Conveyancing Table of Contents
In this chapter1. Introduction Prior to 1920 various forms of contract were used depending upon whether the sale was of ordinary freehold by auction, ordinary freehold by private treaty, Torrens title by auction and Torrens title by private treaty. This occasionally caused problems because the wrong form was used for the particular transaction. The 1920 edition of the standard form of contract approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales remained in use unaltered until 1965. However since 1965 there has been subsequent editions of the standard form in 1972, 1982, 1986, 1988 and 1992 The current standard form of contract for the sale of land is the 1992 edition of the contract published by the Joint Committee of the Law Society and the Real Estate Institute. This edition of the contract has attempted to present the terms in plainer english than in previous editions of the contract. The 1982 edition was only settled after considerable discussions and no sooner had it been introduced than there was much dissatisfaction with it. The 1986 edition was only possible because legislative amendments to the Conveyancing Act that came into effect on the 1st May, 1986 required certain changes to the standard form. The advantage of using a standard form is that is reduces considerably the time that would be spent drafting and negotiating the form the contract for the sale of land would take. The conditions of the contract as they now stand are generally accepted as embodying a fair contract for both vendor and purchaser and the temptation for solicitors to change its basic provisions should be resisted. The standard form of contract is divided into two parts, defined terms, the provisionsof the contract and Schedule 1. The function of the terms is to describe the subject matter of the contract. The function of the provisions of sale are to state the terms upon which the subject matter is sold. However the terms, provisions of sale and Schedule 1 at the end of the conditions of sale must all be looked at to obtain a complete picture of the nature of the estate sold, the benefits which pass with it and the burdens to which it is subject. The heading on the front page of the 1992 edition of the contract is:- "Contract for the sale of land - 1992 edition (comprising this page, the following cooling off notice, the following provisions, Schedule 1 and anything attached) (a choice printed in BLOCK CAPITALS applies unless a different choice is marked) When "this contract" is encountered in the standard form contract that term includes all those things. It also means for example, should neither of the "Invest deposit" choices be ticked or crossed "NO" applies. Instructions should be obtained regarding all choices and the choices should be marked if possible. Any tick, cross or mark will do. The heavy black border is intended to enclose the areas that an estate agent is authorised to amend for residential property1. Unfortunately, the space for the date is outside the bold line and may easily be overlooked as a necessary insertion. 2. Terms - Meaning of Term (a) "Vendors Agent" Where the vendor has negotiated the sale through an agent the agent's name should be inserted here. This is important for the purpose of clause 2 and term "depositholder" under which the deposit is payable to the vendors agent. On occasions when there are two or more agents involved in the sale both agents may be referred to by inserting the first agent's name "in conjunction with" the second agent's name. With agents involved in a multi-list arrangement it is common that only the principle listing agent is referred to. If two agents are referred to it must be clarified which agent is to invest the deposit. The wording "if more than one the first named one" is intended to identify the vendor's agent for the purpose of holding the deposit when more than one agent is listed. The identification of the agent is also evidence of the existence of an agency relationship but it does not of course establish the scope of that relationship. Where the sale does not involve an agent the words "without the intervention of an agent" may be inserted under this heading and "Vendor's agent" crossed out as depositholder and "Vendor's solicitor" inserted. In addition the vendor to protect himself against a claim for commission may require a special condition included in the contract wherein the purchaser warrants that he was not introduced to the property by an agent and indemnifies the vendor from any claim for commission. An A.C.N. is not required for the agent because the contract is not a document of the agent. "Address, DX, Phone, Fax and Ref" while convenient for future contact they are not required for the purpose of service of documents on the parties. (b) "Vendor" The vendor's full name, address and occupation, preferably in the same way as he was shown on the assurance to him, should be inserted here. This was important so that in the assurance prepared by the purchaser before he had access to a title search the vendor can be described in the same way without requisition by the Land Titles Office. In recent years the Land Titles Office has not insisted upon an address and occupation description for the vendor An address is important for service of documents on the vendor. The correct spelling of the vendor's name is still important. However since the vendor disclosure legislation in 1986 requiring the inclusion in the contract of a copy of the certificate of title there is less chance of an error in the assurance when it is prepared by the purchaser. There is no need to change the word "vendor" to "vendors" if there are two or more vendors. "Vendor" is used throughout the contract and the singular includes the plural2. Clause 20.4 of the standard form also provides that "if a party consists of 2 or more persons, this contract benefits and binds them jointly and separately." (c) "Vendor's Solicitor" The solicitors identity should be disclosed as a matter of convenience during the course of the transaction and it provides evidence in connection with the service of documents under clause 20. Provision was made in the 1992 edition of the contract to include fax numbers as an additional means of service. Failure to insert solicitors details does not effect the validity of the contract. (d) "Depositholder" The person or body that is to hold the deposit must be specified to give effect to clause 2. If the contract fails to specify an agent two situations may arise. If an agent is acting extrinsic evidence is admissible to identify the agent. Where no agent is acting it seems that the contract is construed as requiring payment of the deposit to the vendor or some person authorised to receive the deposit on the vendor's behalf. Under the 1992 edition of the contract there should be little chance of the depositholder not being identified. The contract provides that the vendor's agent is the depositholder. Provision is also allowed for an indication as to whether the deposit is to be invested pursuant to clause 3. The contract assumes that the deposit will not be invested unless otherwise specified. It is undesirable for the deposit to be paid straight to the vendor. Should the vendor become insolvent the vendor may be unable to complete and refund the deposit. The charge provided for in clause 2.5 is subject to existing encumbrances, may be void in the event of insolvency, and may take time and trouble to enforce. If the deposit is to be paid to the vendor do not delete the definition of depositholder. It may be useful for the purposes of clause 7.2.1. In clause 2.1 change "depositholder as stakeholder" to "the vendor" or incorporate an overriding special condition. (e) "Completion Date" Six weeks after the date of the contract is the date specified for completion. Clause 15.1 