Assessment 2: Essay - Hypothetical

13 Found helpful • 5 Pages • Essays / Projects • Year: Pre-2021 • Previously uploaded under: LAW316 - Property Law

On 12 April, 2014 Boris, a property developer, enters into an agreement with Clare, that he will purchase her Torrens title property in Dural New South Wales, at a price of $500,000, lease the property back to her for 3 years and then resell it to her at the end of the 3 years for a price of $700,000. During that time Clare intends to use the money from the sale to develop the property as a wedding reception venue and then, after her repurchase, to run it as a business. After the contract reflecting this arrangement has been signed and exchanged but before the Transfer to Boris is registered Clare approaches Stone Rock Capital (SRC) for a loan. SRC agrees to lend Clare $350,000 secured by mortgage over her property. Clare executes a mortgage in registrable form in favour of SRC and tells SRC that the Certificate of Title (CT) to the Property will be handed over to them once she has taken it out of the bank where it is held for safekeeping. As the property is apparently otherwise unencumbered SRC are not too concerned. The solicitor for SRC, Rob, then puts the paperwork including the unregistered mortgage in approved form in his filing cabinet, but forgets to follow up about the CT. Rob also neglects to lodge a caveat over Clare’s property thinking that his client will be secure once they receive the CT. On 12 May, 2014, Boris becomes the registered proprietor of the property in accordance with his agreement with Clare. Clare remains in possession of the property under the terms of the lease back agreement and begins the construction work. In March 2015 Boris is discussing this investment with his girlfriend Millie. Millie says that she has heard that Clare is in financial distress and may not have the money to complete her renovations. Boris takes a calculated risk that Clare will not be able to repurchase the property at the end of the 3 year term. He tells Millie that he is going to put the property into her name, but, just in case, tells her that if Clare does manage to come up with the money that she will need to resell it to Clare in accordance with the agreement of April 2014. Millie says, “don’t worry, I’ll do the right thing”. Boris then executes a transfer of the property to Millie, the consideration for which is listed as $1. Millie also signs the Transfer and 2 days later she becomes the registered proprietor of the property. In April 2015 the solicitor for SRC finds the file containing the unregistered mortgage and realises that he has not received the Certificate of Title in order to register his client’s mortgage. He rushes to the titles office to lodge a caveat, noting that his client has an interest as “unregistered mortgagee”. The caveat appears on the title later that day. Millie decides that she is over her relationship with Boris but thinks that she needs money in order to move overseas away from him. She advertises the property for sale and finds a buyer at a price of $600,000. On inspecting the property the purchaser, Frank, sees evidence of construction work but no-one in occupation. He also inspects the Register and sees that Millie is the sole registered proprietor. For some reason he ignores the caveat placed by Rob and proceeds to settlement of his purchase. He has lodged his Transfer for registration accompanied by the CT but has been unable to become registered because of Rob’s caveat.

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