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Expect the unexpected3 September, 2018
Conveyancing practitioners need to look for non-standard transactions.
Victorian law practices act in hundreds of conveyancing transactions every week worth millions of dollars. Conveyancing transactions invariably comprise many moving parts with the potential for things to go wrong, but usually they do not. The challenge is how to maintain your curiosity and vigilance to ensure you identify the unusual issues before they go wrong. What are your firm’s processes and safeguards to spot the unusual issues and matters?
Never assume a conveyance is routine. In LPLC’s June LIJ article Take a step back, we highlighted the need to think proactively about what each matter involves and properly understand your client’s objectives. The following conveyancing examples show what happens when you don’t do this.
The firm acted for the vendor of a residential property. The property contained an electrical substation that was housed in a building clearly visible on inspection.
The vendor’s instructions about the substation and the power company’s access rights were attached to an email to the firm’s conveyancing clerk with some other documents. This attachment was not printed and put on file. The section 32 statement was then drawn without reference to the substation and the power company’s access rights.
General condition 2.4 of the contract was a warranty that vacant possession of the property would be given to the purchaser. The presence of the substation was alleged to amount to a breach of warranty and after settlement, the purchaser claimed the costs of relocating the substation to a more convenient location within the property.
The firm acted for the purchaser of a rural holiday retreat. The property included a main residence accessed from a public road at the front of the property and cottages at the rear of the property accessible by car through an adjoining council reserve. The cottages were operated as short-term guest accommodation.
The purchaser told the firm that access to the cottages was via the reserve. However, the firm did nothing more to investigate the right of access or advise the purchaser on the issue.
After settlement, the council informed the purchaser the right of access over the reserve had expired, leaving the purchaser without any permanent right of access to the cottages.
The purchaser then sued the firm, alleging it failed to take reasonable steps to ensure there was permanent lawful access via the reserve or advise that no lawful access existed. The relevant practitioner had treated the conveyance as a standard suburban-based residential conveyance despite the property being rural and including the sale of a business. He failed to consider access rights and in particular, recognise the significance of separate access to the cottages for the purchaser’s intended use of the property.
Section 173 agreement
The firm acted on the purchase of a property that was subject to a section 173 agreement with the local council restricting the type of house that could be built. The firm did not alert the purchasers to the issue when it gave pre-contractual advice.
The section 173 agreement did allow approval to be sought to build to a different design but when the purchasers sought approval to build a much larger house than allowed for in the planning permit, the application was rejected. The purchasers then claimed they would not have purchased the property if they had been informed of the section 173 condition.
During this transaction the firm was busy with multiple large subdivisions. The conveyancing clerk handling the matter assumed it was a straightforward purchase of a vacant block and failed to properly read the section 173 agreement. This resulted in the purchasers receiving no advice about the restrictions on what they could build and the options available to them
- Identify what is unusual about the property or transaction.
- Think about what could go wrong and the skills/resources needed.
- Ask your client about their intended use of the property.
- Conduct all necessary searches and consider them properly.
- Take more instructions if necessary.
- Ensure staff have adequate training and supervision.