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Real Property: Exceptions to indefeasibility Assoc Prof Cameron Stewart (c) Cameron Stewart 2009.

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Presentation on theme: "Real Property: Exceptions to indefeasibility Assoc Prof Cameron Stewart (c) Cameron Stewart 2009."— Presentation transcript:

1 Real Property: Exceptions to indefeasibility Assoc Prof Cameron Stewart (c) Cameron Stewart 2009

2 Last week Introd to Torrens Indefeasibility Fraud against an interest holder; against the Registrar General – Australian Guarantee Corp v De Jager [1984] VR 483 – needs dishonesty (c) Cameron Stewart 2009

3 Bill introduced on motion by Mr Barry Collier I will now move on to the most significant amendment that this bill proposes to make to the Real Property Act, and that is the section that deals with mortgages. As members of the House may be aware, identity fraud is one of the fastest-growing crimes in Australia and costs the Australian community billions of dollars every year. Protecting the community from identity fraud is an important task that we take seriously. The department has Been involved in an increasing number of claims for compensation relating to mortgage fraud involving what appears to be a lack of due diligence by some lenders in verifying the identity of borrowers. While the Torrens Assurance Fund may be available to compensate innocent landowners who are the victims of a fraudulent mortgage, it is preferable if the fraudulent mortgage can be avoided in the first place. The mortgagee, who is dealing directly with the fraudster, has the best opportunity to prevent a fraud. The amendments this bill proposes are intended to encourage due diligence in mortgagees' loan approval practices. The majority of cases of fraudulent mortgages in which the Registrar-General has been involved are with those mortgages that are commonly known as low-doc loans. These loans are usually offered by lenders of last resort who lend at excessively high interest rates. Usually these types of loans are not covered by the consumer credit code and in many cases the lender has not performed due diligence. Disturbingly, it appears that the value of The property to be used as security for the loan is usually the only qualifying requirement for a low-doc loan to be granted. The nature of these loans I have described presents a perfect opportunity for fraudsters to perpetrate their crime; the department has many examples of claims of compensation based on these types of loans. (c) Cameron Stewart 2009

4 Bill introduced on motion by Mr Barry Collier For example, a few years ago the department was involved in a claim for compensation made by elderly Property owners whose title was encumbered by registration of a mortgage they did not sign and knew nothing about. The son of the property owners, together with an accomplice, obtained a loan of $750,000 at upwards of 12.5 per cent interest per month, pretended to be the owners of the property and purported to give a mortgage over it as security for this loan. The lender appears to have done little or nothing to confirm that the borrowers were the persons recorded in the freehold land register as the owners of the then unencumbered property and to verify that the borrowers were able to service the loan. It appeared that the value of the property alone—more than $1 million—was enough to satisfy the grant of the loan. Soon the borrowers defaulted on the loan and it was only when the mortgagee came to exercise its power of sale that the true owners found out that a mortgage was registered on their title. The fraudsters were apprehended and sent to jail, but in the end the Torrens Assurance Fund had to compensate not only the owners but also other parties that were affected by the fraud. This included paying the lender's legal costs. This claim resulted in payment of in excess $2 million from the Torrens Assurance Fund. As this example indicates, there is clearly potential for our State to be liable for payment of large amounts of compensation for fraud. Questionable lending practices or wilful disregard of matters that might raise doubts in a prudent person's Mind unfortunately do not currently disentitle a lender from recovering its loss under the Real Property Act (c) Cameron Stewart 2009

