Property News 5 Mar 2025

With the imminent arrival of Cyclone Alfred, buyers and sellers engaged in real estate transactions must be aware of the risks and protections available under the Real Estate Institute of Queensland (REIQ) contract. Understanding these provisions can help prevent costly mistakes and ensure a smoother settlement process despite severe weather conditions.

Risk Allocation Under REIQ Contract

One of the most critical aspects of an REIQ contract is Clause 8.1, which states that the property is at the buyer’s risk from 5:00 pm on the first business day after the contract date (Real Estate Institute of Queensland, 2024). This means that if Cyclone Alfred causes damage to a property after this point, the financial responsibility for repairs falls on the buyer.

However, buyers are not left completely unprotected. Under Clause 6, the seller must take reasonable steps to minimize any risks and ensure that the property remains in a reasonably habitable condition at settlement (Sunstate Conveyancers, 2024). If they fail to do so, the buyer may have rights to terminate the contract.

Termination Rights Under the Property Law Act 1974

Section 64 of the Property Law Act 1974 provides additional protection for buyers. If a cyclone causes damage that renders the property unfit for human habitation before the risk passes to the buyer, the buyer may be entitled to terminate the contract and recover their deposit (Queensland Government, 2024). However, this applies only in cases of severe damage where the home is no longer liveable.

Delays in Settlement Due to Cyclone Alfred

Another essential consideration is the impact of Cyclone Alfred on the settlement process. If extreme weather prevents settlement from occurring on the due date, this may constitute a Delay Event under the REIQ contract. A Delay Event allows settlement to be extended by no less than 5 business days and no more than 10 business days beyond the original settlement date, providing time for necessary repairs or alternative arrangements (Real Estate Institute of Queensland, 2024).

Insurance Considerations

Given the early transfer of risk to the buyer, securing insurance immediately upon signing the contract is essential. Some insurers, like CGU and QBE, continue to offer storm and cyclone coverage with a 48-hour waiting period before activation (Sunstate Conveyancers, 2024). Buyers should confirm policy terms directly with their insurance provider to ensure adequate protection before Cyclone Alfred makes landfall.

Additional Protection Through Contract Amendments

To further safeguard buyers from sudden financial risk due to extreme weather events, a special condition can be included in the contract:

“The buyer and seller agree that the property remains at the seller’s risk for the first 7 days from the date of contract, in an amendment to condition 8.1, and the buyer assumes risk from day 8 onwards.” (Sunstate Conveyancers, 2024).

This amendment allows buyers additional time to arrange insurance and protects them from immediate liability if a cyclone damages the property shortly after signing the contract.

Key Takeaways

• Buyers assume risk for property damage from 5:00 pm on the first business day after signing the contract (REIQ, 2024).

• If the property becomes unfit for habitation before risk transfers, buyers may terminate under Section 64 of the Property Law Act 1974 (Queensland Government, 2024).

• Delay Events allow settlement extensions of up to 10 business days if a cyclone prevents timely completion (REIQ, 2024).

• Immediate insurance coverage is crucial, as some policies require a waiting period before taking effect (Sunstate Conveyancers, 2024).

• A special contract condition can provide added protection, keeping the property at the seller’s risk for an initial period (Sunstate Conveyancers, 2024).

Final Thoughts

Cyclone Alfred presents a serious concern for property transactions, but buyers and sellers can mitigate risks by understanding their rights under the REIQ contract. Buyers should secure insurance promptly and consider negotiating special contract conditions for added protection. Sellers must take reasonable steps to maintain the property’s condition and be aware of potential delays in settlement.

By staying informed and proactive, both parties can navigate this challenging situation with greater confidence and security.

References:

• Real Estate Institute of Queensland (2024). Standard REIQ Contract Terms.
• Sunstate Conveyancers (2024). Cyclone Alfred and Real Estate Contracts.
• Queensland Government (2024). Property Law Act 1974.