Just another way to extract money from buying a block of land

We are purchasing a block of land in NSW with the same Lawyer that we used for the purchase of the last 2 blocks and we are actually purchasing from the same Vendor.

The below Caveat is written on our Lawyer's Cost of Agreement to manage our latest purchase.

Caveat
There has been a significant recent case where a writ was registered on the title of a property between settlement and registration of the Purchaser's transfer. The writ related to the Vendor, not the Purchaser, this is unusual, however it meant that the Purchaser was unable to register their transfer and therefore the title remained in the Vendor's name until the writ was removed.

The only way to protect you, as the Purchaser, against this is to lodge a caveat over the title immediately after Contracts have exchanged. The caveat prohibits the Titles Office from registering any writs (or other documents) on the title without your consent. The caveat will automatically be removed upon registration of your transfer. Our costs for preparing and lodging the caveat will be $385.00 (including GST) and the registration fees are $117.30.

Please let us have your instruction as to whether you wish us to lodge a caveat to protect your interest. If we do not hear from you within 10 days from the date of this letter then we will assume that you do NOT wish us to do so.


I will be ringing up Lawyer this week and asking;

1. Was our Vendor involved in this writ?
2. Would not your professional indemnity cover this since it was an unusual action ( a once off event)?
3. If you conveyance 3 properties a week x 52 weeks @ $385.00 + 117.30 = 1506.90 x 52 weeks = $78358.80 cost to Purchasers' which I feel is needless since an unusual situation.

Any comments?
Anyone else received this on Lawyer's letter when purchasing


Kind Regards
Sheryn

Sheryn said:

I will be ringing up Lawyer this week and asking;

1. Was our Vendor involved in this writ?

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No, it wasn't them

Sheryn said:

2. Would not your professional indemnity cover this since it was an unusual action ( a once off event)?

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No your solictior's PI will not cover this. It is not a fault of anybody's solicitor

Sheryn said:

3. If you conveyance 3 properties a week x 52 weeks @ $385.00 + 117.30 = 1506.90 x 52 weeks = $78358.80 cost to Purchasers' which I feel is needless since an unusual situation.

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So don't pay. Take the risk and see how you get on if you are unlucky enough to suffer this scenario.

Your solicitor is doing you a favour. They are doing their job, staying up-to-date on the latest court judgements that affect conveyancing and asking you if you want to protect yourself. You can't get better professional advice than this.

Sheryn, lodge the caveat or alternatively take out "Title Insurance" and you'll be safe. Or accept the risk is small and you will probably not be affected. Its your call.

Sheryn said:

I will be ringing up Lawyer this week and asking;

1. Was our Vendor involved in this writ?
2. Would not your professional indemnity cover this since it was an unusual action ( a once off event)?
3. If you conveyance 3 properties a week x 52 weeks @ $385.00 + 117.30 = 1506.90 x 52 weeks = $78358.80 cost to Purchasers' which I feel is needless since an unusual situation.

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Wrong questions.

Your lawyer wants to know if you wish to lodge a caveat against the property to protect your interests/priority in the period prior to settlement.

As an example, if I obtained a court judgement against your vendor today and I knew his/her major asset was the land, I might seek to lodge a caveat against the property to ensure it isn't disposed of. This would screw with your ability to purchase as a bank won't settle without clean title.

If you don't want to do it...don't.

What they said.

I've also received a letter like this; I'd think it's become pretty standard. As mentioned, it's entirely up to you whether you think it's necessary to protect your interests with respect to the title between exchange and settlement. Your solicitor would be negligent not to bring this to your attention.

This case had the high court divided, and may well have gone a different way if different judges were sitting or if ALL the judges were sitting. Basically it is up to you as to where you lodge a caveat or not, but if you choose not to and something happens then you will not be able to do anything about it (ie, the lawyers are covering their own butt in doing this as well as yours). The legal community are divided in how they are facing this issue, and there were other issues faced by this case.

I will not give you my opinion, as that is all it is, an opinion. You will have to make up your own mind as to whether you do this or not. Options are a) you do lodge a caveat or b) you do not. You choose a) - chances are it may not be needed, so you have spent the money on nothing. Or something happens and it turns out to be the best money you ever spent to protect your interests. Or you choose option b) Don't lodge one and chances are you will be fine. Or something happens and you are left without your money, without a property and with no recourse because your solicitors adviced you to lodge a caveat. Your call.

It is a bit like insurance, hopefully it is never needed, but do you pay to cover yourself 'just in case'? Or do you take the risk of going without?

your not taking the solicitors serious advice about this??

but are balking at 375 bucks to cover your ar$e...

i think thats a very unwise move personally...i very much doubt the solicitor is trying to take you for a ride on this......

rarely would they bother unless they felt it was warranted for simple transactions of this type.....

id definitely take the advice to heart and cover yourself in this instance....

if not chances are it may bite you hard down the track....just call it insurance for life!

cheap at double the price if you ask me...

your complaining about a less than a 1% additional cost most lightly..chicken feed in scheme of things....

next complaint please???

that will be $295 for online services..

thankyou.

cheers

Is the solution as simple as adding a clause to the contract like...

The vendor guarantees clear title at settlement, and will refund any deposit in full if the vendor fails to do so.

keithj said:

Is the solution as simple as adding a clause to the contract like...