5 Bill introduced on motion by Mr Barry Collier This bill proposes to amend the Real Property Act 1900 to require mortgagees, that is the lenders, to take reasonable steps to confirm the identity of the mortgagor, that is the borrowers, before presenting a mortgage For lodgement and registration. If the mortgagee fails to comply with the requirement to confirm the identity of the mortgagor and the execution of the mortgage involved fraud against the registered proprietor of the Mortgaged land, the Registrar-General may cancel any recording in the register with respect to the mortgage. The reasonable standard required to be taken by mortgagees for identification under the proposed amendments will be established by the guideline to be known as the Registrar-General's Directions. In most cases the reasonable standard will, at minimum, be the equivalent to the 100-point check that is common to financial institutions. The Registrar-General's Directions is intended to be available on the department's website. It will also be necessary for the mortgagee to keep a written record of the steps taken to comply with this requirement and a copy of any associated documents. The Registrar-General may require the mortgagee to answer questions and produce documents in determining whether the mortgagee has complied with their obligation to verify the identity of the borrower. If a mortgagee refuses to comply with a request of this nature the Registrar-General will have the power to either put a notation on the title to alert anyone dealing with the property that the mortgagee has not complied with the requirement to verify the identity of the borrower or, if the mortgage has not yet been registered, refuse to accept the mortgage for lodgement. (c) Cameron Stewart 2009

6 Real Property and Conveyancing Legislation Amendment Act 2009 NB Not yet in the legislation!! 56C Confirmation of identity of mortgagor (1) Mortgagee must confirm identity of mortgagor Before presenting a mortgage for lodgment under this Act, the mortgagee must take reasonable steps to ensure that the person who executed the mortgage, or on whose behalf the mortgage was executed, as mortgagor is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates. (2) Without limiting the generality of subsection (1), the mortgagee is to be considered as having taken reasonable steps to ensure the identity of the mortgagor under subsection (1) if the mortgagee has taken the steps prescribed by the regulations. (c) Cameron Stewart 2009

7 Real Property and Conveyancing Legislation Amendment Act 2009 (3) Record-keeping requirements A mortgagee must keep the following for a period of 7 years from the date of registration of the mortgage under this Act (or for such other period as may be prescribed by the regulations): (a)a written record of the steps taken by the mortgagee to comply with subsection (1), (b) a copy of any document obtained by the mortgagee to comply with subsection (1). (c) Cameron Stewart 2009

8 Real Property and Conveyancing Legislation Amendment Act 2009 (4) Mortgagee to answer questions and produce documents The Registrar-General, in determining whether or not this section has been complied with, may at any time require the mortgagee: (a)to answer questions in relation to the steps taken by the mortgagee to comply with subsection (1) and (b)to produce for inspection any records kept under subsection (3). (5) If a person fails to comply with a requirement made under subsection (4), the Registrar-General may: (a)in relation to a registered mortgage—make a recording in the Register, with respect to the relevant land, to that effect, and (b) in relation to a mortgage that has not been registered— refuse to register, or reject, the mortgage in accordance with section 39 (1A) or refuse to make any recording or entry in the Register or take any other action in respect of the mortgage. (c) Cameron Stewart 2009

9 Real Property and Conveyancing Legislation Amendment Act 2009 (6) Cancellation of recordings in the Register The Registrar-General may cancel, in such manner as the Registrar General considers appropriate, any recording in the Register with respect to a mortgage if the Registrar-General is of the opinion: (a) that the execution of the mortgage involved fraud against the registered proprietor of the mortgaged land, and (b) that the mortgagee: (i) has failed to comply with subsection (1), or (ii) had actual or constructive notice that the mortgagor was not the same person as the person who was, or was about to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates. (c) Cameron Stewart 2009

10 Real Property and Conveyancing Legislation Amendment Act 2009 (7) Before cancelling a recording of a mortgage in the Register under subsection (6), the Registrar-General must give notice of the proposed cancellation to the mortgagee and may also give notice to any other person that the Registrar-General considers should be notified of the cancellation. Section 12A (2) and (3) apply to and with respect to a notice given under this section. (c) Cameron Stewart 2009

11 Real Property and Conveyancing Legislation Amendment Act 2009 (8) Application to transferee of a mortgage This section applies to the transferee of a mortgage in the same way that it applies to a mortgagee (that is, requiring the transferee of a mortgage to take reasonable steps to ensure that the person who executed the mortgage as mortgagor is the same person who is, or is about to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates). Accordingly, a reference in this section to: (a) the presentation of a mortgage includes a reference to the presentation of a transfer of mortgage, and (b) the mortgagee includes a reference to the transferee of the mortgage, and (c) the date of the registration of the mortgage includes a reference to the date of registration of the transfer of mortgage. (c) Cameron Stewart 2009

