Qld Finance Clause

The Queensland Finance Clause is a critical element in most standard Queensland property contracts, specifically the REIQ (Real Estate Institute of Queensland) contracts. It provides a crucial safety net for buyers who need to secure financing to purchase a property. Essentially, it makes the contract conditional upon the buyer obtaining satisfactory finance approval within a specified timeframe.

Key Components:

• Finance Amount: The clause requires the buyer to nominate the specific amount of finance they require. This figure should be realistic and sufficient to cover the purchase price, stamp duty, legal fees, and any other associated costs. Underestimating this amount could lead to issues down the line if the buyer is unable to secure the necessary funds.
• Financier: The buyer must name the financial institution they intend to seek finance from. While it’s not mandatory to have pre-approval at the time of signing the contract, it’s highly recommended. Naming a specific lender provides clarity and prevents the buyer from endlessly shopping around for the absolute best deal, potentially delaying the process.
• Approval Date: This is the most critical date in the finance clause. It dictates the deadline by which the buyer must obtain unconditional finance approval. This date needs to be carefully considered, taking into account the lender’s processing times and any potential delays. Overly optimistic approval dates can put undue pressure on the buyer and increase the risk of the contract failing.
• Notification: The clause outlines the buyer’s obligations to notify the seller whether or not they have obtained finance approval by the approval date. If the buyer secures unconditional approval, they must promptly inform the seller. If finance is not approved, the buyer must provide written notice to the seller or their solicitor before 5 pm on the approval date. Failure to do so can have serious legal consequences.

What Happens if Finance is Declined?

If the buyer, after making genuine and reasonable efforts, is unable to obtain finance approval by the approval date, they can terminate the contract by providing written notice to the seller. In this case, the deposit is typically refunded to the buyer. However, the buyer must demonstrate that they made genuine efforts to secure finance. A simple rejection based on a change of heart or lack of diligence may not be sufficient to trigger the finance clause and entitle the buyer to a refund.

Seller’s Perspective:

While the finance clause primarily protects the buyer, it also has implications for the seller. Sellers need to be aware of the approval date and understand the potential for the contract to fall through if the buyer cannot secure finance. A longer approval period may increase the risk of the sale collapsing, while a shorter period may deter potential buyers. Therefore, it’s crucial for sellers to carefully consider the proposed approval date and ensure it aligns with their own timeline and risk tolerance.

Important Considerations:

• The finance clause should be reviewed and understood by both buyers and sellers before signing the contract.
• Seeking legal advice from a qualified solicitor is highly recommended to ensure the clause is appropriately worded and protects your interests.
• Buyers should act diligently in pursuing finance and promptly notify the seller of the outcome.
• Sellers should be prepared for the possibility of the contract being terminated if finance is not approved.

In conclusion, the Queensland Finance Clause is a vital protection mechanism for buyers in property transactions. Understanding its key components and potential implications is essential for a smooth and successful sale.