Sale Of Land Notes

Sale of Land

• Stage 1 - Contract (exchange of promises)

• Must be in writing and signed

• Usually purchaser pays a deposit once signed

• Part Performance - an oral contract which is not enforceable, but equity might enforce it if ‘partly performed’ by one of the parties

• In NZ - most contracts use the ‘Standard Form Contact’ (Auckland District Law Society)

• Strict rules to ensure certainty and to encourage evidence in court cases

• Stage 2a - Settlement (enabling registration)

• P pays V in full

• Stage 2b - Registration

• P gets the actual property title

• Issue (in-between stage)

• Assuming there is an unconditional contract, what happens if problematic events occur between the contract and settlement/registration? E.g. damage, death of party

• Re Richards (party dies)

• Facts

• Richards left Opie Street to Ms McTague in his will

• Richards and Eade enter into an unconditional agreement to sell Opie Street

• Richards agrees to buy a house in Meyer Street

• Richards dies

• Issue 1 - Did Ms McTague have an interest in Opie Street?

• Issue 2 - Does Ms McTague have an interest in Meyer Street?

• Judgment on Issue 1

• When contract is signed, purchaser (Eade) becomes owner in equity

• Vender (Richard) holds land in a similar way to a trustee

• This means vendor no longer has an interest in the land but in a personal estate i.e. the sum of money being the unpaid purchase price

• Therefore, Opie Street no longer in will (adeemed)

• Judgment on Issue 2 - as Opie Street not in will, can’t trace title to Meyer Street

• Clark v Ramuz (when land is damaged)

• Facts

• R enters into contract to sell land to C

• In between, trespasser entered property and took a piece of land

• Issue - does the vendor (R) or the purchaser (C) have to pay for the land?

• Default Rules

• Equitable title passes on the contract. This means that risk lies with the purchaser.

• But the vendor becomes a ‘sort-of’ trustee.

• Judgment

• R was in a similar position to a trustee with C as the beneficiary

• R owed certain duties to C - one being “to use reasonable care to keep the property in a reasonable state of preservation” from when contract made

• R had breached contract, so had to pay for land

• Englewood Properties v Patel (commentary on many circumstances)

• After contract vender is a ‘quasi-trustee’ - owes some duties to purchaser

• Keep property in proper state of cultivation.

• Use reasonable care to keep property in a reasonable state.

• Prevent removal of soil by a trespasser.

• Keep property in good state and condition and ensure it does not deteriorate.

• Not to abandon rubbish on the property.

• If the sale is of land and a business, not to let the business lapse.

• Liable for physical damage resulting from not exercising reasonable care (including damage by trespassers)

• However, vendor retains possession and can still receive benefits from the property (like compensation) - Snowball case

• Central Duty - “preserve the property in its state as at the time of contract”

• There is still uncertainty as to how far this contract extends (perhaps a duty to maintain a future development agreement is the absolute limit)

• Scepticism of Trustee Analogy

• Duties imposed by the vender are contractual - not that of a trustee

• The vendor still has right to possess and enjoy land at the in-between stage

• Analogy does not work for all trustee duties

• Batchelar Centre Ltd v Westpac New Zealand (duty of vendor)

• Facts

• Westpac was exercising its mortgagee’s power of sale.

• Contract with BCL contained a term allowing Westpac to accept a better offer from someone else before settlement (which it did).

• BCL objected arguing that Westpac owed it a ‘duty of good faith’ to keep it informed and to allow it to match that offer.

• A ‘duty of good faith’ is also known as a ‘fiduciary duty’ akin to a lawyer-client and broker-investor duty, also in relationship between trustee and beneficiary

• BLC argued that Westpac owed this duty as it was a kind of trustee

• Judgment

• BCL did have an equitable interest - but duty of vendor not so clear

• Fiduciary duties usually only occur when one party is vulnerable to another - not clear that this was the case here

• Usually no fiduciary duty in commercial relationships

• There was a clear term stated in the contract that Westpac could accept a...

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