makes this a fixed but non-essential time for completion. If settlement does not take place within that time a party may issue a notice to complete making time of the essence of the contract. Should 6 weeks be inappropriate, cross out "6" and insert a different number. Alternatively, cross out all the wording and add a date to the right e.g. 14th March, 1995. Clause 20.7 may be relevant in some circumstances. It provides that "if the time for something to be done or to happen is not a business day, the time is extended to the next business day, except in the case of clause 2 (deposit) and clause 21 (auction). (f) "Property" (i) Generally. Whilst the major item included in a sale of land is the land itself it is important to accurately define the subject matter of the sale. In this context there are two basic principles that are expressed in Latin maxims: quicquid plantatur solo, solo cedit (whatever is affixed to the land becomes part of the land) and accessio cedit principali (the addition becomes part of the main thing).Normally the sale includes the parcel of land including fixtures. At common law ownership of land included title to the centre of the earth and to an indefinite distance upwards into the airspace. This is now subject to reservations to the Crown in Crown grants of minerals and limits the substratum of land included in the grant eg. from the surface to a depth of 15 metres. Also mining legislation may grant certain mining rights overriding the title of the owner. The general policy behind the current standard form contract is that the vendor should provide as much information as possible about the subject property. The provision of this information should encourage the exchange of contracts, the purchaser having rights to compensation and rescission in the event of errors or inaccuracies. The term in the contract "Property" refers to "The following land and the following furnishings and chattels". The contract is for the sale of both land and goods. All the provisions of the contract apply to "the property" ie. the land and the goods, with the exception of clauses 2.5 (land), 10.2 (furnishings and chattels) and provisions necessarily confined to the land (14.7, 17.2 and A5). (ii) Adequacy of Disclosure. Failure to identify the property with certainty entitles the purchaser to rescind and recover his deposit. A title search of the property should be obtained by the vendor's solicitor to ensure that the property will be accurately described in the contract. Difficulties in identifying the property may often be overcome by the annexure of a plan to the contract however the plan must not be misleading. An overstatement of the dimensions of the property not covered by the word "approximate", if minor will entitle the purchaser to compensation. If substantial, will entitle the purchaser to the option of either rescission or compensation. An understated dimension will not entitle the vendor to compensation or to resist a claim by the purchaser for specific performance. If the description of the property consists of more than one part and one (or more) part is false but the other (or others) is true, then the false part will be rejected as a "falsa demonstratio" (a false description) and will not vitiate the description. (iii) Presumptions Concerning Subject Matter of Sale. There are four prima facie presumptions concerning the subject matter of the sale. They are rebuttable by provision in the contract to the contrary or by pre-contract knowledge by the purchaser. * The subject matter of the sale is the whole of the vendor's interest in the property. * The subject matter of the sale is an estate in fee simple and not some lessor estate eg. life estate or leasehold. * That the property is sold free from encumbrances and this presumption is not rebutted by the purchaser's pre-contract knowledge where the contract expressly promises an unencumbered title. * That vacant possession will be given on completion. (iv) Identifying the Subject Matter. It is important to be able to identify the precise subject matter of the contract when considering compensation. In this regard a reference to improvements and an address may be of significance. It is permissible in identifying the subject matter of the contract to go outside the terms of the contract and look at the surrounding circumstances of the case3. (v) "Land Address" It appears to be to the purchaser's advantage to ensure that a street address for the property is incorporated into the description of the property. The use of the word "approximate" covers only minor discrepancies between the actual measurements of the land and the measurements stated in the contract. However the existence of clause 6 in the standard form contract providing for compensation for errors or misdescriptions may mean that words of approximation allow for a greater discrepancy. Clause 20.3 provides that "an area or dimension in this contract is only an approximate area or dimension. In describing the approximate dimensions and area of the property it is prudent to use metric rather than imperial measurements. A possible interpretation of s. 12(1) of the National Measurement Act, 1960 is that a contract for the sale of land describing the property by units of measurement which are no longer legal units of measurement is void. Concern about this led to the N.S.W. Law Society making representations to the Commonwealth that the effect of the section. As a result the government stated that:- "The 1984 amendment does not of itself abolish imperial units as legal units of measurement. When metric units are eventually declared the sole legal unit[s] of measurement, legislative amendment will be enacted to ensure that land transactions will not be avoided by the inadvertent use of imperial measures." Where the interest in land being sold is less than an estate in fee simple it is important to ensure that the particulars provided are correct because an error eg. in the statement of the term or rent of a leasehold, will give rise to a right to compensation or where the error is substantial a right of rescission. (vi) "Land Improvements" Land includes any improvement, building or other structure on the land. Reference to an improvement may assist the purchaser if by completion the improvement has been demolished or altered or there is a risk of an order for its demolition or alteration. (vii) "Land Plan" In the case of a registered plan details must be filled in and a copy of the plan attached. The whole plan should be attached not merely the sheet showing the lot. In the case of land under old system a full description by metes and bounds must be attached unless the land can be described as a lot in a deposited plan4. In the case of an unregistered plan details must be filled in and copies of the existing registered plan and the proposed plan must be attached. Consideration will also have to be given to whether the plan registration time is appropriate. The contract provides "the plan registration time is 6 months after the date of this contract." (viii) "Land Title" It is important to specify the title system under which the land is held. Failure to do so could not only cause confusion in respect of the application of certain conditions of the contract (eg. clauses A1, A3, A4 and A5) but may also subject the vendor to a possible claim by the purchaser. In the case of Fischer v. Bennett5 the contract for sale was in the form appropriate for Torrens title land when in fact the land was under old system title. It was held that the purchaser was entitled to specific performance of the contract with a Torrens title. That is, the vendor was required to convert the land to Torrens title at his own expense. For a special Real Property Act title reference to the special title must be marked. For old system title "old system" must be marked. Should