Overview
When you are buying your dream home, you will naturally be excited and – with competition in the property market remaining strong in Queensland despite recent tax changes – you may be eager to get the contract signed ASAP so your offer can be accepted and you can get on with celebrating what lies ahead.
However, without carefully reading the contract, and being on guard for key risks, buyers can be exposed to severe consequences that may give the seller the right to terminate the contract – and in some cases, keep your deposit.
In a series of articles, we will take you through some of the most common “property traps” for buyers and how you can avoid those traps through advance planning, careful contractual drafting and proper legal advice.
In this first article in the series, we will focus on what can go wrong with deposits, and the risks that remain for buyers despite recent changes made in the standard-form Contract for Sale and Purchase of Residential Real Estate issued by the Real Estate Institute of Queensland (REIQ).
What the contract will say about the deposit
The REIQ contract is the standard form used for most residential property sales in Queensland. However, it is not mandatory and is not used in every case. Even where it is used, there can be special conditions that override its key terms.
You therefore need to make sure you thoroughly review the contract of sale, and you should not just assume there will not be anything out of the ordinary.
While there is no strict legal requirement for you to pay a deposit when buying residential property in Queensland, it is common practice for buyers to pay a deposit when the contract of sale is signed. This is the default position under the REIQ contract unless this is crossed out.
The deposit is required to be paid to the “deposit holder” – usually the real estate agent for the property, unless otherwise listed as the buyer’s or seller’s solicitor (but this is unusual).
Under section 87 of the Property Law Act 2023 (Qld), the maximum deposit a seller can require you to pay is:
- 20% of the purchase price in an off-the-plan sale; and
- 10% for all other contracts.
If the contract requires a deposit to be paid, it can provide for the entire deposit to be paid at once (whatever the time specified in the contract), or in instalments – e.g. 5% on signing the contract and the remaining 5% once the finance, building and pest conditions have been satisfied (thereby making the contract unconditional).
In Queensland, time is of the essence in property contracts. If a deposit is not paid by the agreed deadline, the seller is legally entitled to terminate the contract and, if the deposit was in fact paid (albeit late) keep what you have paid.
Queensland buyers have traditionally assumed that if a due date for a deposit falls on a weekend or public holiday, it rolls to the next business day. However, in the latest REIQ contract, there is updated wording, so that if a deposit falls due on a weekend or public holiday, it must be paid on that day. “Monday is fine” can be a costly misunderstanding.
What can go wrong with deposits?
Let’s take a look at a few case studies to give you a bit of a flavour of what might go wrong if you do not strictly comply with the strict deadlines in the contract of sale relating to the payment of a deposit.
Novadeck Pty Ltd v CK & PT Property Holdings Pty Ltd [2025] QCA 170
In this case, the Queensland Court of Appeal addressed the interpretation of the term “pay” in relation to the payment of a deposit in a sale contract.
The contract stated that the buyer was required to pay an initial deposit of $1,000 and a balance deposit of $48,990 upon satisfaction of the finance condition.
On 16 October 2024, the buyer received confirmation that finance had been obtained. On the same day, the buyer arranged at 10:32am for its bank to transfer the balance deposit by EFT to the trust account of the seller’s solicitor held with another bank. At 11:50am, the buyer’s conveyancer informed the seller’s solicitor that the finance condition was satisfied and confirmed the deposit payment had been made. However, due to EFT delays common in transferring significant amounts in first-time payments, the balance deposit was not actually received into the solicitor’s trust account until 9:38pm that evening.
Overturning the decision at first instance, the Court of Appeal held that the term “pay” requires the actual receipt of funds by the deposit holder, not merely the initiation of the transfer. Therefore, the buyer’s instruction to the bank to initiate the EFT transfer did not constitute payment under the contract. The Court also rejected the buyer’s argument that a term should be implied in the contract that the initiation of the transfer should count as deemed payment – as this was not required to give business efficacy to the contract.
The result was that the seller was entitled to terminate the contract, on the basis the deposit was not paid on time.
In Novadeck, the parties used an old version of the standard-form REIQ sale contract which was in existence at the time of the sale in 2021. However, from 20 January 2022, the REIQ contract has contained a new EFT “deeming provision”.
Under new clause 2.2(3), where the buyer has:
- paid electronically;
- provided the deposit holder with proof of electronic payment (which can be the screenshot of the payment from a banking app or a receipt from the bank); and
- taken no action to delay or prevent payment,
the buyer will be deemed as having paid the deposit on the date of the electronic transaction rather than the date the payment is received.
However, buyers need to remain vigilant. There is also now a new clause 2.2(4) in the REIQ sale contract, which provides that the seller is entitled to issue the buyer with a notice – even if the buyer has complied with clause 2.2(3) – when the funds are not in fact received by the nominated due date in the contract. In that case, if the funds have not in fact been received into the account of the deposit holder 2 business days after the notice is given, the buyer will be considered to be in default.
This effectively limits the “processing time” for a deposit to 2 business days (if the seller takes positive action to issue a notice of late payment).
