A Queensland couple has been ordered to pay more than $10,000 to a unit owner after wrongly relying on the "subject to finance" clause in a sale contract as a "get out of jail free card".
Trevor and Irene Hauff agreed to buy a Port Douglas unit for $575,000 in September 2010 on the condition they secured a loan for $400,000 from ING Bank within seven days.
Under standard sale contracts buyers must take "all reasonable steps to obtain finance".
However, the couple's mortgage broker never submitted a formal application to ING Bank.
Instead, the broker made an application to The Rock Building Society.
The building society could not approve the loan application by the nominated date and the Hauffs terminated the contract.
Not satisfied, unit owner Anne Marie Miller demanded to see evidence that the Hauffs made a sufficient effort to obtain a loan from ING Bank, as stipulated in the contract.
Ms Miller took her case to the Supreme Court, which ruled in her favour.
The Hauffs appealed the decision in March this year but lost.
Associate Professor Kristy Richardson of Central Queensland University's property programs said the Hauff's experience served as a cautionary tale.
"The realisation that you might not be able to afford the great Australian dream may turn into a contractual nightmare," she said.
Ms Richardson said the subject to finance clause could not be taken lightly or used as a "get out of jail free card".
"Under a contract of sale, you as a buyer will be required to take all reasonable steps to obtain the finance that you are saying that you will under the contract," she said.
"Also bear in mind that documents supporting your attempts to obtain finance can be called upon."
The Hauffs were ordered to pay Ms Miller their $13,000 deposit for breaching the sale contract.
www.BrisbaneTimes.com.au
Trevor and Irene Hauff agreed to buy a Port Douglas unit for $575,000 in September 2010 on the condition they secured a loan for $400,000 from ING Bank within seven days.
Under standard sale contracts buyers must take "all reasonable steps to obtain finance".
However, the couple's mortgage broker never submitted a formal application to ING Bank.
Instead, the broker made an application to The Rock Building Society.
The building society could not approve the loan application by the nominated date and the Hauffs terminated the contract.
Not satisfied, unit owner Anne Marie Miller demanded to see evidence that the Hauffs made a sufficient effort to obtain a loan from ING Bank, as stipulated in the contract.
Ms Miller took her case to the Supreme Court, which ruled in her favour.
The Hauffs appealed the decision in March this year but lost.
Associate Professor Kristy Richardson of Central Queensland University's property programs said the Hauff's experience served as a cautionary tale.
"The realisation that you might not be able to afford the great Australian dream may turn into a contractual nightmare," she said.
Ms Richardson said the subject to finance clause could not be taken lightly or used as a "get out of jail free card".
"Under a contract of sale, you as a buyer will be required to take all reasonable steps to obtain the finance that you are saying that you will under the contract," she said.
"Also bear in mind that documents supporting your attempts to obtain finance can be called upon."
The Hauffs were ordered to pay Ms Miller their $13,000 deposit for breaching the sale contract.
www.BrisbaneTimes.com.au
