The recent Queensland floods have created difficulties for people who have entered into contracts in relation to property, whether they are commercial or retail leases or purchase contracts.  There has also been publicity recently about difficulties with insurances and the uncertainties of whether policies actually cover flood damage or not.

Negotiation by the parties to try and resolve their disputes is invaluable, and a recent case in the Supreme Court of Queensland illustrates the difficulties which can arise by taking these issues to court. It dealt with a purchaser who had agreed to buy an apartment on the ground floor of a building in Brisbane, which included basement car parking and storage. 

The Brisbane floods occurred before settlement, both basement levels were inundated and water also entered the ground floor apartment. The developer offered to clean up and restore the apartment and offered a delayed settlement date four months later.

The purchaser sought to rescind the contract under Section 64 of the Property Law Act 1974 (Qld) which provides that if before completion of a contract the dwelling is damaged so as to be unfit for occupation, the purchaser can rescind the contract.  The purchaser sought an urgent court declaration that the contract had been rescinded and also submitted that occupation of the premises would be illegal under Fire Safety and other Health and Safety Regulations.

The Qld Supreme Court decided that on the facts of this case, there were uncertainties about the application of the legislation. Even though the court acknowledged the delay and cost of a lengthy court hearing, it said that the matter should go to a further trial, and the purchaser would be adequately protected in the meantime by an order extending the date for completion, without prejudice to her right to maintain that the contract had been validly rescinded. The court therefore deferred making a final decision on the facts, and perhaps the parties may have been able to negotiate a resolution before the trial in any event.

In NSW there are provisions in the Conveyancing Act which may apply to allow a reduction of price or rescission by the Purchaser, depending on the circumstances and the amount of damage caused to the property. The contract between the parties will also deals with claims for compensation by the Purchaser. Each state has its own separate legislation dealing with these issues.

There are many issues which will arise in relation to commercial leases where the premises are damaged, including who is responsible for repairs, rights of the parties to terminate the lease, and insurance provisions.  All of these issues are usually dealt with in commercial leases, but there is a wide range of wording used in these clauses which may create different results. The circumstances of the damage caused in each case will also be crucial in determining how these issues are resolved, using alternate methods such as negotiation and mediation of the dispute.

 For legal advice in relation to all Real Property matters and Commercial Transactions, please contact Roger Harkin of Owen Hodge Lawyers on 9549 0770

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