different parts of the property be under different systems an annexure may have to be attached to list the parcels and specify which system, title reference and interest apply. In the case of computer folios the folio number must be inserted and a copy of the computer folio certificate attached. In the case of a computer folio with a manual certificate of title both folio identifier and volume and folio numbers should be included. A copy of the folio certificate should be attached. If there is only a manual folio, the reference will be only to volume and folio and a copy of the manual folio search attached. It is always preferrable to attach a copy of the Land Titles Office search of the folio as the duplicate folio in circulation may not contain all the information that is on the LTO folio. In the case of old system title reference should be made to the document containing a description of the land e.g. Book 1234 No. 56 and a copy of that conveyance should be attached. A copy is strictly not required by the vendor disclosure regulation but it may save the purchaser having to obtain a copy and delay exchange of contracts. The usual choice will be FEE SIMPLE-ownership. Care must be taken to identify leasehold. Consideration will have to be given whether there is need for consent of a mortgagee or Minister (see Schedule 1). If purchase money is payable to the Crown it must be specified. The vendor bears the purchase money, unless otherwise stated (clause A4.1). If the holding is sold "subject to" the purchase money an amount equal to or greater than the purchase money should be inserted. In one sense it does not matter whether the contract provides for a sale "free from" or "subject to" purchase money payable to the Crown provided that the contract reflects the intention of the parties and the price. (g) Systems of Title to Land in New South Wales. (i) The Real Property Act, 1900. (1) The Scheme of the Torrens System. The Torrens system of registration of titles was introduced in N.S.W. in 1863. Approximately 95 % of land in N.S.W. alienated by the Crown is now held under the provisions of the Real Property Act, i.e. under Torrens title. The important feature of the Torrens system is that it is not a system of merely registering documents to enable them to be searched (as the Registration of Deeds Act, 1897) but it is a system of title by registration. Registration of a "dealing" under the Act vests title in the proprietor of that interest. On registration the holder of a registered interest, acquiring it in good faith and for value, obtains an indefeasible title. This means a conclusive title which cannot be attacked even by the former registered proprietor who may have lost his title through an instrument on which his signature has been forged. At common law a forged instrument was void and ineffective or if procured through the fraud of a third party could be set aside restoring the true owner's title. Under the Act subject to some limited exceptions, the title obtained through registration is an absolute State guaranteed title, free from unregistered interests. The Act also provides that persons deprived of an interest in land for example through fraud or some error, omission or misdescription in the Torrens register, may recover the damages suffered. If damages cannot be recovered from the wrongdoer an assurance fund has been set up for that purpose. However it may be argued that the fund does not achieve its objective because of the difficulty of claiming from the fund. An owner in fee simple is the registered proprietor of Torrens title land and his interest is noted on a certificate of title issued by the Register-General. When he transfers the land, on the registration of a memorandum of transfer, the name of the new registered proprietor is noted on the certificate of title and the name of the former registered proprietor is deleted. When the registered proprietor deals with the land, by granting a mortgage, or lease, or easement, that can be registered on the certificate of title. The title of the holder of an interest less than the fee simple is evidenced by the particular dealing e.g. a registered mortgage or lease. The holder of the interest is the registered proprietor of the mortgage or lease. There are approved forms for different types of dealings which must be used in order that these dealings may be registered. Only registered dealings are recognised as statutory interests under the Act. The certificate of title contains details of the parcel and of registered interests held over the parcel. The concept of a certificate of title has been replaced by "folio of the Register". The form and contents of a folio are similar to those of the former certificates of title. Formerly when the title deed issued to the first private owner the purchaser from the Crown received a Crown grant. In the future the first registered proprietor will be recorded as the proprietor on the folio of the Register relating to the parcel of land. The legislation permits the conversion of all parcels of land, including those held under Crown land title to the Torrens system. A recent objective is the rapid computerisation of the entire Torrens register. In 1983 automation commenced by creating computer folios for parcels in new subdivisions. Successively automation will cover parcels held under strata title and then all parcels held under Torrens title. The registered proprietor receives as evidence of his title a certificate of title, which replaces the duplicate certificate which formerly issued to proprietors when the original certificate of title was held by the Registrar-General. (2) Unregistered Interests. Unregistered interests are not invalid or illegal. Some unregistered interests, if recorded on a form registrable under the Act may be registered. There are several types of interests not capable of registration e.g. a declaration of trust whereby the registered proprietor declares that he holds the whole or part of the land on trust for someone else. A person claiming entitlement to an unregistered interest in land under the Act may lodge a private caveat forbidding the recording of any dealing affecting that interest until after notice shall have been given to the person lodging the caveat (called the caveator). A caveat may be lodged by a purchaser after having entered into a binding contract to purchase the land or by a mortgagee who advanced moneys on the security of a mortgage which is unregistered. To lodge an effective caveat a person must have an identifiable interest in the land at law or equity. For example, a plumber to whom money is owing for plumbing work done on improvements on the property, or a real estate agent claiming commission on a sale, cannot lodge a caveat, being only entitled to a debt against the owner without having any interest in the land. The registered proprietor can apply to have a caveat removed. If a caveat is removed having been lodged without reasonable cause any person who sustained damage may recover compensation for the damage. It is interesting to note that in the conduct of family law property cases it has proved to be a cheap and expeditous method of restraining a spouse from disposing of real estate, to avoid a prospective claim against that property in the Family Court, to lodge a caveat on the title to the property. The Registrar-General takes the view that the prospective rights of a spouse "pursuant to the Family Law Act should not be capable of protection by way of caveats. An equitable charge has been held to be a caveatable interest6 as was a purchaser's lien over the land for the deposit or part purchase price paid7. However it is more difficult to say whether a purchaser has a caveatable interest under a conditional contract. This is because until the condition is satisfied all the purchaser has is a