Luxury River-Front Property For Sale – Flooded Only Once (Or Twice)

Posted on January 31, 2012 by | 7 Comments

Tim O'Dwyer M.A., LL.B OPINION
by Tim O’Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

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What do you do when a property you have contracted to sell is damaged (by flood, fire or whatever) before settlement?  What do you do if you are the buyer of that property?  These critical questions arose for more than a few sellers and buyers across Queensland during the State’s extensive flooding of December 2010 and January 2011.Brisbane Floods

A year later, with Queenslanders currently remembering and revisiting those dark days, these questions are still of concern to all involved in selling, buying or renting a home.

In one instance last year, the buyer and seller of a flood-damaged property could not agree on what to do.  So they took the matter to court.  Queensland’s Court of Appeal in the recent case of Dunworth v Mirvac ultimately ruled that a woman buying a $2.155 million river-front apartment in Mirvac Queensland Pty. Ltd’s up-market Tennyson Reach development had validly terminated her 2007 off-the-plan contract because of significant damages caused to the apartment by the January 2011 flooding.   Despite quite technical legal arguments raised by the seller/developer’s Queen’s Counsel and Senior Counsel during two hearings the appeal court finally found for the buyer.    Even before the flooding took place, every apartment in Mirvac’s complex of high-rise buildings had dropped drastically in value from the 2007 off-the-plan sale prices.  Needless to say values on most, if not all, flood-affected Queensland properties have dropped drastically since the floods.  Sales of such properties have, of course, been very few and far between.

After Mrs Dunworth had earlier attempted to escape her by now over-priced purchase contract on the basis of alleged false, misleading and deceptive representations by Mirvac particularly regarding the apartment’s elevation, Mirvac obtained a Supreme Court order obliging Mrs Dunworth to settle the contract (and pay some $500,000 interest) by 8th February, 2011.  Less than a month before that date, along with thousands of other  Brisbane and Ipswich properties on or near the river,  the Brisbane River flooded this ground-floor apartment (as it had similarly in 1974 inundated the land on which Mirvac built more than 30 years later).

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7 Comments

  • Bob Trendle says:

    Tim,

    As a bayside agent, I would have thought that the flooding risk of any property that is at or below the level of 1974 would have been easy to identify, either through council or state government searches.

    I would assume that people were well aware of the damage done by the 74 floods and I assumed that council were only allowing new builds to be above the 74 flood levels.

    I am surprised that people are now exiting these pre sold properties – using the damage done by last years flooding as an exit strategy when surely the “softening” of the market vs the 2007 and 2008 prices (down by 15 to 20% by my estimation) is going to be a very strong motivation.

    Would the courts not take this into account when taking these decisions?

    Regards,

    Bob Trendle

  • http:// says:

    Bob, thanks for your comments and questions.

    One of the problems which the current Floods Enquiry will have to address is how accurate was search-provided information on past and projected flooding.

    My clients in this story had no real knowledge of the 1974 floods, although they did tell me how some time before contracting they had seen a marker in a park in Toowong which indicated flood levels which would not be reached again because of the construction of the Wivanhoe dam.

    Mrs Dunworth and, I suspect, every other flood-aware buyer of homes or units built post-1974 would have not unreasonably expected councils to have required habitable floor levels to be above recorded 1974 flood levels.

    To my knowlege courts hearing real estate escape cases only take into account reduced market values when buyers alledge misrepresentaion regarding future values.

    See this earlier Blog post:

    https://www.reic.com.au/blogs/australian_real_estate_blog/archive/2009/03/03/developers-beware-of-your-marketing-agent-s-advertising.aspx

  • http:// says:

    Today’s Courier Mail newspaper reports that Brisbane’s Lord Mayor has referred to the State’s Crime and Misconduct Commission the Council’s $15million deal with Mirvac to acquire the developer’s remaining flood-prone Tennyson Reach land and for Mirvac to construct a park on the land. This referral f

    ollowed allegations raised by Seven News. Apparently the terms of the deal were subsequently changed when a valuation report made after the initial deal found that the land for which $6million was being paid had a pre-flood valuation of $9million. The Lord Mayor is reported as saying:”While I have found no evidence of wrong-doing…it is important that an independent investigation is conducted and the air is cleared.” A Mirvac spokesman said the sale of the land was an independent arms-length transaction.

  • http:// says:

    It is my understanding that the purchaser of an existing property for there own protection, fully insure the property at the time of signing the sale note/contract to purchase. I am not sure of the correct procedure for the purchase of an off plan property or new build?

    I have purchased 3 properties over last few years and each time have insured at time of signing sale note/contract, just in case!
    When I have sold I have advised the purchaser to insure as well. So as not to get stuck in an argument if things go wrong.

  • http:// says:

    You are not too far off the mark, Tony, but insurance is not really relevant when things go “uninhabitably” wrong and a (Queensland) buyer wants to terminate under Section 64 (which has comparable equivalents only, to my knowledge, in Victoria, NSW and the Northern Territory). Elsewhere in Australia the existence and extent of sellers’ and buyers’ insurance covers may be very important.

  • http:// says:

    Mirvac’s application to the High Court for special leave to appeal has been refused.

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