Possession before settlement: allocating risk in Queensland residential conveyancing

The request, and why sellers should resist it as a default

The request arrives late in the transaction and rarely in writing. The buyer's lease has expired, the removalists are booked, the buyer's own sale settled a fortnight early, and the agent asks whether the buyer can “just move in a few days before settlement”. The seller, keen to keep goodwill and already committed to a new address, is inclined to agree.

The difficulty is that early possession is an arrangement in which nearly all of the commercial benefit passes to the buyer while nearly all of the legal risk remains with the seller. The seller stays on title, stays exposed on insurance, remains liable for statutory outgoings, and surrenders the most effective piece of practical leverage it holds — control of the keys — before receiving any part of the balance purchase price.

Practitioners advising sellers should treat the arrangement as one to be resisted as a default, and permitted only where it is properly documented and properly insured.

Access and possession are different things

A recurring source of confusion is the conflation of pre-settlement access with pre-settlement possession. The REIQ/QLS residential contract confers limited access rights only: entry for inspections under the building and pest condition, a single valuation, a pre-settlement inspection, a meter reading, and a smoke alarm inspection, each on reasonable notice.

Those are inspection rights. They confer no possessory interest, and they do not authorise occupation, the storage of goods, or the commencement of works.

Risk in the property is a separate matter again. Under the standard contract, risk passes to the buyer from 5pm on the first business day after the Contract Date, independently of possession. Early possession therefore does not shift risk; in most transactions risk has already shifted. What early possession alters is the practical exposure of both parties and, critically, the insurance position.

The contractual framework: clause 8.5

The standard contract does regulate early possession expressly. In the REIQ/QLS Contract for the Sale and Purchase of Residential Real Estate (1st edition), clause 8.5 provides that where possession is given before settlement:

• the buyer must maintain the property in substantially the condition it was in at the date of possession, fair wear and tear excepted
• entry into possession is under a licence personal to the buyer and revocable at any time, which does not create a relationship of landlord and tenant and does not waive the buyer's rights under the contract
• the buyer must insure the property to the seller's satisfaction
• the buyer indemnifies the seller against any expense or damages incurred as a result of the buyer's possession

What clause 8.5 does not deal with

The clause is silent as to the licence fee, keys and access devices, utilities and outgoings, alterations and trade works, the recording of condition at handover, the mechanics of ending the occupation, and holding over.

It also sits awkwardly with the default and termination provisions, which are drafted on the assumption that the buyer is not living in the house. The clause is best understood as a risk-allocation backstop rather than a complete early possession regime.

Licence or tenancy? The characterisation risk

The clause asserts a revocable personal licence and disclaims any landlord and tenant relationship. That is a label, and labels are not determinative: Radaich v Smith (1959) 101 CLR 209. A court or tribunal will look to the substance of what was granted, and the decisive question is whether the occupier obtained exclusive possession for a term, usually in exchange for a periodic payment.

The relevant exposure is the Residential Tenancies and Rooming Accommodation Act 2008 (Qld). Section 12 defines a residential tenancy agreement broadly — express or implied, oral or written — as an agreement under which a person is given a right to occupy residential premises as a residence. Schedule 1 excludes certain arrangements, and conveyancing practice has long proceeded on the footing that a purchaser in possession pending completion of a contract of sale falls outside the Act.

Two factual features erode the exclusion. The first is occupation that extends well beyond a short bridging period. The second, and more dangerous, is occupation that continues after the contract of sale has come to an end while the occupier keeps paying a periodic fee. At that point the purchaser characterisation has nothing left to attach to, and the arrangement resembles a tenancy on any ordinary analysis.

The consequences of a tenancy finding are material. The seller becomes a lessor subject to prescribed termination grounds and minimum notice periods, bond lodgement, condition report obligations and minimum housing standards. Possession can be recovered only through a QCAT termination order followed by a warrant of possession. Drafting should therefore preserve genuine seller rights of entry.

Pitfalls in practice

Insurance. The seller's home policy will ordinarily contain occupancy conditions. Cover may be suspended or avoided where the insured has ceased to occupy and has not notified the insurer of the change. In a jurisdiction with Queensland's storm, flood and cyclone exposure, an uninsured loss during the occupation period is a serious matter. Written insurer consent to the change of occupancy should be a condition precedent to handover.

The buyer who will not leave. If the contract does not settle — finance fails, the buyer defaults, or the buyer terminates for defective disclosure — the seller is left with an occupied house and no purchase price. Termination of the contract does not, of itself, remove anybody.

Alterations and trade works. A maintenance-of-condition covenant does not prohibit alterations. Occupying buyers paint, remove fixtures, re-landscape and engage trades. Where trades attend at the buyer's direction while the seller remains registered owner, control of the workplace for the purposes of the Work Health and Safety Act 2011 (Qld) is genuinely ambiguous. An express no-works covenant is required.