contingent equitable interest. It seems to be that if equity will not recognise and protect the purchaser by way of specific performance, injunction or otherwise there is no caveatable interest8. In 1986 the statutory provisions dealing with caveats were substantially amended9. The required manner of description of the estate or interest claimed by the caveator, which was the subject of a substantial body of case law is now prescribed by regulation10. It is not part of the Registrar- General's function to investigate whether the caveator's claim to an interest in the land is genuine11. While the caveat remains in force the Registrar- General cannot record in the register any dealing which appears to him to be prohibited by the caveat. There are two qualifications to this. The first is that a caveat does not prohibit the recording in the Register of certain kinds of dealings. The second is that a caveat does not prevent the recording of a dealing already lodged in registerable form12. The registered proprietor or any person claiming an estate or interest in the land may request the Registrar-General to serve upon the caveator a notice requiring the caveator within 21 days to obtain a Court order extending the caveat13. Failure by the caveator to comply will cause the caveat to lapse to the extent that it would prohibit the recording of the dealing in question. Once a caveat has lapsed or been withdrawn, no further caveat can be lodged by the same caveator in respect of the same estate or interest in and purporting to be based to based on the same facts, except by leave of the Court or the consent of the registered proprietor. (3) Exceptions to Indefeasibility. Until registration a purchaser of land under Torrens title may be in a less secure position than a purchaser of land under old system title. On settlement a purchaser of old system land receives a deed of conveyance which vests the legal estate in him and he will take free of any prior equitable interest in the land provided that he has taken for value and without notice of that interest. A purchaser of Torrens title land however on settlement still has an unregistered (equitable) interest only and does not acquire the benefits of an indefeasible title until registration which may not take place until some time after settlement. Until registration his interest is liable to be postponed to an earlier unregistered interest. Section 43A of the Act affords to a purchaser of Torrens title land who has, at or before settlement, no notice of outstanding unregistered interests "the same measure of protection as that given at common law to a person who has acquired a legal estate in land without notice of some prior equitable interest" and he is thereafter "entitled to perfect his title by registration". There must be an immediately registerable dealing, no notice by the purchaser and no void dealing (e.g. a forged dealing). A special condition is often added to the standard form contract to the effect that a purchaser will accept on settlement an unregistered discharge or withdrawal thereof in registerable form together with an allowance for lodgment fees. But it is highly doubtful that a purchaser could insist that the mortgage be registered or caveat withdrawn prior to settlement because of the protection the purchaser receives under s. 43A. The title of the registered proprietor is defeasible for fraud14. However knowledge of the existence of any trust or unregistered interest is not of itself to be imputed as fraud. Fraud must be "actual fraud, moral turpitude". It is not fraud to purchase with notice of an unregistered lease to become registered as proprietor and then to evict the lessee relying on the indefeasible title conferred by registration. Nor is it fraud to register promptly with the purpose of defeating a claim over the land which may be established by pending litigation. A title would be defeasible for fraud where the purchaser takes not merely with notice of the unregistered interest but having given an assurance that the interest will be preserved. A number of exceptions to indefeasibility are set out in s. 42(1):- * Estates and interests as are recorded in the folio. The true import of a dealing prevails over the way in which its import is recorded in the folio of the register and a purchaser is bound to go behind that recording to the dealing itself to satisfy himself of the rights created by it. * Any right of way or easement misdescribed in or omitted from the register. * Any portion of land which may by wrong description of parcels be included in the folio but not if the registered proprietor is a purchaser for value. * Tenancies the term of which together with any option for renewal does not exceed 3 years under which the tenant is in possession or entitled to immediate possession and of which the registered proprietor had notice. Notice may be actual or constructive notice. Such leases may be registered and because of their less than absolute protection it would be prudent for such leases to be registered or at least safeguarded by a caveat. (4) Possessory Title under the Torrens System. Until 1979 it was impossible to acquire title over Torrens title land by adverse possession. The registered proprietor's indefeasible title was protected against trespassers. However there were thousands of Torrens title parcels which had been sold or dealt with without any change of ownership being recorded in the Torrens register. Part VIA of the Act enables persons claiming title to whole parcels of land to make possessory applications. The successful conclusion of a possessory application is the creation of a folio of the Register in favour of the applicant who then holds an indefeasible title to the land. (ii) Strata Titles Act, 1973. Before 1961 there was no legal mechanism to subdivide a building in order to create separate title and ownership to parts of buildings. The legal mechanism used was to transfer ownership of the building to a company whose articles of association provided that the holders of particular groups of shares were entitled to occupy specified parts of the building. Ownership of a residential unit was secured by relying on shareholding rather than on title to land. Several thousands of company title home units were created many of which still exist. Company title did not however provide an entirely satisfactory form of title or security for mortgagees. The Conveyancing (Strata Titles) Act, 1961 enabled land and buildings to be subdivided into common property and lots, with separate legal title to each lot. It also provided by- laws for the management and internal regulation of strata schemes. In 1973 this legislation was replaced by the Strata Titles Act. A lot in a strata plan means one or more cubic spaces and if it is intended to subdivide land by way of strata subdivision the strata plan must be prepared by a surveyor. The plan then requires approval of the local council and is registered with the Registrar-General. On registration the proprietors of the lots constitute a body corporate known as the "Proprietors-Strata Plan No. ...." each strata plan being numbered on lodgment. The body corporate is the owner of the common property which includes those parts of the land and buildings not specified as lots on the strata plan. If no special definition is used the normal lot boundaries are the upper surfaces of floors, under surfaces of ceilings and inner surfaces of walls. A lot is virtually airspace, so that the physical parts of a building are common property. This has an important consequence on the responsibility for repair and maintenance of common property which generally becomes the obligation of the body corporate. A folio of the register issues in respect of the common property and all dealings affecting common property are entered on that folio e.g. rights of way or