Signing a property contract before your loan is formally approved carries real risk. If your finance does not come through and the contract has no finance condition, you may be locked in, with your deposit at stake and no straightforward way out.
A finance clause is a printed condition in Queensland's standard residential contract that makes the sale conditional on the buyer obtaining loan approval. If approval is not obtained by the finance date, the buyer may give notice to terminate. Without that clause, the contract is unconditional from the moment both parties sign.
Our solicitors in Springfield and Ipswich help clients across Greater Springfield with property contracts, including reviewing finance conditions and advising on what happens when a finance deadline approaches.
Here is how finance clauses generally work in Queensland, and what the key dates mean for buyers and sellers.
Key takeaways
- A finance clause only applies if the finance amount, financier and date are all completed.
- The buyer must take all reasonable steps to obtain approval.
- Missing the finance date gives the seller, not the buyer, the right to terminate.
This article is general information only and is not legal advice. Every situation is different, and you should speak with a solicitor about your own circumstances.
What does a finance clause actually do in a Queensland contract?
A finance clause makes the contract conditional on the buyer obtaining approval of a loan for a specified amount, from a specified financier, by a specified date, on terms satisfactory to the buyer, according to the standard Queensland residential contract. The buyer must take all reasonable steps to obtain that approval.
The clause only operates where three things are completed in the contract: the finance amount, the name of the financier and the finance date. If any of those fields are left blank, the contract is not subject to finance at all. That means a buyer who assumes their contract has a finance condition, without checking those fields, may find they have no protection if their loan is refused.
Pre-approval from a lender is not the same as formal loan approval. Moneysmart describes pre-approval as showing a buyer is eligible to apply for a loan up to a certain amount, lasting 3 to 6 months. It does not commit the lender to the loan. A formal approval is what the finance clause is designed to capture.
What happens if finance is approved, or if it is not?
Once the buyer has an outcome, the standard contract requires them to give the seller written notice by 5pm on the finance date. The notice states one of two things: either that finance approval has not been obtained and the buyer terminates the contract, or that the condition has been satisfied or waived.
If the buyer terminates under the finance condition, they are entitled to the deposit back, according to the standard Queensland residential contract. The deposit holder pays the balance held, after any agreed deductions, to the person entitled within 14 days of a written request, or within 42 days of the transaction finalising, per Queensland's Agents Financial Administration Act.
If the buyer gives notice that the condition is satisfied or waived, the contract becomes unconditional on that point. The sale then proceeds toward settlement.
What happens when a finance condition exists but a lender withdraws an earlier approval after the buyer has already given notice of satisfaction is not covered by any current official source. A solicitor can advise on options in that situation.
What are the time limits and notice rules for a finance condition?
The finance date is the deadline for the buyer's notice. Under the standard Queensland residential contract, the notice must be given by 5pm on the finance date.
The standard contract also addresses what happens when a deadline falls on a day that is not a business day. A settlement, finance or inspection date that is not a business day moves to the next business day. A business day under the contract means any day other than a Saturday, Sunday, a public holiday or a special holiday in the place for settlement, or a day from 27 to 31 December.
If the buyer does not give any notice by 5pm on the finance date, the seller may terminate the contract by notice. That is the seller's only remedy in that situation. The standard contract notes that this is subject to the buyer's continuing right to give written notice of satisfaction, termination or waiver.
Notices under the standard contract must be in writing. An emailed notice is treated as given when sent. A notice emailed or hand delivered between 5pm on a business day and 9am on the following business day is treated as given at 9am on that next business day.
How does a solicitor help with finance clauses in Queensland?
Before a contract is signed, our conveyancing team reviews the finance condition to confirm the three fields are completed and the finance date allows enough time to obtain formal approval. We also explain what the notice requirements mean in practical terms.
Step 1: Talk to us
Get in touch and we will explain how the finance condition works and what dates to watch in your contract.
Step 2: Review the contract before signing
We review the contract and confirm whether the finance condition is properly completed, and we explain what the terms mean alongside any other conditions in the contract.
Step 3: Monitor the finance date
We track the finance date and liaise with the other side. If an extension of the finance date becomes necessary, we handle the communication and documentation with the seller's solicitor.
Step 4: Manage the notice and proceed to settlement
Once the buyer has an outcome from their lender, we draft and deliver the notice required by the contract and, where the condition is satisfied, we manage the steps toward settlement.
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When does a finance condition not protect a buyer in Queensland?
Understanding the limits of a finance clause is as important as knowing what it does. Several situations arise where the clause does not provide the protection a buyer might expect.
