Transfer & Creation of Property Interest

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  • Created by: Rachel
  • Created on: 02-04-14 17:54
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  • Transfer & Creation of Property Interest
    • FORMALITIES
      • ADVANTAGES
        • provide written evidence of transaction
        • ensure theres evidence of the sale
        • terms will be clear - oral trans. -> disputes may arise
        • warning to those entering transaction that it will have legal effect
      • If you transfer land - must be in a DEED
      • DISADVANTAGES
        • making formalities compulsory makes informal transactions unenforceable
        • cost
    • STAGES OF TRANSFER
      • 1.PRELIMINARY NEGOTIATIONS
        • At this stage parties still negotiating
          • purchaser may make an offer, seller might accept
            • agreement will be 'subject to contract' = won't be contractually bound
        • don't have effect in law - NOT legally binding
          • 'gentleman's agreement'
          • arent legally binding until exchange of contract - so to give parties a chance to make enquirers and searches
          • this can cause problems for the purchaser
            • seller - sell property to someone else (legally entitled to do so)
            • at risk that another buyer will offer more $$$ - won't be any remedy in court
              • "GAZUMPING"
        • LOCK OUT AGREEMENTS
          • seller may be bound before exchange of contract
            • can't negotiate w/ anyone else for limited period of time
          • PITT v. ASSET MNGT LTD 1984
            • held: possible to over come limitations to 'subject to contract'
          • don't need to be in writing
          • prior collateral contract
            • states during agreed period - seller can't negotiate with anyone else
              • doesn't mean purchaser has right to demand land is sold to them
                • entitles purchaser to recover damages for breach of argument
      • 2.EXCHANGE OF CONTRACTS
        • Any contract for sale of an interest in land created after Sept 1989 must comply with S.2 of LAW OF PROPERTY (MISCELLANEOUS PROVISIONS)ACT 1989
          • Act states:
            • 1. contract must be in WRITING
            • 2. must contain ALL TERMS OF AGREEMENT
            • 3. must be SIGNED BY BOTH PARTIES
              • both copies of contract must be signed
              • both parties must sign contract - signature must be by HAND
            • if provisions are met - contract is VOID
        • EXCEPTIONS TO s.2 LoP (MP) Act 1989
          • collateral contract doesn't have to reform w/ requirements of act
            • if parties agree other conditions in separate agreement (collateral contract) it is enforceable as a separate agreement as long as terms aren't overly important
          • any variation in term of contract won't be effective unless both parties sign them
            • doesn't give parties chance to include fresh terms
            • if parties informally vary the terms (not signed) the informal variation won't take effect and original contract will stand
          • contract which doesn't comply with s.2 may be upheld on estppel or a constructive trust
            • conduct must be unconscionable
          • contract to grant leases less than 3 years, contracts made in public auction and collateral contracts can be made orally
        • SPECIAL PERFORMANCE
          • once contracts have been exchanged they are binding. thus neither party can withdraw from the sale w/o committing a breach of contract
            • if other party does commit a breach - other party can seek a remedy from courts (special performance)
          • equitable remedy - may be unavailable when
            • 1. party seeking has acted unconscionably
            • 2. award would prejudice the interest of 3rd parties
            • 3. it would cause hardships amounting to an injustice
          • if SP is refused/not sought after - damages can be claimed
            • recession
              • if impossible - damages can be claimed
              • may be available to return parties to position they were in before the contracts were exchanged
            • rectification
              • where there has been an error in the contract
                • contracts can then be relied on in altered state and sale may proceed
        • entering into binding contract doesn't transfer legal title to purchaser
          • BUT in equity contract to transfer land is enforceable - equitable ownership of land passes to purchaser as soon as contract is entered
            • thus from moment of exchange of contract -vendor becomes a trustee and holds property on trust for purchaser
    • 3.COMPLETION OF SALE
      • formal transfer of legal title from vendor to purchaser
        • necessary to use a DEED - s.51(1) LPA 1925
          • deeds before July 1990 - had to be signed, sealed and levered (didn't need to be witnessed)
          • deeds after July 1990 must comply with s.1 LP (MP) Act 1989
            • deed must be clear that is is a deed
            • must be signed by grantor or by both of them if theres more than 1
            • signature must be witnessed
            • must be delivered as a deed by the grantor or someone authorised to do so on their behalf

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