easements. There is no right to mortgage common property. A separate folio for the register is issued in respect of each lot in the strata plan in favour of its proprietor. The owner of a lot in a strata plan holds title under the Real Property Act and any dealings with the lot are registered on the folio for the lot. The owner of a lot may sell, mortgage or lease the lot. The Strata Titles Act sets out the powers, duties and functions of the body corporate. The daily management of the body corporate may be delegated to the council of the body corporate which is elected at an annual general meeting. The body corporate may appoint a managing agent however the agent must hold a strata managing agent's licence. There are by-laws setting out the regulations for the conduct of lot proprietors and occupants of lots. The body corporate may levy maintenance to set up funds for regular expenses (e.g. lights, insurance, cleaning) or irregular expenses (e.g. painting common property). The body corporate must maintain a strata roll, which includes inter alia the name of each lot proprietor and mortgagee. It must insure the building under a "damage policy", for workers compensation and public risk. An application can be made to the Strata Titles Commissioner or the Strata Titles Board for orders to settle any disputes, rectify a complaint with respect to the exercise or performance of or failure to exercise or perform a power authority duty or function under the Act or By-Laws. An order can be made to acquire swimming pool equipment or the removal of any animal kept in contravention of by-laws. There is also certain rights of appeal against decisions made. The Strata Titles Act was amended by the Strata Titles (Development Schemes) Amendment Act, 1985 provided for the staged development of strata title properties. A strata plan may incorporate provision for further subdivision in the future and the details of the further subdivision must be incorporated into a "development statement". The "development statement" must be submitted to and approved by the relevant consent authority and which is registered by the Registrar-General. The Strata Titles (Leasehold) Act, 1986 enables the strata title development of Torrens title land the subject of a lease from the Crown or a public authority (including local council). (iii) Community Title. Community titles are created under the the Community Land Development Act, 1989 and the Community Land Management Act, 1989 which commenced on the 1st August, 1989. Previously there were only two modes of subdividing land in New South Wales, subdivisions under the Local Government Act, 1919 and strata subdivisions under the Strata Titles Act, 1973. This third mode of subdivision includes management and disputes mechanisms similar to strata title. Community titles allows land development to occur in stages. There are three tiers:- * Community Association. A community plan will cover the whole parcel of land and upon registration of this plan a community association will be established which will be an umbrella association to which all subsidiary schemes will belong. The lots created will usually be intended for further development and are referred to as development lots; * Neighbourhood Association. When a developer is ready to subdivide the land for sale it is by way of a further plan called a neighbourhood plan. This subdivides the land into neighbourhood lots, neighbourhood property and will establish a neighbourhood association to administer the land within its domain; and * Precinct Association is a middle tier of management interposed between a community and a neighbourhood association. These associations are not expected to be used often and are intended for further subdivision. A precinct plan will create precinct development lots, precinct property and precinct association. Where the community titles are not developed in stages there is no need for a community scheme and only a neighbourhood plan is registered to create a neighbourhood scheme. That enables the creation of residential, industrial or rural neighbourhood lots and neighbourhood association property which may be used by the proprietors in common e.g. swimming pool, tennis courts, children's playground, hall, BBQ area, recreation areas. It is also possible to create a strata subdivision within a community scheme. (iv) Qualified Title. The Registrar-General is entitled to issue a qualified folio of the Torrens register for old system title land, in some circumstances, the most important being on registration of a new subdivision or on the sale or mortgage of the land. Usually a qualified folio of the register will only issue where there has been a relatively recent survey definition of the land accurately identifying its boundaries. The issue of a qualified folio is entirely at the Registrar-General's discretion but current policy is to reduce the number of old system titles in N.S.W.. The Registrar-General's Office does not investigate title to the land so that the title is subject to any "subsisting interests" i.e. any interests in the land in existence at the date of issue of the folio, even if it is not noted on the certificate of title. A caution to this effect is entered on the folio. A person who becomes the registered proprietor of the land, after the land has become subject to the qualified title, for valuable consideration, may apply to have the caution removed after six years from the issue of the qualified title. Even if there has been no dealing for valuable consideration the caution lapses at the end of 12 years after issue of the qualified title. Whilst land is under qualified title, proof of title involves establishing a good common law title for the period prior to the issue of the qualified title. (v) Limited Title. When the boundaries of the land are not sufficiently defined to enable the Registrar-General to create either an ordinary or a qualified folio of the Torrens register a limited folio can be created. The Registrar-General records on a limited folio that the description of the land has not been investigated. The title to a former old system parcel of land for which a limited folio has been created is qualified The Registrar- General records on a limited folio that the description of the land has not been investigated. The title to a former old system parcel of land for which a limited folio has been created is qualified as regards the title and is limited as regards the boundaries of the parcel. The limitation can be removed by the registration of a plan of survey which adequately defines the boundaries of the land. (vi) Old System or Common Law Title. At the foundation of the Colony of N.S.W. all land was vested in the Crown under common law title. Old system conveyancing (also known as common law or general law conveyancing requires the title of the current owner to be established at the time of each transaction by tracing title back a certain period of years. It involves the devolution of title to land by successive transactions and events which form a chain of title. There is no guaranteed or perfect title and the maximum period required for proof of title is from a date which at the time of investigating title commences with a good root of title at least 30 years previously 15. A good root of title would normally be a sale or mortgage of land. A transfer of the fee simple in old system land is in the form of a deed of conveyance. The Conveyancing Act Schedule 2 sets out a short form of conveyance. There is a registration system enabling documents affecting title to old system land to be registered. The Registration of Deeds Act, 1897 was repealed in 1984 but a General Register of Deeds is maintained. Registration is important to ensure priority where there are conflicting dealings involving the land. However registration does not guarantee