12 Real Property and Conveyancing Legislation Amendment Act 2009 NB not yet in force - Sec 117 – certification of correctness by witnesses (4) In this section, eligible witness, in relation to the execution of an application, dealing or caveat, means a person who: (a) is at least 18 years of age, and (b) is not a party to the application, dealing or caveat, and (c) has known the person to whose execution of the application, dealing or caveat the witness is attesting for more than 12 months or has taken reasonable steps to ensure the identity of that person. (5) Without limiting the generality of subsection (4) (c), a witness is to be considered as having taken reasonable steps to ensure the identity of the person to whose execution of the application, dealing or caveat the witness is attesting if the person has taken the steps prescribed by the regulations. (c) Cameron Stewart 2009

13 Real Property and Conveyancing Legislation Amendment Act A Registrar-General may take steps to rectify Register in case of fraud (1) The Registrar-General may, in relation to the settlement of a claim in accordance with section 135, take any of the steps set out in subsection (2) that are required to rectify the Register (including by registering a person as proprietor of land) if the Registrar-General is satisfied that: (a) the person has been deprived of land, or an estate or interest in land, as a result of fraud, and (b) the current registered proprietor acquired the estate or interest in land through fraud. (2) The Registrar-General may do one or more of the following: (a) cancel or amend a folio of the Register, (b) cancel, amend or make a recording in a folio of the Register, (c) create a new folio of the Register, (d) create a new edition of a computer folio, (e) issue a new certificate of title. (3) The Registrar-General may, if he or she considers it appropriate to do so, require the current registered proprietor to deliver up the certificate of title for the purpose of it being cancelled, by notice in writing to the current registered proprietor. (4) If the current registered proprietor fails to respond to such a notice within a reasonable time or cannot be found for the giving of such a notice, the Registrar-General may, if the Registrar- General considers it appropriate, dispense with the production of the certificate of title or take action under the authority conferred upon the Registrar-General by section 111 (3). (c) Cameron Stewart 2009

14 Exceptions to indefeasibility - Prior folio If the RG makes a mistake and issues two folios for the one piece of land the earlier folio is said to take priority – s 42(1)(a); or If two folios are issued one for a larger block, the other for a block within the larger, the earliest one issued has priority; or Two blocks which have an overlapping strip probably better dealt with under s 42(1)(c)

15 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Prior interests entered into the folio Sometimes an instrument will be registered but the folio may not properly or fully describe all the interests registered - the interest described in the folio is said to be subject to the actual import of the instrument (s 42(1)) – Hence in a case where the folio had not fully described the transfer of an interest subsequent interest holders took their interests subject to the original import of the document and not the register.[Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73]

16 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Prior interests entered into the folio Mercantile Credits Ltd v Shell Co of Australia [1976] 136 CLR 326. In this case a folio contained reference to a lease. The lease itself turned out to be a lease for five years with two options to renew, making it apply for a possible total of 15 years. The holder of the title defaulted on a mortgage and the mortgagee sought to exercise their power of sale. They went to court arguing that while they were subject to the lease as noted on the folio, they were not subject to the options to renew. The lease document contained in the register contained the options, so the question was: did the option to renew in that registered lease bind subsequent interest holders even though the folio made no reference to that option? The case went to the High Court which said yes. The option to renew is enforceable against successors and so in this case is enforceable against the mortgagee. What we learn from this is that a purchaser needs to look at the documents in the register to see exactly what it is that they are being bound by.

