With all the uncertainty relating to shutdowns and a possible lockdown, you may be wondering what happens if the Government were to announce that all property settlements, both paper (physical) and electronic, were to cease. As the situation currently stands with the shut downs (29 March 2020), property settlements can occur as per usual.

While it is foreseeable that future Government lockdown/social distancing policies could cause or require traditional paper/physical settlements to cease, property settlements would still be able to occur electronically through platforms such as PEXA. Therefore, it is important you ensure your solicitor is able to settle your property electronically, either directly or through a third party. However, this begs the question: what happens if the Government announced all property settlements, both paper (physical) and electronic were to cease. In Queensland, this will mean that clause 6.2 (Suspension of Time) of the standard sales contract will come into effect. Clause 6.2 provides that if a “Delay Event” occurs which prevents either or both parties from being able to complete Settlement, then Settlement is delayed until the Delay Event is no longer preventing the Settlement. The net effect of this clause will be to delay settlement to a time when it can be effected (i.e. to when the Government revokes or amends their policy and allows property settlements to re-commence).

Clause 6.2(8)(b) defines a “Delay Event” as follows,

"Delay Event" means:

(i) a tsunami, flood, cyclone, earthquake,

bushfire or other act of nature;

(ii) riot, civil commotion, war, invasion or a

terrorist act;

(iii) an imminent threat of an event in

paragraphs (i) or (ii); or

(iv) compliance with any lawful direction or order by a Government Agency;

Therefore, a Government policy ordering or requiring property settlements to cease, both physical and electronically, would clearly be defined as a Delay Event pursuant to clause 6.2(8)(b). Should this Delay Event occur, there are several important implications you should bear in mind:

1. During the period of the Delay Event, neither party would be in breach of contract for “failing” to complete Settlement on the Settlement Date.

2. No right of termination is given to either party – meaning that, assuming the Contract is otherwise unconditional, both parties must settle once the Delay Event ceases to be of effect.

3. There is no minimum or maximum time for how long a Delay Event can last. This has a number of implications including, but not limited to, the risk that the Delay Event continue for, say, 6 months. In this case, the buyer’s finance approval may expire during the period of the Delay Event (as most finance approvals only last 90 days) and the buyer may be unable to secure new finance given their financial position has changed (likely during this coronavirus pandemic). Should this happen and the buyer is unable to complete Settlement, they would be in breach of Contract for failure to settle.

4. If the Government’s policy changes and allows for electronic settlements, but not physical (paper) settlements, both parties should have a solicitor who can settle electronically either directly or through a third party. If your solicitor cannot settle electronically, then the Settlement cannot occur until the Government fully revokes all policies preventing property settlements. This could lead to unnecessary delays in Settlement occurring.

5. Once the Delay Event ceases to be of effect (i.e. the Government’s policy preventing settlements to occur is revoked), notice must be given by the solicitors “promptly” that they are no longer prevented from settling and Settlement must occur not less than 5 nor more than 10 Business Days after that Notice. Therefore both parties must be in a position to settle on relatively short notice.

This information has been compiled with the assistance of Tom Blackhurst of Blackhurst Law - www.blackhurstlaw.com.au