Vendor & Purchaser, Conveyancing Transactions - Assignment Example

Conveyancing Transactions By student’s name Course code+ name Professor’s name University name City, state Date of submission Question 1 Peter has contracted to sell a house at Leichhardt to Frank. The contract specified that the house was to be sold with vacant possession and that time was essential. Peter is unable to remove all his goods from the house as at the time specified in the contract because his truck had broken down. Vacant possession means giving the title to the property that is free from any tenancy agreement or any other right of occupancy and also giving physical vacant possession.1 The element that is in issue, in this case, is the fact that with some of Peter’s goods being at the house, he failed in delivering physical vacant possession to Frank. The fact that the clause on time being of the essence was expressly stated in the agreement means that the parties intended to make it a condition in the contract.2 In New South Wales, General Conveyancing practice and the standard contract for the sale of land stipulate that time in such contracts is not of the essence.3 Further, the Conveyancing Act 1919 provides that stipulations in contracts as to time being of the essence which would not have been of the essence before the commencement of the Act shall be construed in the same way the courts would have done before the Act came into force.4 However, in this case, the parties had expressly stated that time is of the essence in the contract which means that the failure by Peter to remove all goods amount to a breach of the contract. In this case, a completion notice is not necessary since time was already of the essence. The breach of the term of the contract means that Frank is entitled to rescind the contract or choose to seek for orders of specific performance due to the fact that the Peter had failed to deliver physical vacant possession. In Isaacs v Diamond [1880] WN 75 the court held that the fact that there were furniture and goods remaining on the premises on the completion date, there was a breach of the obligation to give vacant possession. In this case, the court found this consistent with the seller keeping possession of the premises.5 This would justify a decision by Frank to rescind the contract. The goods that had been left were all chattels which mean that, unlike fixtures, the seller’s abandonment of the goods does not give Frank outright ownership. Peter remains to be the owner. However, since the contract stated that Frank was required to accept the property in its condition and state of repair, he would be bound to accept the house with the goods rather than rescinding the contract. Though Peter has the right of ownership to the goods, allowing the operation of the agreement means that the Frank can accept the property even with the goods. Question 3 Where a property is sold by auction, the purchaser has an obligation to purchase the property once he has made the highest bid at the end of the auction. This means that it is important for the purchaser to have a conveyancer to inspect the sale contract before the auction to ensure that the terms are in order.6 Though a cooling off period is provided for in every sale contract involving land,7 such a provision does not apply to sales by auction. In the sale of land, the vendor has a duty to disclose any defects that may be on the land or house to which the purchaser would notice even after inspection of the property. The vendor has to disclose the latent defects in the property as was held in Micos v Diamond [1970] 72 SR. The failure to disclose any latent defect in the property entitles the purchaser to certain remedies which depend on the seriousness of the defect. Where the defect is serious, the purchaser has the right to terminate the contract or seek specific performance with compensation. However, where the defect is not serious, the purchaser is entitled to damages or compensation.8 When purchasing or selling land, the Conveyancing Act 1919 requires that the vendor attaches certain documents or copies of such documents to the contract before it is signed.9 These documents include a section 14910 certificate which specifies the planning requirements and restrictions that apply to a parcel of land, a diagram of the location of the local authority’s sewer in relation to the land, copies of all deeds among others.11 The Conveyancing (Sale of Land) Regulations 2010 (NSW) state that the failure to attach these documents on the sale contract gives the purchaser the right to rescind the contract.12 In this case, the vendor has failed to attach the sewer diagram and has provided a section 149 certificate that is over 12 months old. On making inquiries a new section 149 certificate shows that there are a group of large and old eucalyptus trees that have listed as an item of environmental heritage, and there is also a letter showing plans by Transgrid to construct a new transmission line which would run across a corner of the land. The replies to requisitions show that the local council has approved the owner of the neighboring property to build a go-kart racing circuit to operate seven days a week which would cause noise in the area. There is an implied warranty that applies to the purchase of residential property13 that the section 149 certificate that is attached to the contract specifies the true status of the land.14 In Mandalidis v Artline [1999] NSWSC 909 the court held that where the section 149 certificate does not contain information on the true status of the land as at the contract date, the purchaser can rescind the contract.15 Regulation 16(3)16 sets out the criteria which a purchaser can use to rescind the contract. Where the breach arises from a failure to disclose the existence of a matter affecting the land and the purchase was unaware of the matter when the contract was made, and such a matter would have made the purchaser not to enter into the contract, the purchaser can rescind the contract. In this case, the failure to include a sewer diagram entitles Jeremy to the right to rescind the contract. Further, the fact that the electricity line