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The Facts

Property buyer and property sellers enter into contract for sale of residential land

A dispute heard in NSW was between the buyer of a property and its vendors, who wanted to rescind the contract of sale after the sunset date had passed.

The parties entered into a conveyancing transaction for off-the-plan (unregistered) residential land in Picton, NSW.

The vendors were husband and wife. The wife signed the contract of sale on behalf of her husband. The purchaser signed the counterpart contract and the contracts were exchanged on 2 July 2015.

The contract contained several special conditions, one of which was that the plan of subdivision had to be registered within six months of the date of the contract (commonly referred to as a "sunset date").

If the vendor did everything reasonably necessary to register the plan of subdivision but failed to do so within this time, it would enable either party to rescind - that is, terminate the contract.

Vendors send Notices of Rescission to buyer after sunset date

On 25 August 2016 and again on 20 October 2016, over 12 months from the date of exchange, the sellers sent a Notice of Rescission to the legal representative of the purchaser.

The Notices of Rescission highlighted that since the plan of subdivision was not registered within the relevant time frame, namely six months, the vendors were exercising their right to terminate the contract.

Property buyer does not consent to termination of contract and lodges caveat over property

The purchaser did not consent to the termination of the contract and made reference to the statutory requirements of section 66ZL(4) of the NSW Conveyancing Act 1919, which requires at least twenty-eight days' notice in writing, specifying the reason for delay in registering the plan of subdivision and why the vendor is proposing to terminate the contract.

Consequently, the purchaser lodged a caveat over the property and brought an action of specific performance in the Supreme Court of NSW, to force the vendors to complete the sale of the land to him.

The plan of subdivision was subsequently registered on 23 December 2016.

CASE A

The case for the property buyer

CASE B

The case for the property sellers

Both vendors were always aware that the property was for sale. Irrespective of the fact the husband did not sign the contract, the wife acted as his representative in the transaction, with his knowledge and permission.
According to a professional valuer, the value of the property increased by $165,000, or 47%, between exchange of contracts and registration of the plan of subdivision. That is why the vendors want to terminate the contract.
The contract was not terminated, as the notices I received did not conform to the requirements of section 66ZL of the Conveyancing Act.
I was at all times ready, willing and able to complete the transaction.
As the contract is valid and the vendors have not terminated it, the court should make orders for the specific performance of the contract, so that the sale of the land can proceed.

My wife and I did not both sign the contract to create a legally binding and enforceable agreement.
As a vendor, I did not know that my wife might sign the contract on my behalf and I never specifically gave her permission to do so.
If a contract does exist, we insist as vendors that either or both Notices of Rescission were valid, as we were unable to register the plan of subdivision by the sunset date. Registration took place almost twelve months after the sunset date, allowing the contract to be terminated.
Section 66ZL of the Act has no application under the terms of the contract to our notices to terminate the contract.
It defeats the purpose of having a special condition with a sunset date if we are unable to rely on it and the court should rule that we validly terminated the contract.

So, which case won?

Cast your judgment below to find out

Lesley Dingley
Buying a block of land
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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"The Vendors Only Want To Rescind The Contract Because The Property's Value Increased." Which Case Won?

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