Terms contracts for sale of land are regulated by Credit Code

In Geeveekay Pty Ltd & Ors v Director of Consumer Affairs Victoria [2008] VSC 50 , the Victorian Supreme Court decided that a terms contract of sale for land was regulated by the Consumer Credit Code.

The Director of Consumer Affairs Victoria applied for civil penalties relating to 46 contracts of sale including the sale to Rand.

The main features of the transaction between Mr and Mrs Keogh and Ms Rand were:

• Mr and Mrs Keogh were the registered proprietors of the property and would remain so until final settlement, probably in 30 years (2032)
• Mr and Mrs Keogh had mortgaged the property to Westpac
• by the terms contract of sale, Mr and Mrs Keogh sold the property to Ms Rand for a price plus interest payable by 360 monthly instalments unless additional payments were made
• Ms Rand was entitled to possession of the property (which was to be her home) shortly after signing the contract
• under the terms contract, Mr and Mrs Keogh agreed to use the instalments in the first instance to meet their payments under the Westpac mortgage and to discharge the mortgage before final settlement, and Ms Rand agreed to be bound by the terms of that mortgage

The vendors argued that they did not provide "credit". The court decided the contract provided credit because Ms Rand’s obligation to pay instalments was a present obligation to pay a future debt which came within the concept of “incurs a deferred debt” in the definition of “credit” in s 4(1)(b) of the Code. It also concluded the terms contract between the parties is a credit contract under the Code on the additional basis of Ms Rand’s assumption of Mr and Mrs Keogh’s mortgage and loan obligations.