title or cure any defect in documentation. Under old system title, if a purported sale is a nullity, e.g. a third party forges the signature of the true owner the document is ineffective to pass title to a bona fide purchaser. Also under old system title where a person occupies land in circumstances constituting adverse possession for a continuous period of 12 years the adverse possessor will gain a good legal title in fee simple and the title of the owner of the documentary title is extinguished. The true owner can protect his title by recovering possession however he will be statute barred from doing so after 12 years.16 Investigating old system title is more costly and time consuming than Torrens title. Under Part IV of the Real Property Act persons claiming certain interests in land e.g. an owner in fee simple, a mortgagee or a purchaser under a contract of sale, can apply to bring the land under the provisions of the Real Property Act. The application, called a primary application is lodged with the Registrar-General. After the title has been established and the boundaries accurately defined by survey plan a folio of the register for the land issues. One inducement for making a primary application is that land cannot form part of a strata plan unless it is held under Torrens title. (vii) Crown Lands Act, 1989. The Crown Land Consolidation Act, 1913 was repealed on the 1st May, 1990. Prior to this Act there were several Crown Lands Acts. The Crown Lands Act deals only with land in the Eastern and Central Divisions of N.S.W., the Western Division (about 40% of the total area of N.S.W.), being almost entirely controlled under the Western Lands Act, 1901. By the Crown Lands (Continued Tenures) Act, 1989, which was passed in conjunction with the Crown Lands Act, the majority of the 54 types of Crown land tenures provided for under the previous complex legislation have been re-classified into 4 broad groups:- (i) Incomplete Purchases; (ii) Perpetual Leases; (iii) Term Leases; and (iv) Yearly Leases. While this re-classifications has simplified the categories of Crown tenures the rights of holders has been on the whole unaffected. In addition to the above four lesser forms of tenure, Special Leases, Permissive Occupancies, Quarry Licences and Commonwealth Leases have been continued in there present form but no new tenures will be created except on the subdivision of existing tenures. The tenures formerly created under the Closer Settlements Acts, Returned Soldiers Settlement Act and Prickly Pear Act .have been brought under the Crown Lands Act. It will be sometime before a perusal of the certificate of title will show the new tenure label. Nevertheless, in Particular F(a)(vi) of the current agreement for sale of land the tenure of the holding to be sold should be recited by reference to it new tenure name under the Crown Lands (Continued Tenures) Act followed by the words "held under the terms of the Crown Lands (Continued Tenures) Act, 1989 and should not be referred to by reference to the repealed legislation. The Crown Lands Act changed a number of aspects of conveyancing Crown land In relation to Incomplete Purchases the whole of the balance of purchase monies due and payable to the Crown is required to be paid in full to the Crown by any registered holder who takes a transfer of the tenure. Payment is required to be made within three months from the date of registration of the transfer. A "transfer" however does not include a devise under a will, acquisition under intestacy, survivorship of a joint tenant or discharge of a mortgage. In relation to Perpetual Leases Crown Lands Act stipulates that the old rents not subject to periodic redetermination (in future to be known as the "rent base") are to be adjusted annually in line with the Consumer Price Index movements; that no base rent is to be less than $ 100.00; and Perpetual Leases with rents subject to periodic redetermination will be redeterminable at a standardised five yearly interval. The rights to convert existing Perpetual Leasehold to freehold has been preserved. The Act provides however that the old "notified capital value" or price (in future to be known as the "purchase price base") at which the land may be purchased is also to be adjusted in line with the movement of the CPI from the date of the commencement of the legislation to the date of the application to convert or purchase the land. Where there is no purchase price base in the records of the lease the land may be purchased at the current market value. The Act in so far as it relates to the rent and purchase of Term Leases is much the same as for Perpetual Leases. There were only a small number of Yearly Leases in existence and the Lands Department propose to gradually eliminate these and replace them with leases, licences or permits under the Crown Lands Act. The Act has given a new name to what have been known for many years as Road Permits. These permits authorise the holder of land to enclose within it Crown land which was originally designated to provide a way of access to adjoining and adjacent lands. Many permits relate to roads that have never been formed or used for access. These permits may also authorise the enclosure of a watercourse where it is Crown land. The new name given to these permits is Enclosure Permits. Changes to the provisions relating to these permits include the responsibility of the transferee to notify the Department of Lands of any transfer of the permit; the holder of the permit is responsible for all outstanding rents due and payable under the permit; and cultivation of the land for specific periods may be authorised if the land is not required for public access during that period. The prior Crown Land Consolidation Act17 stipulated that a person must not hold other land within New South Wales which together with a Crown holding, would in the opinion of the Minister, substantially exceed a "home maintenance area". A home maintenance area is an area of land which when used for the purpose for which it is "reasonably fitted" would be sufficient for the maintenance in average seasons and circumstances of an average family. The home maintenance provisions have been carried over into the new Crown Lands (Continued Tenures) Act. For various reasons, including the inability of the home maintenance concept to take into account technological advances or trends in the rural industries it is likely that this concept will be reviewed or phased out.18 A feature of many of the tenures held as Crown land is that a transfer cannot be made without obtaining the Minister of Lands consent. Application for consent involves a written application and enables the the Crown to control the aggregation of rural land by large landowners. There is provision in some cases for the owner to have the transfer restriction removed on payment of a fee to the Crown. The general format for the removal of the restriction on transfer continues in the Act. Thus the requirement of obtaining the Ministers consent to the transfer may be removed from freehold land or purchase tenures provided that all conditions have been complied with and the whole of the purchase money has been paid to the Crown. The fee payable for the removal has been reduced from 5 per cent to 3 per cent of the "land value". The land is evidenced in a current notice of valuation issued by the Valuer General. The cost of the assessment of the land value by the Valuer General must be borne by the applicant but is deductible from the 3 per cent of the land value actually paid. The Act also dispenses with the requirement of Minister's consent to leasing of "restricted freehold" holdings. The Land Aggregation Tax Management Act was enacted in 1971 for the purpose of discouraging the obtaining unrestricted freehold land to build up excessive aggregations. The Act imposes extremely