Queensland property buyers who terminate contract during cooling-off period may still have to pay termination fee

In brief - Termination fee still payable even though deposit cheque cancelled

The Queensland Civil and Administrative Tribunal (QCAT) has recently determined that buyers of a residential property on the Gold Coast had to pay the statutory fee for terminating a contract during the cooling off period, despite the agent not holding any deposit money. (See Lucy Cole Prestige Properties Broadbeach Pty Ltd ATF Gaindri FT Trust t/as Lucy Cole Prestige Properties Broadbeach Pty Ltd & Anor v Kastrissios [2013] QCAT 653.)

Buyers terminate contract during cooling-off period and cancel deposit cheque

The buyers signed a Real Estate Institute of Queensland Contract of Sale for the purchase of a property in Surfers Paradise. In accordance with the contract, the buyers provided a deposit for the purchase of the property to the sellers’ agent by way of personal cheque.

Three days after signing the contract (and within the cooling-off period), the buyers terminated the contract utilising their cooling-off period rights and cancelled the personal cheque. This occurred prior to the cheque being banked into the agent’s trust account.

Agent seeks to recover termination fee from buyers

The agent sought to recover, on behalf of the sellers, the termination fee that is potentially payable whenever a contract for the sale of residential land in Queensland is terminated during the cooling-off period solely utilising the cooling-off period rights (and not by reference to any condition of the contract).

We note that the fee is not mandatory – it is a matter for the seller as to whether the fee is charged.

Buyers argue that they are not required to pay the termination fee

In this instance, the buyers refused to pay the termination fee, alleging that the termination fee can only be recovered where an agent has received a deposit. The buyers claimed that:

• as the buyers’ personal cheque was cancelled, the agent had not received the deposit

• the buyers were not required to pay the termination fee

QCAT finds that termination fee must be paid

The QCAT held that the buyers' attempt to avoid paying the termination fee by cancelling the deposit cheque did not remove the buyers’ liability to pay the termination fee.

QCAT found that the buyers were required to pay the termination fee, plus costs, to the agent. The purchase price was $1,950,000, giving rise to a termination fee of $4,875.

Steps Queensland buyers can take to try to avoid paying a termination fee

This case highlights the fact that buyers who do not pay a deposit but terminate the contract utilising their cooling-off period rights can still be charged the termination fee.

Rather than rely on cooling-off period rights, buyers should consider attempting to negotiate the insertion of a special condition into the sale contract, allowing termination, with no penalty, for due diligence matters.

Alternatively, if the contract is subject to the buyer obtaining finance approval or satisfactory building and pest reports (or both), buyers may wish to terminate relying on their rights under those conditions.

We point out, however, that terminating under these conditions may require production of supporting evidence - for example, a letter declining the provision of finance from a financial institution, or a report concluding that extensive building and pest matters have come to light.

For completeness, a buyer buying residential property in Queensland at auction is not afforded the protection of a cooling-off period.