• Loss of leverage — an occupying buyer who identifies defects has every incentive to seek a price reduction or an extension, and none to move out while doing so
• Holding over — occupation continuing past the scheduled settlement date without a stated end date or an escalating fee both obscures the occupier's status and strengthens a tenancy argument
• Compliance — smoke alarm obligations under Part 9AA of the Fire and Emergency Services Act 1990 (Qld) and pool safety obligations under Part 8B of the Building Act 1975 (Qld) should be confirmed as satisfied before handover
• Equitable interest and caveats — possession does not create the buyer's caveatable interest, but it entrenches the occupier's position, and an occupier who both refuses to vacate and lodges a caveat forces two proceedings, including removal under s 127 of the Land Title Act 1994 (Qld)
• Outgoings — the seller remains liable as registered owner for rates, water and land tax, and absent express allocation subsidises the buyer's occupation
• Waiver — a buyer who moves in and begins work while a finance or building and pest condition remains unsatisfied risks a finding that it has waived the condition by conduct
• Transfer duty on a cancelled contract — duty attaches to the contract, not to possession, but on cancellation Public Ruling DA115.1.3 applies and a buyer who has exercised rights of ownership may provide evidence against a genuine cancellation for refund purposes
• Instalment contracts — where possession is coupled with substantial pre-settlement payments, the instalment contract provisions of the Property Law Act 2023 (Qld) warrant consideration, particularly where the fee is creditable against the price

Documenting the arrangement: the occupation licence deed

Reliance on the standard clause alone is not adequate. Where a seller elects to proceed, a standalone deed of early occupation licence should be executed before keys are released, recording at least the following:

• Nature of the arrangement — a personal, revocable licence; no exclusive possession; no tenancy or lease; a seller right of entry on notice
• Occupation licence fee — amount and frequency, expressed as a fee for use and occupation rather than rent, and whether it is creditable against the purchase price
• Term — commencing on handover and ending on the earlier of settlement or termination of the contract, with no automatic extension
• Insurance — written insurer consent as a condition precedent; buyer contents and public liability cover, evidenced; immediate notification of incidents
• Indemnity and release — against loss, damage, injury and third party claims arising from the occupation
• No alterations or works — including no trades attending without the seller's prior written consent
• Acceptance of condition — the buyer accepts the property as at handover and may not rely on matters observed during occupation to delay settlement, reduce the price or terminate
• No further requisitions — occupation is not to found requisitions, objections or claims as to condition
• Deposit — increase and/or release to the seller, by written authority consistent with the contract
• Obligation to vacate — immediately on termination or revocation, with an express acknowledgment that remaining thereafter is trespass
• Keys and access devices — all returned on settlement or termination
• Utilities and outgoings — buyer pays consumption and connection charges; seller retains statutory outgoings as registered owner
• Condition report — signed, dated and photographed at handover, as the baseline for the maintenance covenant
• No caveat — a covenant not to lodge a caveat during the licence period; contractual only, but it founds a damages claim and supports urgent relief
• No interest in land — an acknowledgment that the licence confers no legal or equitable estate or interest
• Possession proceedings — an acknowledgment that on termination the seller may apply for recovery of possession, trespass damages and injunctive relief
• Liquidated holdover fee — an escalated daily fee drafted as a genuine pre-estimate of loss rather than a penalty
• Independent advice — a recital that each party has obtained or declined independent legal advice

Three commercial protections that should accompany the deed

Written insurer consent before handover; an increased or released deposit so the seller holds meaningful security; and file-noted independent advice to both parties. Without those three, the deed is doing more work than it should have to.

Recovering possession after termination

This is the scenario clients seldom contemplate. The immediate steps are to serve the notice of termination of the contract and, separately and expressly, to revoke the licence in writing. The two are legally distinct and should not be conflated in a single loose paragraph. A written demand to vacate by a specified date and time should follow, and evidence should be preserved: the executed deed, the handover condition report and photographs, the fee ledger, and all correspondence. Further payments should not be accepted after revocation without a clear reservation that they are received for use and occupation only, and without prejudice, lest an implied new arrangement be argued.

Where the arrangement is a genuine licence, QCAT has no jurisdiction. The remedy is a civil claim for recovery of possession of land and trespass, with an application for urgent injunctive relief where warranted. Value and urgency determine the forum, though in practice these proceedings are commenced in the District or Supreme Court because injunctive and often caveat relief is sought alongside possession. Enforcement is by enforcement warrant executed by sheriff's officers.

Where the arrangement is found to be a residential tenancy, the statutory pathway applies: a notice to leave on an available ground with the prescribed minimum notice period, a QCAT application for a termination order, and then a warrant of possession enforced with police assistance. That route is slower in notice terms but generally cheaper and faster than Supreme Court litigation.

In neither case is self-help available. Changing locks, disconnecting utilities, removing the occupier's goods or attending in numbers exposes the client to claims in trespass to land, goods and the person, conversion, and breach of quiet enjoyment if a tenancy is found — and, where force or threats are used, to criminal liability under the Criminal Code Act 1899 (Qld).

As to cost, an unopposed urgent application on clear facts — an executed deed, a clean termination and an unambiguous licence characterisation — may resolve within a few weeks. A contested matter in which the occupier asserts a tenancy, claims an equitable interest or lodges a caveat can run for several months and into the tens of thousands of dollars, before removal and storage costs for abandoned goods. In every case the cost exceeds any conceivable convenience the early possession delivered.

Conclusion

Early possession is not, in itself, improper. It is simply an arrangement whose risks are borne almost entirely by the seller, and the standard-form treatment under the REIQ/QLS contract is not adequate to protect the seller.

The practitioner's task is to insist that the arrangement be documented as what it is — a short, revocable, fee-bearing licence with a hard end date, written insurer consent, a recorded condition baseline and an unambiguous obligation to vacate — and to advise the seller plainly that once the keys change hands, the remaining remedies are slow, expensive and litigious.

Early possession before settlement in Queensland — common questions