onerous rates19 of tax on aggregations of derestricted land. It is not assessable against the owner derestricting but only against subsequent owners. Following the derestriction of a Crown land title the Registrar-General places a notation on the certificate of title that the Act may be applied to the land. Although the Act itself is operative section 8 which relates to the imposition of the tax has not been proclaimed. As there has been no evidence of the excessive aggregation of derestricted land there appears to be no current proposal on the part of the Crown to proclaim the commencement of the taxing provisions. It has been commented:- "Given the savage nature of the tax, its doubtful receptive potential, the fact that it is now 20 years since the Act was passed and also the advent of the new Crown Land laws, it would appear quite likely that, in due course, the repeal of this Act will also certainly be looked at. If such repeal does take place practitioners can then look forward to discontinued notation of the s. 8 on the Certificates of Title issued in respect of derestricted freehold title land."20 The main tenure under the former Crown Land Consolidation Act was the conditional purchase which involved a sale of land by the Crown on certain conditions being complied with by the purchaser, the purchase price being payable by instalments over a lengthy period of years. On compliance with these conditions formerly a Crown grant issued under the Torrens system. Since 1980 the Registrar-General has commenced to issue folios for unalienated land. A purchaser from the Crown now has an estate in fee simple notwithstanding that the entire purchase price has not been paid. The folio will show the purchaser as the registered proprietor and record the outstanding obligations to the Crown. The reforms currently being implemented to bring all Crown land tenures under the Torrens system have almost been achieved. While title to land remains under Crown land title dealings are registered at the Crown Titles Branch of the Registrar-General's Office. Title under this system is not guaranteed nor does it confer an indefeasible title. Land under the Western Lands Act is held mainly under lease tenure often for a perpetual term. (viii) Other. In N.S.W. the mining of most minerals is controlled under the Mining Act, 1973. The legislation enables the acquisition of various mining rights or leases over Crown land and rights to prospect or mine over private land. In most of the Crown grants the minerals have been excluded and therefore they are the property of the Crown. The owner of land may prospect or mine for minerals owned by him relying on his rights under the general law however he may secure statutory rights to mine by obtaining a mining lease or exploration licence over his own land. If he does not do this anyone may apply to the Crown for a mining lease or exploration licence. Some protection is afforded to private owners. There are restrictions on the grant of mining leases e.g. over land bona fide in use as a garden or orchard or agricultural land or within 200 metres of a dwelling house. Royalties and rent are payable by the person acquiring mining rights, seven eights of the royalty and the whole of the rent is payable to the owner of the land. Compensation is also payable to the owner and occupier of private lands for loss suffered for disturbance. A mining lease may be granted for a maximum area of 1600 m x 1600 m for a period not exceeding 21 years with an entitlement to renew the lease. A mining purpose lease, exploration licence or prospecting licence may also be acquired. Coal mining is dealt with in the Coal Mining Act, 1973. Whilst it is most unlikely that a small urban block of land with a residence erected on it is subject to any mining tenement, rural land may will be subject to a mining tenement. These are not recorded on the title and there existence must be established by a search at the Department of Mineral Resources. There are several special statutes permitting certain statutory or local government corporations to sell or grant interests in land e.g. under the Forestry Act and Oyster Farms Act. Provision is not made in the standard contract for native title as established Mabo v. State of Queensland21. The reason for this is that by definition native title cannot be alienated, that is, transferred. (h) "Furnishings & Chattels" The sale may include some chattels situated in the improvements on the property which are not affixed to those improvements. If these items are intended to be included in the sale they must be expressly included otherwise they would remain the vendor's property and may be. Where the furnishings and chattels are too numerous to be included in the space provided a separate schedule should be annexed to the contract. The contract makes it clear that the furnishings and chattels listed are part of the "property" being sold and are included in the references to property throughout the contract. The words "all inspected by the purchaser" are probably superfluous because under the general law the vendor is a trustee of the property for the purchaser pending completion. The vendor is required to take reasonable care to preserve the property as it was at the date of the contract including carrying out ordinary repairs to prevent deterioration of the property. The 1992 edition of the contract does not contain a clause such as condition 4(d) in the 1988 edition providing that the vendor was not liable for any "fair wear and tear". Clause 10.2 does however provide that "the purchaser cannot rescind or terminate only because of a defect in the title to or quality of the furnishings and chattels." This is a limited provision and the parties should agree on the state of repair and condition of the furnishings and chattels. An exemption is no longer available from ad valorem stamp duty in respect of furnishings and chattels can be obtained if they comprise "goods, wares and merchandise" and are fully set out with the price apportioned between the items. Section 3(a) of the Real Property Act defines "land" to include all paths, passages, ways, watercourses, easements, gardens, mines, minerals, trees and timber thereon or thereunder unless any of these is specially excepted from the particular dealing. Section 67 of the Conveyancing Act (which does not apply to Torrens title land) provides that a conveyance includes all buildings, erections, fixtures, commons, hedges, ditches, fences, waters, watercourses, easements, rights and advantages appertaining to the land. At common law crops and trees pass on sale unless excluded from the sale. There is no need for the contract for sale to itemise fixtures which are to pass with the property as they are part of the realty and pass automatically with it. Nevertheless it is sometimes difficult to distinguish between a fixture and a chattel. In considering whether an item is a chattel or a fixture the court looks at the degree of annexation and the object of the annexation. That is, the prime consideration is the intention of the party bringing the item onto the land. Where a chattel has been so securely fixed that it cannot be detached without substantial injury to the chattel or the the erection to which it is affixed, that provides strong evidence that permanent fixing was intended. The intention with which a chattel has been affixed should be ascertained objectively and all the circumstances should be considered. See Butt Contract for Sale of Land 22 for some examples of chattels and fixtures. In domestic sales. Lang23 lists the following commonly occurring inclusions which should be listed as inclusions in the contract in order to avoid subsequent disputes:- * floor coverings (including wall to wall carpets) * carpets * rugs * linoleum * wall hangings * door mats * curtains * blinds * light