A BILL FOR

An Act to amend the Conveyancing Act 1919, with respect to the passing of risk between vendor and purchaser under a contract for the sale of land, and in other respects.

BE it enacted by the Queen’s Most Excellent Majesty, by and with the advice and consent of the Legislative Council and Legislative Assembly of New South Wales in Parliament assembled, and by the authority of the same, as follows:-

Short title.

1. This Act may be cited as the "Conveyancing (Further Amendment) Act, 1984".

Commencement.

2. (1) Sections 1 and 2 shall commence on the date of assent to this Act.

(2) Except as provided by subsection (1), this Act shall commence on such day as may be appointed by the Governor in respect there of and as may be notified by proclamation published in the Gazette.

Amendment of Act No.6, 1919.

3. The Conveyancing Act, 1919, is amended in the manner set forth in Schedule 1.

Savings provision.

4. The amendments made by this Act to the Conveyancing Act, 1919, do not apply to or in respect of a contract for the sale of land which was made before the day appointed and notified under section 2(2).

SCHEDULE 1.

AMENDMENTS TO THE CONVEYANCING ACT, 1919

(1) Section 2 -

After the matter relating to Division 6 of Part IV, insert:-

DIVISION 7. - Passing of risk between vendor and purchaser - ss.66J-66O.

(2) Section 52(2) -

At the end of section 52, insert-

(2) Division 7 shall apply to land under the provisions of the Real Property Act, 1900.

(3) Part IV, Division 7 -

After Division 6, insert-

DIVISION 7. - Passing of risk between vendor and purchaser.

Interpretation.

66J. (1) In this Division -

"damage" includes destruction;

"land" includes buildings and other fixtures;

"sale" includes exchange.

(2) For the purposes of this Division land damaged after the making of a contract for the sale of the land is substantially damaged if the damage renders the land materially different from that which the purchaser contracted to buy.

(3) It is the intention of Parliament that this Division is to give effect to the recommendations made in the report of the Law Reform Commission on the passing of risk between vendor and purchaser and laid before each House of Parliament and accordingly, in the interpretation of this Division regard may be had to that report, including the draft legislation set out in that report.

(4) Subsection (3) does not prevent regard being had, in the interpretation of this Division, to any matter to which regard might have been had if that subsection had not been enacted

Postponement of passing of risk to purchaser.

66K. (1) The risk in respect of damage to land shall not pass to the purchaser under a contract for the sale of the land until -

(a) the completion of the sale; or

(b) the purchaser enters into, or is entitled to enter into, possession of the land, whichever first occurs.

(2) The reference in subsection (1) to possession in relation to land includes a

reference to -

(a) the occupation of the land (whether pursuant to a licence or otherwise) pending completion of the sale of the land; and

(b) the receipt of income from the land.

Power to rescind contract where land substantially damaged.

66L. (1) Where land is substantially damaged after the making of a contract for the sale of the land and before the risk in respect of the damage passes to the purchaser, the purchaser may rescind the contract by notice in writing served on the vendor -

(a) within 28 days after the purchaser first became aware of the damage; or

(b) within such longer period as may be agreed upon between the vendor and purchaser.

(2) A notice under subsection (1) which is served -

(a) by a solicitor or an agent acting for the purchaser; or

(b) on a solicitor on an agent acting for the vendor,

shall be deemed to have been served by the purchaser or on the vendor, as the case may be.

(3) A notice under subsection (1) may be served -

(a) in any manner prescribed by section 170; or

(b) in any manner prescribed by the contract to which it relates for the service of notices under that contract.

(4) Where the purchaser rescinds a contract for the sale of land pursuant to the right conferred by subsection (1) -

(a) all money paid by the purchaser under the contract shall be refunded to the purchaser;

(b) all documents of title or transfer shall be returned to the vendor; and

(c) the vendor and purchaser shall be relieved from all liability under the contract, except a liability arising out of a breach of any term or condition contained or implied in the contract occurring before the date of rescission.

(5) A purchaser is not entitled to exercise the right conferred by subsection (1) if the damage was caused by a wilful or negligent act or omission on the part of the purchaser.

Abatement of purchase price where land damaged.

66M. (1) Where land is damaged after the making of a contract for the sale of the land and before the risk in respect of the damage passes to the purchaser, the purchase price shall be reduced on completion of the sale by such amount as is just and equitable in the circumstances.