17 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements An easement is right attached to land which is held by someone other than the owner of the land to use the land in a particular way eg right of way Section 42(1)(a1) – registered proprietors take subject to omitted easements “Omitted” when simply not there on the register not fault on part of RG Works either when old system land brought under Torrens and easement left out OR when a registered easement has been left off a reprint of a new folio

18 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Easements ‘validly created’ – probably excludes what of easements where parties have complied with creation formalities but been frustrated by lack of registration Implied easements? If an implied easements existed under the old system and was left off the register on conversion then it will be ‘validly created’ What if land was always Torrens? Implied easements should work against the RP as an in personam exception but will fail when a new RP registers

19 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Australian Hi Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618. In this case land was owned by the Savage family. During their ownership a block of shops was erected and subsequently an office block. At that time there were two buildings on the land. The land was subdivided such that lot 1 comprised the shops and some of the land and lot 2 comprised the office block and the land adjoining it. The Savage family sold lot 1 to Gehl and several years later sold lot 2 to Australian Hi-Fi Publications Pty. Ltd. There was no reference in any of the contracts or transfers or the certificates of title to any easements providing for rights of way. Evidence was adduced that prior to the first sale the tenants of the shops constructed on what became lot 1 used part of the land that became lot 2 to access a public road. The Court considered that if the land had been under old system title then the rule in Wheeldon v Burrows would have allowed the subsequent owners of lot 1 to claim a right of way over those parts of lot 2 used as the right of way. In his judgment in the Court of Appeal, Mahoney J.A. considered the application of the rule in Wheeldon v Burrows to land held under the Real Property Act and said: The argument that such an exception should be created has been put, in substance, upon the following basis: that interests such as Wheeldon v. Burrows easements are interests well recognized by the law; that, as they are incapable of being registered or noted on the register, they will, unless protected by s. 42 (b), be incapable of existing; and that it could not have been the intention of the Act to destroy such interest. But, in my opinion, such an argument involves at least two difficulties.

20 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Rights, such as those which arose upon the sale of the land by the Savage family to the defendant and his wife, would normally be within the class of rights existing personally against the Savage family as proprietors and so enforceable against them notwithstanding s. 42. Those rights would not be enforceable against a subsequent registered proprietor taking without fraud; the existence of such rights is proscribed by s. 42 to that extent. There is, in my opinion, nothing special in this, such as would warrant the creation of an exception to the ordinary effect of s 42 or the extension of the term “omission” to make such rights enforceable against the subsequent registered proprietor. I see no reason why, for example, a Wheeldon v. Burrows interest should be in a better position than he interest which would have arisen had the Savage family, by deed, purported to grant to the defendant exactly a right in similar terms. The right created by that deed would not be enforceable against a subsequent registered proprietor.

21 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements McGrath & v Campbell [2006] NSWCA 180 – (from the headnote) Two adjoining lots were owned by a single registered proprietor. The northern lot (Lot 6) faced a main road, while the southern lot (Lot 12) was bounded by a street known as Brighton Avenue. A registered easement had been created over both lots in favour of a third adjoining property, which permitted access to the third lot from Brighton Avenue. The easement had also been used for some years as an access point for Lot 12, although this use had never been noted on the register. In 1980, Lot 6 was sold to the respondents and Lot 12 was sold to the appellants and the transfers of title were recorded in the register as having occurred on the same day. The respondents continued to use the easement over Lot 12 to access Lot 6 until a dispute arose in The respondents argued that the circumstances of the sale gave rise to an implied easement over Lot 12 for the benefit of Lot 6, and that the simultaneous transfers of the two lots gave rise to an equity or right in personam enforceable against the appellants. The appellants argued that the indefeasibility provisions of the Real Property Act 1900, and the circumstances of the transfers in this case, prevent the recognition of any such equity.Real Property Act 1900

