Suspending Time: Is COVID-19 a valid reason to suspend a property contract?

19-03-2020

Do you have an ongoing conveyancing matter reaching some crucial steps in the near future? Is the pandemic of the novel coronavirus (COVID-19) causing delays or hesitation regarding the completion of your Contract?

There are some important pieces of information you need to know regarding your ability to suspend time in accordance with the terms of your Contract, and how they are potentially impacted by the growing effect of the pandemic.

Can you avoid your contractual obligations?

First, it is important to note that the simple existence of the virus and the potential of closures doesn’t automatically give you grounds to suspend time for fulfilling your contractual obligations. While standard condition 6.2 of the REIQ Contract allows for suspension of time in cases of an event preventing one or more parties from physically attending the settlement, this specifically refers to the fulfillment of the physical settlement itself. This means that not only does it not free you from the burden of completing other conditions (such as finance approval or due diligence), but it also doesn’t inherently provide you with an ability to delay the Settlement without an arguable cause.

The Suspension of Time condition noted in the REIQ Contract was originally added as a result of intensive flooding in 2011 and is intended to cease time being of the essence of the Contract in the case of a physical impediment to completing Settlement. In 2011, roadways and venues were flooded, making it impossible for people to physically attend settlement. But now, the impediments are not so clear cut, especially with the advent of e-Conveyancing.

At present, businesses are still operational and, although delays and inconveniences are increasing, the day to day activities required to conduct and complete a conveyancing matter have not ceased. Accordingly, the suspension of time condition is not necessarily invokable. However, it’s possible that this may change quite quickly with the rate at which mandatory quarantines are being ordered around the world. For instance, if Settlement is required to take place in Brisbane, but orders are handed down from the government requiring businesses to cease operation at physical venues, then the actual settlement itself may be unable to take place and this clause would be validly enforceable. Though, if there are simply concerns with the current market conditions or voluntary measures being taken which cause delay, this would not be considered grounds to invoke the suspension of time.

If suspension of time is required, it’s important to note that this is only applicable for the time during which the Settlement is hindered- it doesn’t allow you to choose a random future date based solely on convenience. It is the obligation of the affected party to promptly advise the other once they are no longer prevented from completing Settlement, and either party may give notice to the other calling for Settlement to take place at which point the time is no longer suspended, and is again of the essence of the Contract.

These situations do not often arise, so many may not be familiar with the intricacies of invoking the suspension of time which is why it’s extremely important that you seek appropriate legal advice if you think the suspension of time may be required. If you are looking for someone with the knowledge and experience to assist in this rapidly changing environment, don’t hesitate to contact us at info@gpla.com.au or give us a call on 07 5444 1022.

 The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.

 

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