The Australian Contract and Property Law - Assignment Example

Contract and property law Name Course Instructor’s Name Date of Submission CONTRACT AND PROPERTY LAW The Australian Property Law provides a system of acts that regulate and prioritize the rights, responsibilities of individuals and their interests in relation to property acquisition. The word ‘property’ is commonly used to refer to things or objects that belong to another. However, it is usually treated as a set of rights permissibly exercised over something both tangible and intangible assets. The problem in this case scenario is covered under the Australian contract laws and the Australian property laws. There this report will highlight if Mr. x can take possession and ownership of the apartment while discussing if there are any valid contracts between the involved parties as well as any competing property rights. Issue The issue to be decided is the position of Mr. X regarding his rights to clear possession and ownership of the property by 15th February 2017, or whether the Comm Bank had the right to sell the house immediately without considering the parties involved such as Mrs. X and the tenant Ms. A. Rules The problem presented here is under contract law on property ownership, specifically the law of real property. Real property or real estate in this case refers to tracts of land, erected buildings and any other stuff that is on land.1 Under this there are also interests and rights that arise from land ownership or having interest in it. The actual surface area and everything under and above a piece of ground is referred to as land. On the other hand, a fixture includes something that is not logically part of a land, and the attachment is in a manner that it cannot be easily detached without causing damage or losses. Thus structure like buildings attached to land, are considered as real property that cannot be easily detached or separated.2 On the other hand, a contract is an enforceable agreement between two or more parties, a promise or set of promises and a breach of which the law provides a remedy and the execution of which the law recognizes as an obligation.3 While all contracts may be regarded as agreements, not all agreements can be recognized as contracts. There are a set of elements that must be available for an agreement to be deemed as a contact and these are: an offer, acceptance, capacity, intention, consideration, legality, and formality where applicable.4 Therefore, a contract only exists when one party makes an offer that is unequivocally accepted by another party, where the two parties have the required capacity to enter into a contract. However, there must be some consideration, and both parties must have intended their actions to result in a legally binding agreement. Also, the purpose of the agreement must be legal. If there are any necessary formalities to be followed, they too must have been complied with. In regards to this case there is a valid contract between Mr. X and Mr. Y which includes a contract of sale. There was an offer of an apartment, which was accepted by Mr. X. The two parties had the capacity to contract and there is the intention to create a legal relationship between them. Mr. X provides consideration in form of the $100,000 deposit paid two weeks before the settlement date. The contract is made for legal purposes involving a landlord and tenant relationship. The formalities indulging a sale of property include title examination and signing of a lease.5 Title examination is one of the essential formalities when a bank or any financial institution finances the purchase of a home. The buyer must have a title agent or an attorney to examine the title in a situation where the bank does not need a title examination, or there is no official lender.6 However, there is no contract between Mr. X and his cousins, Mr. and Mrs. Z even though they signed a lease agreement whereby they were to occupy the apartment and pay a total of $65,000 annual rent. The contract was null and void by virtue of lacking the power to transfer ownership of the house since Ms. P was the lawful owner of the house at the moment they signed the lease agreement.7 Thus, Mr. and Mrs. Z can cancel the contract and claim for a refund of any amounts paid to Mr. X having moved into another apartment which is not the one agreed on the lease agreement. The principles of property law covered in this case include mortgages and liens as well as the transfer of ownership of real property. A lien involves prerogative against property meant to guarantee the payment of a debt or execution of an agreed upon deed.8 A typical type of lien is established when someone use their property as surety to someone else to guarantee settlement of a debt. Under lien theory there is a rule that the mortgagee does not acquire title or a right to possession until foreclosure and sale.9 Lien conveys no tile to the property. The interest of the mortgagee is mere chattel interest.10 Conventional mortgage underpins this case; Conventional mortgages include those that are financed by banks and other financial institutions.11 Most mortgage agreements stipulate that the owner of a real estate cannot transfer a fee simple interest due to the asset to another person unless he first settles the loan from the bank. However, in situations where the real estate owner defaults payment, the bank has the right to close out its mortgage lien, sell the property, and recover their money from the proceeds of the sale.12 For instance, Bank H lends a significant amount of money to Mr. Y who intends to use the money to buy a house. To obtain the huge loan, Mr. Y signs a mortgage with the bank as protection. The bank therefore, obtains an exclusive type of lien on the property. Mr. Y defaults payment of the loan in the third year and the bank decided to foreclose its lien and sold the property to another buyer to pay off the loan. Mr. Y sues the Bank and it is decided that Mr. Y lost his right to ownership and possession to the bank on signing the mortgage.13 To bind a property rental pact a lease is required, it also acts as a means of transferring an interest in property to another party. A lease names the owner of the property referred to as the lessor (landlord) and the lessee (tenant), and describes the property involved.14 In the lease an agreement on the period, amount and the method to be used in paying are clearly stipulated. It also stipulates the method of payment. The lessee promises to take care of the property in return for the “quiet enjoyment” of the premises. The lessee normally pledges to pay the specified rent, makes use of the property for the right purposes, and protects it from unjustifiable damage and returns it in good condition when the lease period elapses. The law also provides that the lease shall be guaranteed a “quiet stay” on the premises until the time the period of the lease expires subject to renewal. Therefore, the lease holder cannot be removed from the premises before the period expires. However, the lessee cannot leave the premises before the agreed period without informing the lessor.15 A mortgage has similar rights to those under a deed, but the lender’s ownership of the property is a type of a lien, that can be imposed against the property in a case where the mortgagor fails to settle the debt. Additionally, mortgages outlines clearly that if the mortgagor settles the debt in full