How Can A Transfer of Property From A Person Who Is Not The Seller Be Legal?

Over a period of many years, our property registration system has been developed and tested in court to the stage where it is now a fairly standard process for most land transactions, and even those of us with little legal knowledge can understand what happens when we sign a real estate contract. A fundamental part of this process is surely that the person who is selling the land is actually the registered owner, but apparently there is provision within the law to allow a person who is not the registered owner to sell land, provided the buyer is fully aware of the situation, and contractual arrangements have been made to this effect.

People feel secure and confident that their transaction has been handled in a most professional way once they have left it in the hands of conveyancing solicitors, as they are assured that the necessary documentation will be lodged with the appropriate authorities and that the title will transfer smoothly from one party to the other.

Sometimes however, prior to reaching that point, things can become unstuck. Finance arrangements can fall through at the last moment, settlements can be delayed, property searches can reveal hidden obstacles affecting the title, or proposed activity by local authorities that may compromise its value.

Whether or not a buyer accepts a transfer of land or property from a seller who’s name does not appear in the contract, is an interesting issue that most lay people are unfamiliar of. This situation could arise when the seller is buying the property from a third party and then on-selling it to the buyer in a simultaneous transaction.

The standard REIQ contract requires the seller to give the buyer at settlement a duly executed transfer of land, from them as the seller, which is able to be immediately registered. This means it must be a transfer from the registered owner of the land to the buyer. If the seller is not the registered owner of the land, they cannot comply with this part of the contract. The buyer does not have to accept the transfer from a person who is not the seller unless there is a special condition in the contract which directs him to do so.

If the situation demands it, the seller must direct the registered owner to execute a transfer in favour of the buyer. This is called a “transfer by direction.” If the seller needs a transfer by direction they must ensure that the special condition is in the contract to that effect, and the buyer needs to acknowledge at settlement that the seller is not the registered owner.

These types of situations do arise, but they are much more complex than a simple transfer. After getting professional advice about conveyancing buyers could make these arrangements, but only under the guidance of their legal representatives.