A R Walmsley Solicitors Sydney

DOCUMENTS & GUIDES...

VENDORS AND THE NEED FOR A FULL 10% DEPOSIT

The High Court handed down its decision in Black v Garnock on 1 August 2007. Garnock purchased a property from Black for $1 million. Settlement was due on 23 August 2005. At 8:55 am on that day the purchaser's solicitors did a final title search. They were contacted by solicitors acting for a judgment creditor who had issued a writ of execution by the Sheriff and told that those solicitors would stop the sale.

Settlement was put back until 2:00 pm so the purchasers could consider their position. The writ was registered on the title at 11:53 am. No notice was given by anyone to the purchasers that such registration had occurred. Settlement took place without a further final search. The purchasers paid the money and could not register the documents because of the presence of the writ. They then sought an injunction to restrain the Sheriff from selling the property at a Sheriff's auction. They failed and the Sheriff's sale was the one that proceeded.

The vendor owed almost the whole sale price under a mortgage on the property. We assume the money was paid over to the lender and lost to the purchaser.

Had the purchasers:

  1. done a final search at settlement they would have known of the writ and cancelled the settlement and would then have a loss limited to the deposit of $100,000; or
  2. lodged a caveat on the title after exchange of contracts which only allowed the purchasers' transfer (and related documents such as discharge of the vendor's mortgage and his new mortgage) to be registered, the writ could not have been registered and the sale would have proceeded and the purchaser obtained title

Prudent solicitors will now urge their purchaser clients very strongly to lodge a caveat after exchange in order to protect their interests. The extra expenditure of $200 or so is much better than what happened in this case.

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