But the house is destroyed

Monday, April 20, 2015

Terry Bethke of Munro Thompson, Lawyers Mooloolaba shares his expertise and knowledge to answer another legal question.

This week we ponder:

“Before settlement of the Contract for the purchase of my new house on the river, the property was flooded to the first floor. The first floor has the bedrooms and the second floor has the kitchen, lounge, dining and bathroom. The electricity has been disconnected and will not be reconnected until the house is inspected for safety. Can I terminate the Contract or can the seller make me settle?”

Section 64 of the Property Law Act 1974 gives the buyer of a dwelling house the right to terminate the Contract if “before the date of completion….(it is) so destroyed or damaged as to be unfit for occupation as a dwelling house”.

The damage to the first floor by the flood does not make the house “unfit for occupation”. It may still be occupied after cleaning and repairs being completed.

However, the damage to the electricity infrastructure and the disconnection of supply means that the house would be unfit for occupation and you could terminate the Contract.

What if the electricity was reconnected the day prior to settlement?

If the house is “fit for occupation” on the settlement date of the Contract, you will be required to complete the Contract. Reconnection of the electricity supply means the house is fit for occupation. It does not matter that there has been damage to, destruction of, or diminution in value of the property due to the flood as it is still capable of occupation.

*Appeared in Sunshine Coast Daily Newspaper