The vendor guarantees clear title at settlement, and will refund any deposit in full if the vendor fails to do so.

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It is not as simple as that. In the case in question, the purchasers done a title search, it came back clear. Now between then and when settlement actually occurred not long after, someone else actually managed to lodge their own interest in the property. The result being that the purchasers released their money to the vendors (all of the purchase money, not just the deposit) and it was only upon lodgement of transfer of title that they found out they could not gain legal title over the property. They were left with no money AND no property - all in the space of a couple of hours.

^Not hard to believe at all. I have lodged caveats on every title, mostly because almost all houses I've bought (coincidentally) were deceased estates. In these circumstances it's not unlikely that an aggrieved relative will decide to challenge the trustee by declaring their interest. The other obvious common example where you could be at risk is if the vendor is involved in a divorce. The spouse may not want to sell, or may want to make sure they get their money, or may just want to be a nuisance. Whatever - a caveat is cheap insurance in my book.

I was speaking to the Debt Collection Agency our business uses. They try to be aware of assets owned by debtors and in a small community they know a fair bit. The risk might be small but it is certainly larger than it was a couple of years ago.

keithj said:

Is the solution as simple as adding a clause to the contract like...

The vendor guarantees clear title at settlement, and will refund any deposit in full if the vendor fails to do so.

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I would also hasten to add that this clause is risky in and of itself in that it could be read as a liquidated damages / limitation of liability clause in the event that the title is not clear. That is, you have ostensibly agreed in advance the remedy for the Vendor's breach and you may therefore be estopped from pursuing any general remedies for breach that were otherwise available to you - including general damages.

See, some advice for free

Seriously, folks, in the spirit of this thread you should also be careful about drafting your own legal clauses.

Propertunity said:

No, it wasn't them

No your solictior's PI will not cover this. It is not a fault of anybody's solicitor

So don't pay. Take the risk and see how you get on if you are unlucky enough to suffer this scenario.

Your solicitor is doing you a favour. They are doing their job, staying up-to-date on the latest court judgements that affect conveyancing and asking you if you want to protect yourself. You can't get better professional advice than this.

Sheryn, lodge the caveat or alternatively take out "Title Insurance" and you'll be safe. Or accept the risk is small and you will probably not be affected. Its your call.

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What is Title Insurance?

My call the risk is small - it was not our Vendors who had a caveat.

Agree my Lawyer up to date professionally.

What I am seriously looking at is all the 'strings' attached to purchasing.

The cost to get a 'new' project out of the ground has an increasing number of 'strings' attached to it.

If this was a house I would pay since it is a block of land - I will run the risk.

csc said:

your not taking the solicitors serious advice about this??

Actually I am taking my Lawyers advice seriously and asking/researching as this CAVEAT is something new to me..

but are balking at 375 bucks to cover your ar$e...

NO - I am looking at a NEW cost 'string' to our business of $502.50.

i think thats a very unwise move personally...i very much doubt the solicitor is trying to take you for a ride on this......

rarely would they bother unless they felt it was warranted for simple transactions of this type.....

id definitely take the advice to heart and cover yourself in this instance....

if not chances are it may bite you hard down the track....just call it insurance for life!

cheap at double the price if you ask me...

your complaining about a less than a 1% additional cost most lightly..chicken feed in scheme of things....

next complaint please??? I am researching each little 'string' that adds to my costs -- I would consider this good business practice

that will be $295 for online services..So you charge $295.00 for 15 minutes typing online = $1180 per hour

thankyou.

cheers

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Actually csc- I am researching the costs and weighing this against maybe - we should not be buying a block of land and building something new.

The easier option may well be what Nathan is doing!!!

If each subcontractor I use increases their costs by 1% and I don't question it my profit may be flowing out the door....


Regards
Sheryn

Token Funder said:

Wrong questions.

Your lawyer wants to know if you wish to lodge a caveat against the property to protect your interests/priority in the period prior to settlement.

As an example, if I obtained a court judgement against your vendor today and I knew his/her major asset was the land, I might seek to lodge a caveat against the property to ensure it isn't disposed of. This would screw with your ability to purchase as a bank won't settle without clean title.

If you don't want to do it...don't.

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Good information - THANK YOU


Bottom line Vendors are a group of 6 local professionals, Solicitor, REA, 2 x Surveyors not sure who the other 2 are.


Sheryn

HealthyWealthy said:

I would also hasten to add that this clause is risky in and of itself in that it could be read as a liquidated damages / limitation of liability clause in the event that the title is not clear. That is, you have ostensibly agreed in advance the remedy for the Vendor's breach and you may therefore be estopped from pursuing any general remedies for breach that were otherwise available to you - including general damages.

See, some advice for free

Seriously, folks, in the spirit of this thread you should also be careful about drafting your own legal clauses.

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this is the problem these days - you are dammed if you do, dammed if you don't say, do or write anything. meaning everything goes legal and there is no clear outcome

Ausprop said:

this is the problem these days - you are dammed if you do, dammed if you don't say, do or write anything. meaning everything goes legal and there is no clear outcome

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True...

I guess one tip (and this is by no means provision of definitive or professional advice) is if you're going to draft your own clause think hard about whether there's any other way of construing the clause or whether it could do something you didn't intend, like, in the example above, give the impression that the nominated remedy operates to the exclusion of others.

I guess that's why some lawyers make the big bucks...they know what to look for!