Options Deeds – Are they governed by PAMDA? Options Deeds – Are they governed by PAMDA?

Options Deeds – Are they governed by PAMDA?

17 September 2010 | General
Vale No 1 Pty Ltd v Delorain Pty Ltd [2009] QSC 425

A recent case has once again brought the issue of option deeds and relevant contracts in relation to PAMDA to the forefront. In this case, the Court had to determine whether 3 option deeds were 'relevant contracts' for the purposes of the Property Agents and Motor Dealers Act 2000 (PAMDA). If they were found to be ‘relevant contracts’ then the consumer protection provisions dealing with warning statements applied.

The option deeds in question were between a developer and a property marketer. They allowed the developer to grant call options to the property marketer to buy subdivided residential lots. The property marketer would then introduce buyers, which would be subject to a minimum sale price. Once sold, any sale price above the agreed minimum would be given to the property marketer.

The option deeds also contemplated that if the call options were not exercised then the developer could exercise put options to force the property marketer to buy the lots. Consequently, the option deeds only identified the seller and the terms of the sale. The sale contracts which were attached to the option deeds did not identify the buyer.

After the call options lapsed, the developer exercised its put options to force the property marketer to buy the lots. The property marketer then attempted to terminate the sales claiming that the developer had failed to comply with PAMDA by attaching warning statements to the option deeds.

PAMDA applies to a ’relevant contract’ which is defined as a “contract for the sale of residential property in Queensland…”. The property marketer argued that the option deeds were contracts for the sale of residential property.

The judge (Douglas J) found for the developer and relied on the reasoning of Mullins J in Cheree-Ann Property Developers Pty Ltd v East West International Developments Pty Ltd who found that option deeds did not by themselves result in a contract for the sale of the residential property because the buyer was not identified. In arriving at this conclusion, Douglas J observed that the identity of the buyer depended upon whether the property marketer introduced a buyer or the developer forced the property marketer to buy the lots itself. Until the buyer was identified it was “impossible to conclude that a contract for the sale of property has come into existence”.

Whilst this case found that the option deeds are not relevant contracts under PAMDA, you should be aware that this result arose due to the particular facts in this situation. If you are contemplating entering into an option deed relating to residential property then the possible application of PAMDA should be specifically addressed. 

Breaking News

Just to keep us guessing, the Court of Appeal has now reversed the Supreme Court’s original decision in Vale No 1 Pty Ltd v Delorain Pty Ltd and held that the property marketer had validly terminated the option deeds for non-compliance with PAMDA. In particular, the Court of Appeal stated that the earlier decision in Cheree-Ann Property Developers Pty Ltd v East West International Developments Pty Ltd should not have been followed as it was a matter for the parliament to decide whether property marketers require the consumer protection afforded by PAMDA.

Of course, there is a delicious irony in property marketers benefitting from the very legislation introduced to protect the public from them! Let’s see if the Bligh government takes up the Court of Appeal’s invitation for further amendments to PAMDA.

For further information or assistance to review your option deeds please contact one of our Property & Commercial partners.

Freeda Stevenson

Freeda Stevenson

Principal