The Queensland Court of Appeal has delivered its much anticipated judgement in the case of Bossichix Pty Ltd v Martinek Holdings Pty Ltd [2009] QCA 154; a case that is of importance for all off the plan sales of lots in community titles schemes in Queensland.

The Court of Appeal has held that s 212 Body Corporate and Community Management Act 1997 (BCCMA) requires contracts to provide for the settlement to be a minimum period of 14 days after notice to the buyer that the community titles scheme for the lot sold has been established and that a reference to plan registration alone will not be sufficient to satisfy the BCCMA requirements.

Commonly, off the plan contracts provide for settlement to occur a specified period after completion of construction and title to the lot sold. In Queensland, the BCCMA requires that the contract states that settlement must not take place earlier than 14 days after the scheme has been established. Establishment of a community titles scheme occurs only when both the plan of subdivision is registered and the community management statement for the scheme is recorded.

The underlying purpose of the section, the Court held, is to inform the buyer that the scheme has been established and to allow a sufficient time prior to settlement for the buyer to make any necessary searches and enquiries.

It followed in the Court's view that the contract must refer to scheme establishment and not just plan registration in the context of fixing the settlement date. The Court held that a contract providing for settlement to occur 14 days after notice to the buyer that the relevant plan of subdivision was registered did not go far enough because it did not refer to scheme establishment or the recording of the community management statement with the plan of subdivision. Consequently the buyer's termination of the contract was upheld.

Queensland has highly technical consumer protection legislation in relation to sales of lots in community titles schemes and residential property. In Bossichix, the Court did say that there is no requirement to use the exact language of the section as long as the effect of the contract is that the buyer is informed that settlement will not take place earlier than 14 days after the scheme is established, which could be achieved by referring to all of the steps required for that to occur - plan registration and recording of the community management statement for the scheme.

There was implicit criticism of the harshness of the section in the leading judgment, where her Honour McMurdo J noted that the purpose of the section could have just as easily been satisfied by deeming all contracts to include the requirement especially given that "there would seem to be no prospect that the buyer could have been prejudiced by the non-compliance with the statute such that it should be necessary to make the contract voidable by one side".

Section 212 also on its face requires that the contract actually contain a restriction on settlement taking place earlier than 14 days after scheme establishment. This point did not fall to be considered at first instance but McMurdo J indicates that it is not necessary for the contract to actually contain such a prohibition as long as the legal effect of the clause is to fix the settlement date at a time no earlier than 14 days after scheme establishment. This conclusion was not however universally endorsed by all of the appeal judges.

The key points to come from the Bossichix decision are that:

  • Off the plan contracts must reference scheme establishment and not just plan registration in fixing the settlement date. If this does not happen a cancellation right will exist irrespective of there being no real prejudice to the buyer. It will probably be enough that the contract refers to both the act of registering the plan and recording the community management statement in the absence of specific reference to "establishment of the scheme" but it would be safer to use the language of the section.
  • Sellers must not agree in the contract or separately to settle earlier than the 14 day period as a conclusive agreement between the parties to do so could create a cancellation right where none would otherwise exist. Even if the contract does refer to scheme establishment, an agreement to settle within the 14 day period referred to in section 212 could trigger a breach of the section. This is important as buyers sometimes ask to settle earlier than the contract settlement date .
  • While there may be an argument that contracts need not contain an express prohibition on settling earlier than 14 days, contracts should include such a restriction to rule out an argument based on that interpretation of the section.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.