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Changes to Conveyancing Practice

The Facts: In June 2005, the Garnocks (“the Purchasers”) entered into a contract for the purchase of a rural property (“the Property”) from Mrs Smith (“the Vendor”). Settlement of the contract was due to take place at 11.00am on 24 August 2005.

On 23 August 2005, a firm of accountants, Back, Chapman and Carter (“the Creditors”), obtained a writ for the levy of property from the District Court (“the Writ”). The Writ was obtained in an attempt to execute an unsatisfied judgment against the Vendor.

At 8.55am on the morning of settlement the Purchasers’ solicitors undertook a search of the register in relation to the Property (“a final search”) which did not disclose anything adverse. Between 9.20 to 9.30am the solicitors for the Creditors had discussions with the Purchasers’ solicitors and advised them that they intended to “stop the sale” but did not say that they intended to register the Writ. Settlement was rescheduled to 2.00pm so that the Purchasers could reconsider their position. At 11.53am the Creditors had the Writ registered (pursuant to section 105(2) of the Real Property Act 1900) at the office of Land and Property Information without notifying the Purchaser. At 2.00pm the Purchasers completed their purchase of the Property.

In the days following the Purchasers attempted to register their transfer. On 8 September 2005, the Purchasers’ solicitor was informed the Registrar General could not register the transfer because of the prior registration of the Writ.

The Issues: Pursuant to the Writ, the Sheriff of NSW was able to sell the Property to satisfy the judgment debt. Registration of a writ does not create an interest in land but it does preclude the Registrar General from recording another dealing unless that dealing refers to the writ as if it were a prior encumbrance.

Pursuant to section 105B(1) of the Real Property Act, a purchaser from the Sheriff will acquire the land free of any estate or interest except those recorded on the relevant folio of the register and will not be bound by any unregistered interests such as those of the Purchasers (including the equitable interest a purchaser acquires on exchange of contracts).

The majority of the High Court held that although writs for the levy of property did not create interests in land, they were capable of being registered on title, and as such entitled the Sheriff to deal with the land on the face of the register.

Notwithstanding the High Court’s decision, practical steps can be taken to protect a purchaser’s interest between exchange and settlement. In particular, completing a final search as close to settlement as possible and lodging of a caveat after exchange. If a caveat is registered, any sheriff’s purchaser will not be able to obtain registration of a transfer. The caveat gives notice of an interest recorded in the register and any sheriff’s purchaser will be fixed with that interest.

The Effect of the High Court’s Decision: Prior to Black v Garnock, prudent conveyancing practice did not call for lodgment of a caveat against the property between exchange and settlement in all cases nor was it expected that a final search be done immediately prior to settlement.

The Law Society’s Property Law Committee (“the Committee”) regards the state of the law following this decision as unsatisfactory as it is likely to increase the cost, complexity, uncertainty in conveyancing and because some of the views expressed by the High Court do not accurately reflect current conveyancing practice in NSW. The Committee will be lobbying for amendments to the legislation in an effort to reinstate some certainty in this now confusing area.

For further assistance regarding property matters, please contact Alexandra Tzavellas.

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. The publication reflects the law at the date the publication was written which may differ at the date the publication is being read. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.
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