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Buyer in a bind
18/01/2005 The Star Articles of Law with Bhag Singh
EVEN though we have evolved into a highly literate society many people
continue to suffer because of their lack of understanding of the law as
well as their gullibility to be influenced by a well-dressed man who holds
a good position, drives an expensive car and projects a good image.
A reader bought a house some time ago from a person who appeared to have
some status. The seller was associated with the landowner, the developer
and a finance company.
This seller was very helpful. He guided the buyer to a lawyer and even
helped him obtain a loan from the finance company to buy the house. The
documentation was done as if the lawyer was the buyer’s solicitor.
The loan was almost 85% of the purchase price. At this point of time the
buyer has paid off 90% of the loan but is reluctant to pay the balance
because he has still not received the title.
When the buyer approached the finance company for the title he was
informed by the clerk that the title was in the process of being issued.
However, the title was not issued and the buyer stopped paying the balance
of the loan.
As the buyer has not paid the monthly payments, the finance company
proceeded to auction off the property. The buyer wants to know his
position.
In this case, the buyer bought a property from an individual whom the
buyer perceived to be well off, influential and respectable. However,
these factors are of no value in terms of rights and obligation of the
parties.
What the buyer has purchased would have been reflected in the Sale and
Purchase Agreement (SPA). The property, which was owned by the seller,
moved to the purchaser. The seller would have received his money through
the loan from the finance company.
I am certain that the SPA would have stated that the property was being
sold without a title but all the interest and beneficial rights in the
property would have been transferred to the buyer by virtue of the SPA and
Deed of Assignment.
Since there was at that time no title to the land and the property, the
seller would have likely executed a Deed of Assignment to transfer all his
rights in the property to the buyer.
It is on the basis of such rights acquired through the SPA and Deed of
Assignment that the finance company would have granted the loan. In doing
so it is certain that the finance company would have required the buyer to
sign a Loan Agreement as well as execute a Deed of Assignment to assign
all his rights and interest to the finance company.
As far as the finance company is concerned they have nothing to do with
whether the title is issued or not; this is because all that they have
done is to lend money to the buyer and have provided themselves with a
security through the Deed of Assignment.
The statement made by the bank that the title is “on the way” is of little
value. In most cases the person may say that it was not intended to create
an excuse for non-payment of instalments. Or the person may even deny that
such a statement was ever made.
In any event, even if such a statement was made it would hardly provide a
basis to refuse to pay the instalments. This is because the finance
company did not sell the property to the buyer.
Therefore they are in no position to ensure that the buyer will get the
title. It is not within their scope of responsibility to do the needful
nor do they have any power in this regard. The buyer does not have any
right or remedy against the finance company for non-issuance of the title.
As such the buyer should pay the instalments or pay off the balance of the
loan. If this is not done the finance company will proceed with the
auction. The expenses of all this will eventually be borne by the buyer.
What the buyer can do is to quickly pay the bank. His rights will only be
against the seller.
But even if there is such right it will only come into existence after the
loan has been repaid and the property has been re-assigned to the buyer
who will than have all rights and interest in the property. Then he will
be in a legally correct position to pursue his claim.
However, the success of any action that the buyer may have against the
seller will only exist if the seller has given the undertaking that he
will ensure that the separate individual title will be issued within a
specified period.
However, if the seller is himself a buyer from the landowner and
developer, he will not be in a position to ensure that the title is
issued. All he may be able to do is to assist the buyer by allowing the
buyer to use his name to sue the landowner and the developer. If such
persons have given their consent to the assignment to the buyer then the
buyer could proceed directly.
All this said and done, a worry still remains. It appears that the
property is still not yet sub-divided and is likely to be in the name of
the landowner. It is always possible that the developer may have charged
the land for facilities, which have not been repaid. These are all matters
which the buyer needs to examine further in order to know where he really
stands. |
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