While the new provisions in the REIQ contract overcome the result in Novadeck, as noted the contract of sale will not always be the REIQ contract, and even if the REIQ contract is used, there may be special conditions modifying its terms. Buyers therefore need to continue to read the fine print, and have expert advice to make sure they are protected and strictly comply with all conditions under the contract.
Evans v Jan [2025] QSC 31
On 22 January 2024, the seller and the buyer entered into contract of sale for property in Shailer Park. The purchase price was $985,000. The contract required the buyer to pay a 10% deposit (i.e. $98,500) when the contract was signed.
On 23 January, the real estate agent emailed both parties and their lawyers to confirm the property was under contract and requested the buyer to pay the $98,500 deposit that same day. However, the buyer did not pay the deposit on the due date as it exceeded his bank’s daily transfer limit.
The next morning, on 24 January, the buyer transferred $45,000 into the agent’s trust account and texted an apology for the delay, explaining the remaining balance would be paid the following day due to bank difficulties.
The real estate agent acknowledged the message and replied via text: “OK. As long as I let seller know. Two deposits today and tmr”.
Following the agent’s text, the buyer heard nothing more and proceeded with the building and pest inspection later that afternoon.
On 25 January, the buyer deposited $50,000 into the agent’s trust account in two instalments of $40,000 and $10,000, while his brother contributed the remaining $3,500.
On 28 January, the agent texted the buyer, informing him that the seller no longer wished to proceed and was terminating the contract. This was formally notified to the buyer by the seller’s solicitors the following day. In addition to terminating the contract, the seller also claimed an entitlement to retain the deposit that had been paid (albeit late).
In that regard, the seller relied on the following clauses in the contract:
- clause 2.2(5) – “the Seller may recover from the Buyer any part of the deposit which is not paid when required”; and
- clause 6.1 – “time is of the essence except for any agreement between the parties regarding the time of day for settlement.”
The buyer sought specific performance of the contract as the deposit was paid in accordance with instructions the buyer claimed could be attributed to the seller via the conduct of the agent.
However, the Court held that the agent did not have authority to agree to an extension of the deposit deadline on behalf of the seller.
Specifically, the agent had not been actually authorised by the seller to extend the time for payment of the deposit, whether in the agent’s appointment documents, the contract of sale or otherwise. Further, there was no ostensible authority for the agent to authorise the late payment. Ostensible authority occurs when a principal’s actions make it appear that the agent has the authority to act on their behalf, even if such authority does not in fact exist.
In this case, the Court found no evidence that the seller made any representations to the buyer that would have led the buyer to reasonably believe the agent had the authority to accept a late deposit. It was not otherwise reasonable for the buyer to infer that the agent had authority, given that in any real estate transaction, the agent’s role is limited to marketing the property, informing the parties when the deposit is due and accepting payment into their trust account on the due date specified in the contract.
Having failed to establish actual or ostensible authority, or that the contract had been affirmed by the seller, the buyer’s estoppel case – i.e. that it would be inequitable for the seller to rely on the failure to pay the deposit to justify the termination of the contract – also failed.
Because the buyer did not pay the deposit by the due date, the seller was entitled to terminate the contract and keep the deposit. This may be seen as a harsh result, but it was the legal effect of what was clearly stated in the contract. This brings home the need to pay close attention to what the contract says and always carefully read the express terms.
In Evans, the buyer would not have been saved by the new drafting of the REIQ contract which would have changed the result in Novadeck. That is because the whole amount would have needed to be paid by EFT on the due date (in this case, the time of signing the contract) for the deeming provision to take effect.
Recommendations
It is essential for buyers to carefully review the contract of sale and seek legal advice before signing in order to fully understand their rights and obligations. For a deposit, close attention should be paid to the amount and time the deposit is due.
Buyers should understand the importance of “time is of the essence” in relation to deposits (and other due dates in a contract of sale), which requires strict compliance with the nominated deadlines. Late payment (or other compliance) may result in the contract being terminated, the buyer losing their deposit (if it has been paid) and messy breach of contract claims that can derail your property dream.
While the current version of the standard-form REIQ contract now offers buyers more protections in relation to the payment of a deposit by EFT, strict compliance with the contractual terms is still required, and if the REIQ contract is not used or is modified by special conditions for a specific property, careful thought will need to be given to your contractual rights and obligations.
The K2 difference
At K2 Law, we have a highly experienced team of dedicated, passionate lawyers who act in a broad range of real estate and commercial property transactions. We are committed to working with you to help you achieve your property goals. When you engage us, you can rest easy knowing you are in safe hands and that we will work to ensure your interests are protected in your property transaction – so that you can enjoy the fruits of all your hard work and focus on your goals for the future. If you would like to discuss further how we can help, please get in touch with Matt Kumnick or Peter Kumnick.
The content – including publications – on this website is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive, nor does it constitute legal advice. We attempt to ensure that the content is current, but we do not guarantee its currency. You should seek legal or other professional advice before acting or relying on any of the content.