and the development of the neighboring land would cause noise which would defeat the purpose of buying the land to have peace and quiet means that Jeremy can rescind the contract. Question 5 In contracts involving the sale of land, the parties may specify that time is of the essence which means that once the completion date has reached, all the parties should complete performing their obligations under the contract. Failure to perform as of the completion date amounts to a breach which entitles the innocent party to the right to rescind the contract. However, where the parties have not stated that time is to be of the essence in the contract, either party may send a completion notice to the other party. In United Scientific Holdings Ltd v Burnley BC [1977] 2 All ER 62, the court held that a completion notice makes times to be of the essence. The intention is that the parties will be required to complete performance of their obligations on that date.17 Where the time has become of the essence as a result of a completion notice, the parties may agree to extend the time without waiving the essentiality of the time.18 In this case, Joanne, through her conveyancer, seeks an extension of time from 19th September as stipulated in the completion notice to 23rd September due to delays in her finance. Peter’s conveyancer agrees to the extension though no written agreement was made other than the fax sent by Joanne’s conveyancer. Later, Peter’s conveyancer sends a notice of termination of the contract based on the date of the completion notice and forfeits the deposit. In Tropical Traders Ltd v Goonan it was held that the granting of an extension of time is an intention to refrain from rescinding the contract once the completion date has reached.19 By agreeing to the extension of time to 23rd September, Peter’s conveyancer agreed that the completion date would be extended from the one stipulated in the completion notice. This means that the conveyancer cannot rescind the contract. Joanne can. Therefore, seek orders of specific performance to require Peter to complete the contract as at the date specified by extension. Joanne can, alternatively, seek the return of her deposit where Peter intends to rescind. The challenge, however, arises from the fact that the extension of time was not reduced into writing and signed by the Conveyancers. This makes it difficult to enforce the extension. However, the fact that Joanne’s conveyancer sent a fax on the extension which Peter’s conveyancer did not challenge shows an acceptance of the new terms. Joanne has a high probability of succeeding in seeking orders of specific performance or, alternatively, seeking a refund of the deposit.20 Question 6 The failure by the vendor to disclose all the defects in a property does not create an opportunity for the purchaser to cancel the contract. In Cook v Waugh [1860] 2 Giff 201 and Lowndes v Lane [1798] 2 Cox, the courts reinforced the applicability of the common law doctrine of caveat emptor which stipulates that it is the purchaser’s obligation to inspect land to identify any defects before purchase.21 This means that the purchaser cannot later complain of any defects in the property where they fail to make an inspection. Such inspection must be adequate such that the purchaser cannot also complain where he makes an inadequate inspection of the property.22 Due to the strict nature of the doctrine of caveat emptor,23 the courts went on to distinguish between latent defects in title, that is, those that are not discoverable even upon exercising reasonable care when inspecting property and patent defects which are visible.24 The decision of the court in Micos v Diamond [1970] 72 SR affirmed the position that the vendor’s duty of disclosure only extends to latent defects in the property which are not discoverable on inspection of the property.25 This means that where the vendor fails to disclose latent defects on the property, the purchaser can cancel the contract. However, for patent defects, the purchaser cannot cancel the contract since he ought to inspect the property to detect such defects. The reason why a purchaser is entitled to cancel a contract where the vendor has failed to disclose latent defects is that such a defect affects the ability to pass title to property that is free from encumbrances. In Dormer v Solo Investments [1974] 1 NSWLR 428 it was held that latent defects cover those matters within the vendor’s knowledge which may prevent him from passing a title that is free from encumbrances.26 Based on the arguments made, a purchaser cannot cancel the contract because the vendor has not disclosed all defects but rather only latent defects. References Byron Shire Council 2016, Section 149 planning certificates and other property searches, Available at: http://www.byron.nsw.gov.au/section-149-planning-certificates-and-other-property-searches [Accessed 16 June 2016] Cahill, T 2015, Vendor disclosure and warranty revisited, Australian Institute of Conveyancers. Cahill, T 2015, When time is of the essence, Australian Institute of Conveyancers. Griggs, L 2006, The content and timing of vendor disclosure in the sale of residential real estate: Why both must be considered, Australian Law Teachers Association. Mortgage Choice 2014, National Conveyancing Guide: Everything you need to know about Conveyancing, Available at: http://www.mortgagechoice.com.au/media/183441/Mortgage-Choice-Conveyancing-Guide.PDF [Accessed 16 June 2016] Newton, G 2011, Termination and rescission of contracts, Australian Institute of Conveyancers (NSW). Pallavicini, S 2016, Purchase and sale of property: Default and sale of property, Available at: http://lexisweb.lexisnexis.com.au/Practical-Guidance-Topic.aspx?tid=1758 [Accessed 16 June 2016] Shaw, K 2010, The concept of vacant possession: Theory and Practice, Durham University. Skapinker, D 2008, Vendor disclosure and Conveyancing (Sale of Land) Regulation 2005 revisited, Available at: http://www.stewartau.com/multimedia/VendordisclosureandConveyancingppt.pdf [Accessed 16 June 2016] The Law Reform Commission 2009, Land Law and Conveyancing Law: Service of completion notices, The Law Reform Commission. Read More