(2) Subsection (1) applies whether or not the land concerned is substantially damaged.

(3) Subsection (1) does not apply where the damage was caused by a wilful or negligent act or omission on the part of the purchaser.

Refusal to enforce specific performance against vendor.

66N. The Court may, if it thinks that it would be unjust or inequitable to require the vendor to complete the sale of land that is substantially damaged after the making of the contract for the sale of the land and before the risk in respect of the damage passes to the purchaser -

(a) refuse to enforce against the vendor specific performance of the contract;

(b) order the repayment of any money paid by the purchaser under the contract; and

(c) make such other orders as the Court considers appropriate in the circumstances.

Contracting out.

660. (1) In this section, "dwelling-house" means premises (including a lot under the Strata Titles Act 1973) used, or designed for use, principally as a place of residence, and includes -

(a) outbuildings and other appurtenances to a dwelling-house; and

(b) a dwelling-house which is in the course of construction.

(2) This Division has effect -

(a) in the case of the sale of a single dwelling-house - notwithstanding any stipulation to the contrary, or

(b) in any other case - subject to any stipulation to the contrary.

NOTES ON THE CONVEYANCING (FURTHER AMENDMENT) BILL, 1984

Proposed Section 66J

1. "land".

This expression has been defined to make it clear that the provisions of the Bill apply to damage to buildings and other fixtures. Since the definition is not exclusive, damage to crops and other things that are an integral part of land would also be included.

2. "Sale".

In the Principal Act "sale" means "only a sale properly so called' (see definition of "Sale" in section 7(l) of the Principal Act). Generally this means an exchange of property for money in which the vendor disposes of the whole of his interest in the property. This definition has been extended to ensure that the provisions of the Bill apply to a sale by way of exchange of land. Since "land" is defined in section 7(1) of the Principal Act to include any estate or interest in land, the provisions of the Bill would apply to an assignment of a lease or any other complete disposition of an interest in land that is less than a freehold interest.

Proposed Section 66K

Purchaser wishing to insure prior to passing of risk.

If a vendor has not insured the premises of has not taken out sufficient insurance, a purchaser may wish to insure prior to completion or entitlement to possession. As mentioned earlier in this report (paragraph 2.20), the purchaser would still have an insurable interest if a purchaser takes out insurance at any time after exchange of contracts and before completion or entitlement to possession, the risk remains with the vendor and the purchaser would not lose the statutory right of rescission or abatement of the purchase price conferred by the Bill.

Proposed Section 66L

1. Notice within 28 days etc.

The purchaser loses the right of rescission if it is not exercised within the specified period. However, the purchaser is still entitled to an abatement of the purchase price under proposed section 66M.

2. Damages.

The use of the expression "all money paid by the purchaser under the contract" in subclause (4) (a) excludes the purchaser s conveyancing costs and expenses from the money to be refunded to the purchaser, As foreshadowed in paragraph 4.45 of the report, provision has been made to preserve the right to recover damages where the contract is rescinded but there has been a breach of an express or implied term of the contract (for example, where the premises were damaged as a result of a default in the vendors duty to take care of the property while in the vendor s possession).

3. Restoration.

Where the vendor restores damaged premises before the purchaser enters into possession the purchaser does not lose the right to rescind. In some instances restoration is not satisfactory to the purchaser (for example, rebuilding of a destroyed historic house). If damage is restored but the purchaser does not rescind, there may be no or little abatement of the purchase price.

Proposed Section 66M

The provisions of this section would apply where a purchaser does not have a right of rescission because 'the land is not substantially damaged or where the land is substantially damaged but the purchaser does not exercise the right of rescission.

Proposed Section 66N

1. The provisions of this section would apply where the purchaser does not exercise the right to rescind but seeks completion of the sale with an abatement of the purchase price.

2. "Court",

This expression refers to the Supreme Court (See definition of "Court" in section 7(1) of the Principal Act).

Proposed Section 660

1. "Dwelling-house".

Where a residence is combined with some commercial industrial primary production or business use the premises are not a dwelling-house for the purposes of the section unless the premises are principally used as a place of residence.

2. "Stipulation to the contrary".

This expression is the common expression used in the Principal Act. The expression includes provisions included in the contact for sale and provisions of any other document or verbal agreement that relates to that sale.