First, the clause does not apply at all if the finance amount, financier or finance date was left blank in the contract. A buyer who proceeds on an assumption that the clause exists should confirm all three fields are completed before signing.
Second, the clause requires the buyer to take all reasonable steps to obtain approval. A buyer who does little to pursue their application may not be in a position to rely on the clause if challenged. What those steps look like in practice depends on the circumstances of each transaction.
Third, the clause does not apply at auctions. There is no cooling-off period at auction and contracts are typically unconditional, meaning no finance condition applies. The Queensland Government confirms that auctions carry no cooling-off period. A buyer who has not arranged finance before bidding at auction may have no fallback if their loan is not approved after the auction.
Fourth, a finance condition is not the same as the five business day cooling-off period. The cooling-off period, confirmed on the Queensland Government's website, applies to residential contracts generally and allows a buyer to terminate within five business days regardless of finance. The two operate separately. Terminating under the cooling-off period carries a penalty of up to 0.25% of the purchase price, which the seller may deduct from the deposit. Terminating under a finance condition carries no such penalty where the condition is properly relied upon.
"A finance clause only works if it is properly completed. Buyers often assume the clause is there when the fields have been left blank, which means they have no contractual protection if their loan does not proceed."
Jade Kickbusch, Principal, Brookwater Legal
What common misunderstandings arise around finance conditions in Queensland?
One common misunderstanding is that a pre-approval is sufficient to satisfy a finance condition. Pre-approval shows a buyer is eligible to apply up to a certain amount, according to Moneysmart. It does not bind the lender and it is not formal approval. A buyer who gives notice of satisfaction before receiving formal approval from their lender may find they are then locked into an unconditional contract.
Another misunderstanding concerns who bears the risk when a deadline is missed. Many buyers assume that if their lender is slow, the finance date can simply be moved. Under the standard Queensland residential contract, an extension of the finance date requires communication with the other side. If no notice of any kind is given by 5pm on the finance date, the seller acquires the right to terminate. That right rests with the seller, not the buyer.
A third area of confusion is the relationship between the finance condition and other conditions in the contract, such as the building and pest inspection condition. Each condition has its own date and its own notice requirement. Satisfying the finance condition does not discharge the inspection condition, and vice versa. Each must be dealt with separately and on time.
Frequently Asked Questions
What is a finance clause in a Queensland property contract?
It is a printed condition in the standard Queensland residential contract that makes the sale conditional on the buyer obtaining formal loan approval by a set date, according to the standard contract. The buyer must take all reasonable steps to obtain that approval.
Does a finance clause apply automatically in every Queensland contract?
No. Under the standard Queensland residential contract, the finance clause only applies where the finance amount, the name of the financier and the finance date are all completed in the contract. If any field is left blank, the contract is not subject to finance.
What notice does a Queensland buyer need to give about their finance?
Written notice must be given to the seller by 5pm on the finance date, stating either that approval has not been obtained and the buyer is terminating, or that the condition has been satisfied or waived, according to the standard Queensland residential contract.
What happens if no notice is given by the finance date in Queensland?
If no notice is given by 5pm on the finance date, the seller may terminate the contract by notice, according to the standard Queensland residential contract. That is the seller's only remedy in that situation.
Is a finance clause available on a Queensland auction contract?
Generally no. Auction contracts in Queensland are typically unconditional, and there is no cooling-off period at auction, according to the Queensland Government. Buyers generally need formal finance approval before bidding.
Do you need a solicitor to handle a finance clause in Springfield or Ipswich QLD?
A solicitor reviews the contract before signing to confirm the finance condition is properly completed, monitors the finance date and manages the notice process. Getting the notice wrong or missing the deadline can have serious consequences for a buyer's deposit.
What is the difference between a finance condition and a cooling-off period in Queensland?
They are separate rights. The Queensland Government confirms the cooling-off period is five business days for residential contracts and carries a penalty of up to 0.25% of the purchase price if used. Terminating under a properly relied-upon finance condition generally carries no such penalty under the standard contract.
Your Next Steps
Finance conditions are one of the most time-sensitive parts of a Queensland property contract. Missing the finance date, leaving the fields blank or giving the wrong notice can each have significant consequences for a buyer in Springfield, Ipswich and across Greater Springfield, from losing the right to terminate to forfeiting the deposit entirely.
Every property matter is different, and that's exactly why it's worth a conversation. Make an appointment with the Brookwater Legal team or call (07) 3437 8555.
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External Resources
Brookwater Legal · This article contains general information only and does not constitute legal advice. It does not take into account your individual circumstances. You should obtain legal advice about your own situation before acting on anything in this article. Liability limited by a scheme approved under Professional Standards Legislation.
