Property News September 2007

LEASING

Retail leases

Alert for Lessor’s!

Did you know that under the Retail Leases Act 1994 (NSW) s.44 Lessors [landlords] must give a lessee [tenant] between 6 and 12 months notice* of its intention to EITHER:

renew or extend a lease; or
NOT to renew or extend the lease

Of course this does not apply where there is an option to renew the lease.

If the lessor does not give this notification in the time required and the lessee provides a written notice to the lessor requesting such an extension before the lease expires, then the lessor must extend the lease by 6 months

So lessors, be sure to give the notice within the time frame required so you are in control of what happens to the lease.

*If the lease is for less than 12 months then the time required for the notice is between 3 and 6 months before the expiry of the lease

CONVEYANCING

There has been a hive of controversy surrounding “normal” conveyancing practices in 2007. Here are some of the highlights

Iannello v Sharpe [2007] NSWCA 61 ( 23 March 2007)

The purchaser and vendor exchanged contracts for the purchase of a property in Hunters Hill for $4,500,000. $225,000 was paid as deposit on exchange. The front page of the contract was amended, prior to exchange to show the deposit as $450,000 and 10%. A Special Condition 14 was included, which stated that the deposit was payable in two installments: $225,000 on exchange and $225,000 at completion or in the event that the purchaser defaulted. The vendor sought the balance of the deposit $225,000 after the purchaser defaulted.

The NSW Court of Appeal stated that the purpose of a deposit was for the purchaser to display that they were earnest in their intentions in purchasing the property (if they were not earnest they would forfeit the deposit). If the purchaser did not proceed then the vendor could retain the deposit as a pre-estimate of the damage suffered by the vendor. The payment of the remaining $225,000, in the present case, was only to occur on completion or in the event of a default by the purchaser. Therefore, the Court said, it could not be an indication of the purchaser’s earnest intention to proceed, because either they have already completed or they have clearly shown an intention not to proceed, when the remaining $225,000 became payable.

Furthermore, the Court characterized the second payment of $225,000 as a penalty, not a pre-estimate of damage. Thus the provision relating to the second payment of the $225,000 was not enforceable. The Court went on to say that it is usually irrelevant what name is given to a payment, and that giving it the name of a deposit does not necessarily make it a deposit.

The outcome of this case is that a vendor who accepts a deposit less than 10% on exchange from a purchaser will be unlikely to be able to claim 10% of the purchase price from the purchaser if the purchaser defaults. It is possible that provisions that make the deposit payable in installments may be acceptable, so long as payment does not become payable on default or termination. If it does, it will have the appearance of a penalty and will not, in most circumstances, be recoverable.

Black v Garnock [2007] HCA 31 ( 1 August 2007)

The vendor in a contract for sale of land entered into a contract with the purchasers. The vendor was also a judgment debtor in a District Court matter. The judgment creditors in that matter obtained a writ for the levy of property in the District Court. On the day of settlement, the purchasers’ solicitor performed a search on title and found nothing untoward. After that but prior to the time for settlement, the purchasers’ and the judgment creditors’ solicitor spoke. The judgment creditors’ solicitor informed the purchasers’ solicitor that they intended to stop the sale, but did not say how. The judgment creditors registered the writ with the Department of Lands before settlement took place. At settlement, the purchasers’ solicitor did not perform a final search on the title and as such, because the purchasers were not aware of the writ, settlement proceeded. When the time came, the transfer could not be registered at the Department of Lands because of the writ.

The High Court held that unregistered equitable interest of the purchasers did not have priority over the judgment creditors’ writ, but only by a majority of 3 to 2. The majority held that because the Torrens system of registration is a not a system of registration of title but a system of title by registration, the fact that the writ was registered before the transfer to the purchasers, gave it priority. The majority also agreed that if the purchasers had placed a caveat on the title after exchange but before settlement, then the purchasers’ interest would have been protected because the caveat would act as notice to all the world of that interest.

Callinan J made mention of how conveyancing practices of lodging caveats on property after exchange, of settling at the Department of Lands, so as to enable the purchaser to search the title immediately prior to settlement, and register the transfer immediately after, had fallen into disuse. Such a system would be impractical in the extreme, as anyone who has attended a settlement recently would know, and the lodging of caveats on every purchase is an additional expense for purchasers.

The practical implications of this case may be far reaching, even if the likelihood of the events occurring as they did are remote. All purchasers would be well advised to place a caveat on the properties they intend to purchase after exchange and have their solicitors perform title searches only minutes before settlement. Having said that, it is possible that in the not too distant future, the Real Property Act, and other relevant legislation, may be amended so that a more satisfactory outcome in cases such as these would be the result.

EASMENTS

Westfield Management Limited v Perpetual Trust Company Limited [2007] HCA 45 ( 3 October 2007)

Westfield Management Limited (“ Westfield”) owns the buildings known as Skygardens, Imperial Arcade and Centerpoint which are on the Pitt Street Mall in Sydney. Perpetual Trust Company Limited (“Perpetual”) owns the building known as the Glasshouse which is located on the corner of King Street and the Pitt Street Mall, standing next to Skygardens. Skygardens has use of a private underground laneway which runs of King Street, belonging to the Glasshouse, by virtue of an Easement registered in 1988. Westfield sought to use the Easement to access the Imperial Arcade and Centrepoint, via Skygardens and sought a declaration in the Equity Division of the Supreme Court of NSW that the terms of the Easement would allow this and was successful. On appeal by Perpetual to the Court of Appeal, the decision was overturned. Westfield sought the reinstatement of the original decision, in the High Court.

The High Court unanimously found in favour of Perpetual and refused the appeal. The decision was based on three grounds.

The terms of the Easement allowed for a person entitled to go across the Glasshouse “to and from” Skygardens, but did not specifically state that a person could go across the Glasshouse for the purpose of going across Skygardens to access a further property. The Court felt that if the intention of the Easement was to allow access across the Glasshouse for the purpose of going across Skygardens to a further property, then it would have explicitly said that.
Westfield submitted that because the Easement was access “for all purposes” then that included accessing some further property via Skygardens. However, the Court held that the term “for all purposes”, when considered in conjunction with the rest of the terms of the Easement, meant that the Easement could be used for any purpose sought to be achieved by those using the Easement as described in its terms. In other words, the Easement could be used for all purposes when going across the Glasshouse to and from Skygardens.
The conditions of the Easement required that the owners of the Glasshouse and Skygardens would share equally maintenance and repair costs of the carriageway. The conditions also required that each of the owners take out separate insurance in relation to the carriageway. The Court reasoned that the owners of the Glasshouse would not have intended to disadvantage themselves by agreeing to pay half of repair and maintenance expenses when there was more than one other user and would not have intended to disadvantage themselves by allowing other users of the carriageway to avoid the responsibility of insuring it.

Clearly the Court based their decision on a narrow interpretation of the instrument which created the Easement. The Court rejected some extrinsic evidence which was submitted by Westfield stating that third parties inspecting the Register would not have the benefit of extrinsic material, supporting the principle of indefeasibility of title of the Torrens System.

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Please contact Chris for residential property matters or Annette for commercial leasing and property matters with your enquiries.