Sarah purchases a property 'subject to finance' with a 21-day finance clause. On day 20, her loan application is still pending. What should Sarah do to protect her position?

Q: What is the correct answer to: Sarah purchases a property 'subject to finance' with a 21-day finance clause. On day 20, her loan application is still pending. What should Sarah do to protect her position?

The correct answer is Serve written notice that finance has not been approved to avoid the contract becoming unconditional. Option C is correct because under Australian property law and standard contract terms, when a finance clause deadline is approaching and approval hasn't been received, the purchaser must serve written notice that finance has not been approved. This notice preserves their right to terminate the contract and prevents it from automatically becoming unconditional. The notice requirement is typically found in standard contract forms used across Australian states and is essential for protecting the purchaser's position when finance approval is delayed beyond the specified timeframe.

Q: What background knowledge is needed for this Contracts Conveyancing question?

Finance clauses in Australian property contracts provide purchasers with a specified period to obtain loan approval and withdraw if unsuccessful. These clauses typically require written notice within the specified timeframe if finance is not approved. Standard contract forms (REIQ in Queensland, REI in other states) contain specific notice provisions. The clause protects purchasers from being forced to complete purchases they cannot afford. Key elements include: the finance period (commonly 14-21 days), notice requirements (usually written), and consequences of non-compliance (contract becomes unconditional). Understanding these provisions is crucial for both agents and purchasers to avoid unintended legal obligations.

Q: What is a good way to remember the answer to this Contracts Conveyancing question?

Remember NOTICE: 'No finance? Obviously Tell In Clear English!' When finance approval is pending near the deadline, you must give clear written notice that finance has NOT been approved to avoid being stuck with an unconditional contract. Think of it like a fire alarm - you must actively sound the warning before time runs out. When you see finance clause questions with pending approvals near deadlines, immediately think 'NOTICE' - the purchaser must actively notify non-approval rather than wait passively. Look for options involving written notice of non-approval rather than automatic outcomes or extensions.

Q: What exam tip applies to this Contracts Conveyancing question?

For finance clause questions, remember the golden rule: when in doubt near the deadline, serve written notice of non-approval. This protects the purchaser's position. Never choose options suggesting automatic outcomes or passive waiting when deadlines approach.

Q: How does this Contracts Conveyancing concept apply in Australian real estate practice?

A first-home buyer signs a contract with a 21-day finance clause. On day 19, their broker calls saying the bank needs additional documentation and approval might take another week. The buyer's solicitor immediately prepares written notice stating finance has not been approved and serves it on the vendor before the deadline. This preserves the buyer's right to withdraw if finance is ultimately refused, preventing them from being locked into an unconditional contract they cannot complete. Without this notice, the contract would become binding regardless of the eventual finance outcome.

Question

Contracts ConveyancingContract Of SaleMEDIUM

Sarah purchases a property 'subject to finance' with a 21-day finance clause. On day 20, her loan application is still pending. What should Sarah do to protect her position?

Answer Options

A

Automatically assume the contract becomes unconditional

B

Serve written notice to extend the finance period

C

Serve written notice that finance has not been approved to avoid the contract becoming unconditional

D

Wait for the bank's decision regardless of the deadline