Instalment Contract

A contract can become an instalment contract for many reasons including:

    a)   the deposit is more than 10%; or
    b)   the deposit is stated to be non-refundable in all circumstances; or
    c)   the buyer is given a rebate off the purchase price which makes the deposit more than 10% of the rebated purchase price; or
    d)   the Buyer is required to pay money to the Seller (in addition to the deposit if the deposit is equivalent to 10% of the purchase                 price) before receiving a transfer and the amount payable under the contract exceeds market value for what is provided in                     exchange.  For example, a rent to buy contract may require the payment of instalments which exceed the market rent that would           otherwise be payable.

The effect of the contract being an instalment contract is:

1. if the Buyer defaults in the payment of any instalment or part of the purchase price (other than a deposit), the Seller cannot terminate the contract until 30 days after having served a notice giving the Buyer 30 days within which to make payment. If the Buyer chooses to make payment within the said 30 day period (including any default interest payable under the contract), then the Seller cannot terminate the contract as a consequence of the Buyer’s initial non-payment. This means that where the default is in the payment of the balance purchase price, the Buyer can effectively obtain another 30 days in which to settle the transaction;
2. the Seller is prohibited from re-selling or re-mortgaging the property before settlement; and
3. the Seller may be required to comply with the National Credit Code, including the requirements for pre-contractual disclosure, ongoing notices and certain pre-requisites to enforcement.

​Therefore, we suggest the Buyer always instruct his/her solicitor to investigate the possibility that the Buyer’s contract is an instalment contract.