As a purchaser of property, you might assume that what you are buying is all the land occupied within its physical boundaries. Similarly, you may assume that at settlement you will receive all of the land as described in the property's certificate(s) of title.
While you may assume it is the seller's responsibility to ensure that your contract with them accurately describes the property, such an assumption, while maybe natural, is risky and can leave you without any legal recourse.
How the land, as the subject matter of your purchase, is defined will rest on the interpretation of various sections of your contract. And whether you would have a claim against the seller for failing to deliver good title will, likewise, usually rest on any conditions in your contract which operate to limit the seller's warranties to you in relation to the land.
The Identity Clause
Common to Victorian contracts of sale of real estate, including versions of the Law Institute of Victoria and Real Estate Institute of Victoria approved standard form of contract is the "identity clause". An identity clause refers to a condition of sale which requires the purchaser to accept that the land sold is identical with the title particulars. The rationale behind this clause is that a buyer, having been provided a copy of the certificate of title in the Vendor's Statement, as required by law, is able to check the measurements of the actual occupation of the property prior to exchanging contracts. It then follows that any omission or mistake in the description, measurements or area of the land does not invalidate the sale or give the purchaser a right to compensation1. Most identity clauses operate to cover misdescriptions in relation the both the physical nature of the land sold and how the land is described in the contract.
Recent Case
A recent case in point, Wollert Epping Developments Pty Ltd v Batten [2019] VSC 618 (11 September 2019), involved a buyer who bought farmland in Victoria with the intention of developing it into a residential housing estate.
After the contract had become unconditional, the buyer, as part of seeking planning approval from council, had the land surveyed to determine the location of fence boundaries compared to the property's title. The survey showed that the land's southern fence boundary was misaligned with the title boundary and part of the land was occupied by the neighbouring property.
The seller refused to take any steps to remedy the misalignment and the buyer took the matter to court in seeking a declaration to the effect that the seller had to remedy the encroachment prior to settlement.
The court, in determining that the land sold under the contract was described by reference to the Certificate of Title, agreed that the seller was and/or would be in breach at settlement, noting the vendor seller was not in possession of the encroached land which the parties recognised as encumbered by the neighbouring owner's putative adverse possession claim.
That was not, however, the end of the matter. The contract contained an identity clause that was found to protect the seller with the effect of making the Seller's breaches not actionable and leaving the purchaser without a remedy. The court also found it relevant that the purchaser, being an experienced property developer had decided to obtain a survey of the property after entering the contract and should be taken to know that it was very likely that the farm land fences did not sit precisely on the title boundaries.
What you need to do
Misaligned property boundaries, like in the above case, are not uncommon and can prejudice the development potential of a property and the ability to obtain finance, or create boundary disputes with third parties, including adjoining neighbours, an owners corporation or statutory bodies. If you are a purchaser contemplating the purchase of a property, measuring the physical land is the only sure way to know much land you are purchasing and whether all the land, as physically occupied, matches the title plan.
As for the contract for the sale of the land, purchasers should be mindful that the contents vary widely, as do the identity clauses they often contain - no matter the nature of the transaction. A prospective purchaser should always obtain legal advice on a proposed contract before they sign. If the actual dimensions of the land in question are particularly critical to the purchaser's plans for the property, a lawyer can also assist in negotiating the contract's terms in seeking to preserve the purchaser's rights in this regard.
1 Such conditions are subject to the equitable principle at law that a "significant" discrepancy, that being 5pc or greater diminution in area will generally justify avoidance of the contract by a purchaser.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
