parts:
- COVID-19 Event; and
- Time Extensions
These two clauses work together, but you do have the option of deleting either clause depending on the needs of your clients or the transaction itself.
Special Condition 1: Covid-19 Event
This clause allows for the Vendor and Purchaser, in the event of a COVID-19 Event, to extend the Settlement Date without penalty for a period of not more than 14 days. This time period is in line with Government direction in respect to self-isolation and quarantine periods.
There are some conditions to exercising the extension in order to ensure it is not misused, and to ensure properties are not handed over with risk of the buyer catching the virus.
Special Condition 2: Time Extensions
This clause seeks to extend the time periods to comply with defaults in order to allow some leeway in the current crisis situation.
First it increases notice periods of default before settlement, from 3 business days to 10 business days.
Second, it increases the period of a notice to complete after settlement from 10 business days to 20 business days. Note that default interest is to continue to apply as per normal, the time extension purely delays the right to terminate.
As mentioned above, the two clauses have been drafted to work together. However, in the event that the Vendor and/or Purchaser do not wish to make the contract subject to a COVID-19 Event, then clause 1 can be deleted and clause 2 relied on only, and vice-a-versa.
Notwithstanding, we suspect that given the current crisis, most Vendors and Purchasers would deem it a reasonable position to include both clauses and as a profession we consider it reasonable to encourage that they do so.
Do you have any concerns or disputes relating to your property purchase or sale? Contact any of our residential property law specialists and conveyancers below for more information.