22 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Aldridge v Wright [1929] 2 KB 117[1929] 2 KB Where an owner executes contemporaneous conveyances of adjoining plots with the houses erected on them, and there exists a made road across the land of one plot to an entrance to the house on the other plot, and it is proved that the road was constructed for the use of both houses, there will be implied a grant in the one conveyance of a right to use the road and a corresponding reservation in the other conveyance. Implied easements can arise but they are equitable : 79 One might accept, for present purposes, that had Lots 6 and 12 been under old system title, the authority of Aldridge v Wright may have carried the day in favour of the Campbells. According to Professor Butt in Land Law (2006, 5th ed) at 446, such an easement would be a legal and not merely an equitable interest. Professor Butt refers to the statement of Priestley JA in Dobbie v Davidson (1991) 23 NSWLR 625 at 646 to the effect that easements such as those arising under the doctrine of Wheeldon v Burrows are equitable, and suggests that this approach may be explained upon the basis that the easement in that case arose over Torrens title land and was, at the time of the litigation, unregistered. As an unregistered interest it could only be an “equitable” and not a “legal” interest. The finding by the primary judge in [71] that the Wheeldon v Burrows implied easement in the present case brought about “in equity, the result that lot 6 had the benefit of, and lot 12 was burdened by” may be explained in a similar way.

23 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements While the original title holders may be bound in equity, the personal equity will not be created in the case of simultaneous transfers of title in circumstances where the new owners of the putative servient tenement have not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable

24 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Easements by prescription (long use) – 20 yrs - doctrine of the lost modern grant - Dobbie v Davidson (1991) 23 NSWLR 625, The Court was asked to consider whether a track used for access to a property across another property for a period of 60 years prior to the land being brought under the Real Property Act constituted a right of way and further considered whether the “omission” from the certificate of title after the land was brought under the Real Property Act constituted an exception to indefeasibility within what was then s 42(b).

25 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements In his judgment in the Court of Appeal Kirby P made the following observations:- The purpose of the rule by which a prescriptive right is upheld by the law is ultimately to guard the peaceful enjoyment of the use of land where that use has endured for more than twenty years, as of right.” The evidence showed that the use of the road constituting the right of way to “Ellerslie” was extensive. In connection with access to that property it had been used by bullock drays and bullock wagons; horse drawn vehicles carrying products; carts, trucks, cars and tractors; visitors, tradespeople, shearing teams, droving stock, electricity and bush fire brigade vehicles; shooters; for carting and bailing hay and by children. None of the aforementioned people using the road over this time ever sought permission from the owners of “Lumley Park”. They just used it without dispute until the present litigation began. Relevant to assigning conduct to one category rather than the other will be: (i) the time during which the conduct has been peacefully followed; (ii) the persistence of the conduct, despite supervening sale and the acquisition of new owners by the dominant and servient tenements; (iii) the unlimited variety of the persons who have utilised the alleged right-of-way; (vi) the absence of physical impediments or obstructions to that use; and (v) the knowledge of the use by the owners of the servient tenement yet their failure to attempt to forbid, limit or control the use of the right- of-way by the owners of the dominant tenement and those having dealings with them. Both Kirby P and Priestly JA found that the missing easement had been omitted in the conversion

26 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Williams v State Transit Authority of NSW [2004] NSWCA 179 the Court of Appeal considered an appeal from a judgement of Young CJ in Eq. In the case before Young J, the court was asked to consider whether the doctrine of lost modern grant applied to claim for rights of way over land under the provisions of the Real Property Act. In his judgment Mason P deals with the doctrine commencing at paragraph 78. He says: At common law an easement may be created by twenty years uninterrupted enjoyment of the right claimed. This doctrine of “lost modern grant” requires the court to presume, even if contrary to the truth, the existence of an express grant which has been lost. The presumed grantor must have the legal capacity to have executed the grant.” In particular, s46 of the Real Property Act relevantly provides that “where any easement…..affecting land under the Act is intended to be created, the proprietor shall execute a transfer in the approved form”. Until the present case, there was an unbroken stream of authority in New South Wales to the effect that easements by prescription could not arise over land subject to the Real Property Act where the acts of user occurred during the time the land was under the Act.

