Legal Advice Please

That's a very interesting question.  Since the GFC when properties are getting harder to sell, this issue has become far more common, with vendors asking for evidence of inability to get finance.  During the boom, it wouldn't have mattered as the vendor could just put the property back on the market, but it is not so easy to sell these days to vendors are trying to lock in purchasers.

A contract only becomes unconditional once all the special conditions are fulfilled.  Once upon a time special conditions such as finance and inspections had a date entered into the contract and after that date the contract was unconditional, regardless of whether the purchaser had actually applied for finance, got inspections etc.  However, now some states (ie, NT and SA at least.  I don't know about VIC) have changed the finance clause in the standard contracts to stipulate that for the finance clause to be fulfilled, the purchaser has to give the vendor notice, in writing, that finance has been approved.  Until that is done, that clause has not been satisfied.  The only real relevance of the date is that if finance has not been approved by that date, the vendor has the right to terminate the contract.

So to summarise, if the finance clause says clause doesn't say anything about written approval then the onus is on the purchaser to advise prior to the date specified, failing which the finance clause is deemed satisfied.  If written approval is required, the onus is on the vendor to either terminate the contract or to extend the time for finance approval.

However, when the standard contract requires approval in writing, usually there is also a clause that the purchaser must take reasonable steps to secure finance. 

So firstly you need to work out whether the contract requires you to provide written approval of finance, or whether the contract just deems that clause to be satisfied by the date specified.  If the contract was indeed "unconditonal" then you are bound by the contract.  You can't just tell the vendor two weeks after the date that you didn't get finance.  So sad, too bac.  If, however, written approval was required, then the contract is not unconditional until you have given that evidence, which you haven't.

So, assuming that the clause was subject to written evidence (which you haven't provided), the vendor has two options:

1.  To terminate the contract
2.  To find out whether you took "reasonable steps" to get finance.

If you didn't take "reasonable steps" then the vendor could still hold you to the contract and force you to apply for finance.  The vendor could essentially say "under the contract you needed to take reasonable steps to get finance and you can't get out of the contract until you show me that you couldn't get finance".

If you don't want to proceed with the contract, the vendor would have to sue you to force you to proceed or to try to keep your deposit.  It used to be that if you terminated the contract without any valid reason, you would have to pay 10% of the purchase price as a penalty.  However, there is some case law that suggests that under certain circumstances, you can only be forced to forfeit the deposit you have paid.

Is it worth the vendor suing you?  Depends how much money is at stake.  The vendor will have to work out how much it will cost to take you to court versus how much it will cost just to put the land back on the market.  Only the vendor can answer that question.

You will really need to get legal advice.  There are so many issues involved and there are so many exceptions to the basic laws.  Speak to your conveyancer or solicitor.  I have just given a very basic rundown of the issues involved.  I was in a similar situation a few years back but as the vendor.  In the end I just put the block back on the market because I could resell it at the same price,  But the market has changed now and your vendor might not be able to resell the block.

Good luck.

K