The operation of clause 7.1 in resolving conveyancing disputes.
Conveyancing is the legal process of transferring property from one owner to another. Sometimes the process can go awry and leads to various complications for both buyers and sellers that need to be resolved quickly and efficiently. Learning from these mishaps is crucial to avoid future pitfalls.
Its complexity underscores the importance of expertise and diligence from conveyancers and legal professionals. By dissecting instances where the process encountered hurdles, we can extract valuable lessons to foster more seamless transactions in the future.
Let’s delve into several examples that have come across the desk of Warwick La Hood of Cowell Clarke and their key lessons drawn from real-world conveyancing challenges and the operation of clause 7.1.
The Scenario: Selling more than what’s approved.
The marketing material and contract for the sale of an old block of units in one line confirmed the sale of 7 residential units with 7 residential contracts attached. On inspection of the property, there were 7 residential units (one was strangely on its own level). Prior to completion, the buyer found out that Council only approved 6 residential units and Council provided a letter to the late owner (some 20 years earlier), confirming the 7th unit was not approved for residential letting. It seems Council’s letter was ignored, and Council failed to do anything about it. The estate was selling the property and were unaware of Council’s letter.
The contract at clause 7.1 reduced claims to 1%. The value reasonably attributed to the 7th unit was significantly more than 1%. The buyer threatened to make a claim and the vendor’s conveyancer sought independent legal advice. It was identified early that neither party had a strong desire to walk away and on this, had a common goal. A path needed to be laid towards achieving that goal. The challenge was arriving at terms that were satisfactory to both parties without resorting to litigation.
The Scenario: The forgotten lease.
Searches were done, contracts collated and exchanged. The property was part of a community scheme of townhouses. Before completion, the buyer found out that another owner in the scheme leased a garage space from the vendor under a 50-year lease for a peppercorn rent and that lease was registered. The buyer was unaware of the lease because the contract had not attached the lease, the title did not show a registered lease when searches were done. It seems the lease “dropped off title” without any real explanation. Clause 7.1 of the contract reduced the amount of any claim to $100. In this case, the inability to use a garage for 50 years was a significant value loss, worth considerably more than $100. The buyer threatened to make a claim and the vendor’s conveyancer sought independent legal advice. It was identified early that both parties were motivated to reach an agreement so that the contract could complete. A path needed to be laid towards achieving that goal. The challenge was arriving at terms that were satisfactory to both parties without resorting to litigation.
Key lessons for conveyancers and lawyers:
The goals in property transfers
Firstly, identify the goals of the parties and see if they are common. Work collegiately to achieve the goal and be aware that although parties may have rights to litigate, that right costs a lot of money, takes a long time and rarely does litigation produce a satisfactory outcome, not to mention the stress along the way for the parties and their respective conveyancers because of the uncertainty.
Identifying Clause 7.1
Clause 7.1 is a critical clause. Often one never sees it in operation but be aware of the effects of clause 7.1 and its operation in a disputed conveyance. When a dispute arises, lowering the amount referred to in clause 7.1 can put a non-defaulting purchaser on the back foot.
The path to resolution in a conveyancing dispute
Disputes often happen in the conveyance process. An independent experienced property lawyer familiar with the property law around the conveyancing process, should be able to quickly identify the legal issues to be considered, where risk lies, the range of satisfactory outcomes and how best to prepare the path to a just and quick resolution. An aggressive approach to resolve a dispute in the conveyance process is not normally the best approach.
For any enquiries, please contact Warwick La Hood.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.