27 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Mason P: In my opinion, it is to pile fiction upon fiction to extend the doctrine of lost modern grant into the Torrens system, because (assuming no relevant exception to s42 or its equivalents) that system contemplates title at law as arising only upon registration. To transpose the fiction of lost modern grant into a Torrens context one has to presume considerably more that the loss of an executed (and delivered) deed. At the very least, one would have to presume the execution and delivery of a registrable instrument. But the logic suggests that one has to go further and presume delivery accompanied by certificate of title, since that is the normal way in which the person entitled to have an interest registered goes about perfecting such title so far as lies in the grantor’s power. Indeed, title is only perfected through the act of a third party (the Registrar General), and there is no basis for inferring that officer’s acquiescence in the user giving rise to the common law doctrine.

28 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed easements Dabbs v Seaman (1935) 36 CLR 538 – where conveyance describes land as adjoining a road there is an implied grant of an easement to the road, even in Torrens title without an express easement Limited to where the road is also Torrens land: Cowlisaw v Ponsford (1928) SR(NSW) 331 at 336

29 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Omitted or misdescribed profits a prendre A profit is a right attached to land which is held by someone other than the owner of the land to enjoy part of the sold or the nature produce of the soil eg timber, wild animals Section 42(1)(b) - “Omitted” if the transferred from old system and left off OR If always Torrens system then if all that had to be done for registration had been done but the RG failed to put it on the register Prescription? Williams

30 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Misdescription of a portion of land Section 42(1)(c) – not indefeasible if misdescribed boundaries unless where the proprietor is a purchaser or mortgagee for value Register is not conclusive as to its boundaries: Michael v Onisforoui (1977) 1 BPR 9356

31 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies By s. 42(1)(d) of the Real Property Act, a registered interest is subject to a short-term lease if: (i)the lease plus any option does not exceed 3 years; and (ii)the tenant is in possession of the property or entitled to its immediate possession; and (iii)the holder of the registered interest had notice of the tenancy before he became registered.

32 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies Tenancy for less than three years do not have to be registered – hence under s 42(1)(d) a registered proprietor who takes with notice will take subject to a lease Term probably includes the option Periodic tenancy for less than 3 years do not have to be registered (but can be) Notice in this section includes constructive notice under Hunt v Luck Notice is timed at the date of the settlement (dealing registrable under s 43A) Under Torrens system requires the registration of the correct instrument. Must be registered if term exceeds three years: s 53 RPA

33 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies If the lease is less than three years and not registered what sort of interest does the lessee hold? Legal but subject to the registered interests. If there is competition between the unregistered but legal lease and an unregistered equitable interest eg an equitable mortgage the normal priority rules apply

34 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 A contract for the sale of Torrens Title land disclosed the existence of, and annexed a copy of, an unregistered lease agreement for part of the land for a term of five years with options for renewal in favour of the lessee. Under the contract the purchaser agreed to abide by the terms and conditions of the annexed lease.

35 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 The lease which had remained unregistered while six subsequently executed dealings were registered remained unregistered. The purchaser, on registration of its transfer, sought to evict the lessee as a tenant at will. Held: Construing the contract in the light of its express terms and in the light of the fact that prior to its execution the lessee's interest was, because of lack of registration, one at will only:

36 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies (a) the purchaser, having acknowledged or agreed to recognise that the lessee had a lease for five years with two options for renewal, took title subject to an express trust on those terms; (b) alternatively, repudiation of the agreement to abide by the terms and conditions of the annexed lease constituted fraud within the exception to indefeasibility in s 42 and s 43 of the Real Property Act 1900, so that registration of the transfer free of any reference to the lease did not destroy the lessee's rights

37 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53 a tenant was in occupation of a property under a two year unregistered lease which contained an option to renew for a further two years. At the end of the first two years the tenant exercised the option and started the second two year term. After this, the RP sold to a new RP and the new RP tried to evict the tenants.

38 (c) Cameron Stewart 2009 Exceptions to indefeasibility - Short term tenancies The court found that the tenant was in occupation of the property under a two year lease – the first lease was finished and a new 2 year lease had come into occupation and so they could not be evicted as their lease was an exception to the indefeasible title of the new RP. Ironically, had the property sold six months earlier while the first lease was on foot then the lease would not have been an exception to indefeasibility because it added up to 4 years!


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