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How to vary the terms of a contract after it has been signed?

Situations can arise after a Queensland Residential Contract of Sale is signed by both the Buyer and Seller and dated the day the last party signs the Contract for example the Buyer’s building and pest report may indicate damage to the property previously unknown to any of the parties which gives rise to the Buyer asking for a reduction of the purchase price.  If the Seller agrees to reduce the purchase price then it is important to consider how to vary the Contract to:

1.  To ensure that the variation is binding on the parties; and

2.  Ensure there are no adverse stamp duty consequences for any of the parties.

The other example of a common variation to a contract is where the Buyer needs to change the Buying entity after the Contract has been signed.  This most commonly arises after the Buyer shows the Contract to his or her solicitor or accountant and gets advice to use a different structure for purchasing the property.

whats-in-a-name

Public Ruling DA 501.1.1 published by the Office of State Revenue (the Queensland Government Department responsible for collecting stamp duty) which provides that:

“For the purposes of assessment of transfer duty, the Commissioner will not recognise practises to vary essential elements of agreements, such as the parties to Contracts, by an exchange of letters”.

This means that a change to a Buyer entity should be completed either with:

1.  A Deed of Rescission terminating the earlier Contract on the condition that a fresh Contract is entered into with the new Buyer entity and the Seller; or

2.  The earlier Contract is terminating under another condition on the basis that a fresh Contract is entered into showing the correct Buyer entity.  The Public Ruling goes on to provide that where the purchase price is agreed to be reduced then this should also be affected in the Contract itself or by a formal Deed of Variation.  Letters between the Buyers and Seller’s solicitors agreeing to reduce the purchase price will only serve to ensure that the Seller receives the lower amount and that the Buyer pays that amount but will not prevent the Office of State Revenue from charging stamp duty on the higher amount still shown in the Contract.

Should you get insurance cover when entering a Property Contract in Queensland? {Watch this video}

Should you get insurance cover when entering into a property contract in Queensland?

 

Many people are unaware that when they enter into a residential property contract in Queensland, the property is legally the Buyer’s responsiblity from 5.00pm on the first business day after the Contract date.  In other words it is vitally important that appropriate insurance is organised prior to this time.  This safeguards the Buyer of any damage to the property before the Contract becomes unconditional and up until the settlement date.  Most insurers provide this type of insurance for home buyers which can be organised very easily over the phone.  It is also equally as important for the Seller to retain their property insurance until the settlement date.