as specified in the contract, the mortgage contract is deemed null and void and the lien will be unconstrained.16 However, failure to settle the debt as stipulated in the terms on the promissory note, the mortgagee is within his rights to request the court to foreclose the mortgage and use the profits from the sale to satisfy the amount due. The right for foreclosure arises only if there has been forfeiture by reason of a breach of condition.17 Also, a mortgage is not entitled to foreclosure unless the mortgage is overdue.18 “…The position of a mortgagor who remains in possession after the creation of the contract, if the mortgage agreement does not state therein his right of possession, or after nonpayment, if the mortgage stipulates that he may retain possession until default, is anomalous…” “…The mortgagee is entitled to take possession at any time19 but until the mortgagee demands possession, the mortgagor’s possession is rightful, and he is entitled to the rents and profits of the property without account.20Therefore, the mortgagor is not a trespasser, but he is not entitled to possession against the mortgagee...”21 If a property rental contract contains a provision for quiet enjoyment until default, the mortgagee will be held accountable for indemnities if he decides to repossess the premises before default.22 The principle was ruled in Moore v Shelley, (1883) and Jamieson v Bruce, 6 Gill & J. 72, (1834) where a suit under personal property, trespass was denied too mortgagor against mortgagee who took possession before default. “…When a mortgagee becomes entitled to possession as between himself and the mortgagor, he may maintain an action for possession against the mortgagor’s tenant under a lease made subsequently to the mortgage without authority of the mortgagee or any other person not holding under a paramount title…”23 In a case where, notwithstanding the omissions of any remedies clause, it sufficiently appeared from the provisions of the mortgage and the rules and regulations of the mortgage company that it was the objective of the parties that the mortgagor should remain in possession until default, it was held that until default, the mortgagor should not be disturbed24 in Superior Savings and Loan Society v Lucas, 1879. In a contract of sale by description or sample, the items involved in the transaction must match the description or the sample provided prior to signing the agreement. However, in this case, Mr. X is shown an apartment, 8/114 Blight street Melbourne that had impressed him but finally discovers that the house had another owner. Therefore, Mr. Y had no power to pass title of property to the apartment to Mr. X based on the rules of tenancy that require the quiet enjoyment of the house by the lease holder until the lease period is offer.25 Consequently, the law of contract dictates that if the item described in the lease agreement does not match the actual item purchased, action can be brought against the lessor for damages or specific performance.26 The competing interests, in this case, include Mrs. X ‘s one-half interest in the mortgaged property and the fact that she shows interest to move into the house could imply that she would end up staying in the apartment as Mr. X’s spouse. The fact that Mr. X had already rented the apartment to Ms. A at a fee of $40,000 per year instead of the expected $65,000 also creates a conflict of interest with the Comm Bank that expects the house to yield the expected revenues as agreed upon the examination of the title.27 Application As the purchaser of house, and in the position of a mortgagor, Mr. X has a right to retain and own the property. He also has a claim against the benefits of the property without having to give a reason. Mr. X has no claim of possession against the mortgagee and therefore, he cannot be deemed a trespasser on the 15th February 2017. Applying the factors in Kortright v Cady, 186028 to the facts in this case: 1. The right for Comm Bank to sell the house immediately or to foreclose the mortgage lien can only arise if there has been forfeiture by reason of a breach of condition. The condition in this case we assume is the payment of the interest and principal amount of the $600,000 loan that Mr. X had taken from the bank. We are not informed of any other condition. Also, the facts stated do not suggest any circumstances that could indicate that Mr. X has defaulted in payment of such amounts as may have been required. 2. The reason cited by the bank, “too much trouble” is ambiguous since it does not indicate whether it is trouble in terms of meeting the conditions of the contract of if the term trouble refers to the failure by Mr. X to find a suitable tenant for the apartment to raise the expected returns.29 3. Mr. X was told that the apartment would raise his capital by 2% but the rental yield and value in the market is demand driven. From the extract, it can be seen that Mr. x is unable to find a tenant who is willing to pay the $65,000 annual rent but instead finds a tenant later who agrees to pay $40,000. There is no fault on Mr. X’s part regarding failure to meet the economic expectations since the prices of the house are currently being affected by low demand in the market. 4. Mr. X, however, cannot succeed with his pursuit to sue Mr. S, the sales agent for misrepresentation which is the giving of false information to another party before a contract is settled and they rely upon such statements in making the contract. In cases of private sale, some allowance is made for people who are selling their items privately since they may make some statements with the intention of arousing interest in the prospective buyer. Therefore, Mr. S’ words can be deemed as promotional expressions in a court of law. 5. As evidenced in the case of Fidelity Mortgage Co. v Mahon, 1929, even after a breach of condition, the mortgagor has the right to collect the rents and profits so long as he retains possession.30 According to the theory of lien, it is a rule that the mortgagee does not acquire title or a right to possession until foreclosure and sale.31 6. We can assume the fact that the mortgage contract had permitted for unobtrusive enjoyment by the mortgagor until such a time issues of nonpayment could arise. In this case, the mortgagee can be held responsible and asked to pay damages if he enters before default as was the case in Moore v Shelly, 1883.32 Mr. X, in this case, is entitled to his peaceful stay without disturbance until default which has not yet been told in this case. As a result, he should move forward and claim ownership and possession of the house. The immediate sale of the house by the bank would cause financial loss to Mr. X who had purchased the apartment as an investment. The facts do not indicate any mistake from his side, and it would be wrong to suffer the consequences of economic instability in the market over the five months. Conclusion Mr. X is therefore, eligible to possess and own this property come February 15, next year. There was no breach of condition and therefore, Mr. X can continue receiving the rents and profits from the property. He has a right to claim for the cancelation of the sale of the apartment by the bank since he has the title to the property. Referring to the case of Lucioni v. Bank of America, N.A, 265722, the remedy that can be granted in this case is an injunction to prevent the foreclosure.33 Bibliography Read More