fittings * television antenna * kitchen stove * dish washer * refrigerator * washing machine * clothes dryer * air conditioning * swimming pool equipment * movable partitions * furniture (whether or not attached to walls or floors) The vendor is not entitled to remove fixtures which have not been excepted from the sale. If he does so there is a breach of the vendor's duty as trustee for the purchaser and the purchaser may claim damages for their removal or if damages are not an adequate remedy, and they are still in the vendor's possession, their return in specie. (i) "Purchaser". Here it is appropriate to insert the purchaser's full name, address and occupation and care should be taken to ensure that the correct name is inserted in both the original and counterpart contract. See Georgiou v. Sindel24 and Giliberto v. Kenny25 for examples of the difficulties that arise if this is not done. Extrinsic evidence is admissible to show that whatever name was used in the contract Where there is more than one purchaser the contract should specify whether they take as joint tenants or tenants in common. Where it is as tenants in common the shares to be taken should also be specified. If the purchasers fail to specify in the contract whether they take as joint tenants or tenants in common s. 26 Conveyancing Act deems that they take as tenants in common. It is preferrable to specify shares e.g. "Andrew Bloggs as to a three-quarter share and Bruce Bloggs as to the balance." This minimises the risk of the reference to one share being altered without alteratio to the other. The main distinction between the two ways in which property may be jointly owned is that with joint tenancy "survivorship" operates so that the property automatically becomes the survivors on the death of the joint tenant. Thus most married couples would hold their joint property as joint tenants whereas the partners in a business would normally hold as tenants in common. As between two or more persons who hold the legal title as joint tenants have contributed to the purchase price in unequal shares, they are presumed in equity to hold the beneficial ownership as tenants in common in shares proportionate to their contributions26. If a purchase is on trust for another the trust is generally not mentioned in the contract. The existence of the trust is required for registration purposes and does not affect the vendor. On the other hand, if the vendor is a trustee the purchaser should insist on a receipt from the trustee on settlement. Occasionally in the past a purchaser might be described as "trustee for Bloggs Pty. Limited a company to be formed" and a novation clause was inserted to provide that when the company adopted the contract the purchaser was released. This often led to the imposition of double stamp duty and it has proven simpler to purchase in the name of a shelf company. The 1992 edition of the standard form contract assumes that joint owners will hold the property as joint tenants unless otherwise specified. Clause 20.4 also provides that "if a party consists of 2 or more persons, this contract benefits and binds them jointly and separately." (j) "Purchaser's Solicitor" The comments made in relation to "Vendor's solicitor" apply equally to this term. Should a buyer not have been found these details will be left blank initially. (k) Price Strictly there is no necessity for words to be used as figures would suffice. Where there is a discrepancy between the words and figures, prima facie the words prevail. However where the figures are internally consistent but conflict with the words the figures may well prevail. It might also be inferred from clause 15 of the contract that the figures to be accorded at least as much importance as the words, if not more, because the balance is in figures only. Where the contract was entered into by the vendor under the mistaken belief that the sale price was different to that stipulated in the contract and the purchaser was aware of the vendors misunderstanding it has been held that the vendor is entitled to rescind the contract27 . If a buyer has not been found the price will be left blank to be filled in at a later stage. The use of the words "10% of the price unless otherwise stated" is a back up provision in the event that the amount of the deposit is not filled in. This will always be the case with an auction where the provisions regarding deposit must be able to take affect from the fall of the hammer before the blank is filled in. It appears an oversight in the legislation that the deposit is not one of the things the agent is authorised to fill in28. A deposit of more than 10% could be void as a penalty and 10% is the maximum that can be kept or recovered under clause 9.1 on the purchaser's default. (l) Date of Contract Where the usual course of conveyancing practice is followed and contracts are "exchanged" the date to be inserted will be the date upon which exchange takes place. If the practice of exchange is not adopted then the date to be inserted will be the date upon which a binding contract is entered into. The date of the making of the contract does not alter because one party or both by inadvertence or otherwise insert another date in the contract. If necessary the contract can be rectified so as to correctly reflect the date upon which it was made. This date ties in with the words in clause 2.1 by which the deposit is payable on the making of the contract. The date which is inserted is usually accepted by the Office of State Revenue as the date of "first execution" for stamp duty purposes.
1 s. 84AB(1),(2) Property Stock & Business Agents Act, 1941. 2 s. 181(1)(b) Conveyancing Act, 1919. 3 In Scaife v. Adams [1981] 1 All E. R. 843 at 851 it was held that if the terms of the relevant document clearly define the land, extrinsic evidence is not admissible to contradict those terms but if the terms of the relevant document do not clearly define the land, extrinsic evidence is admissible properly to identify the land. 4 Section 195I Conveyancing Act, 1919. 5 (1911) 11 S.R. (N.S.W.) 399. 6 Clark v. Raymor (Brisbane) Pty. Ltd. (No. 2) [1982] Qd R. 790. 7 Ex parte Lord [1985] 2 Qd R. 198. 8 Stern v. McArthur (1988) 62 A.L.J.R. 588 at 602. 9 Real Property (Caveats) Amendment Act, 1986. 10 Section 74F(5)(b)(v). 11 Section 74O. 12 Section 74H. 13 Sections 74I - 74K. 14 Sections. 42, 43 & 124 Real Property Act. 15 Section 53(1) Conveyancing Act. 16 Section 27(1) Limitations Act. 17 Sections 272 & 274. 18 The New Crown Land Laws by Ian Benecke published in the N.S.W. Law Society Journal of December, 1989 at p. 54. 19 20 % on assessable value of derestricted land which exceeds the prescribed amount $ 100,00.00 which is unreasonable in view of changes to values since 1971. 20 The New Crown Land Laws by Ian Benecke published in the N.S.W. Law Society Journal of December, 1989 at p. 55. 21 (No. 2) (1992) 107 ALJ 1; (1992) 66 ALJR 408. 22 p. 49. 23 Estate Agency Law & Practice 2nd Ed. [1016] 24 [1982] 1 N.S.W.L.R. 435. See discussion under the heading "Exchange of Contracts". The purchaser's name, the purchase price and the amount of the deposit was left blank in the copy contract signed by the vendor and the vendor argued that there was no concluded contract despite the exchange of contracts because the parts of the contract were not identical. It was held that there was a binding conrtact because on the evidence the parties were in agreement. 25 (1983) 57 A.L.J.R. 283. Where it was held that the purchasers were Mr & Mrs Kenny even though Mrs Kenny's name was shown on one part of the form and Mr Kenny's name was on the other part. Evidence of negotiations on the part of both Mr & Mrs Kenny was held to be admissible. 26 Calverly v. Green (1984) 59 A.L.J.R. 111. 27 Taylor v. Johnson (1983) 57 A.L.J.R. 197. 28 s. 84AB Property Stock & Business Agents Act, 1941
