NSW Property Law - Owner Occupied Property Leased Unexpectedly - What to Do?

[Renee sun]

Hi there, just wondering if you could help us.

We have a very distressed client. I want to help her to find a solution to the situation she is in right now. She has bought a Meriton property with the intention to live there herself. However, in the contract, apparently, there is a clause saying this property is for investment purposes only. Her solicitor has not picked up this clause in the contract and even though we, as her real estate agents, have mentioned in the sales advice it is an owner occupied property. However, the owner has signed the management agreement which comes with the contract, thinking that she might want to to lease it out later. Her solicitor has not picked up this clause and has not informed Meriton or the buyer with any evidence of correspondence.

Now the property is already leased out by Meriton before the settlement date and the owner is being left distressed as she did not expect she would be caught in this situation. Just wondering if there is a way she can move into her property and get the tenant to move out, which means they have to break the lease.

Is there anything her solicitor can do now under Property Law or anything we can do as real estate agents to help her get out of the situation?

 

[James D. Ford - Solicitor]

Hi Renee sun

The first thing to attempt to do, is to contact Meriton and find out if they can place this tenant into another identical vacant investment Property before the settlement date. I assume it is a very large development, and there will be plenty of vacant properties at this stage. The longer the situation is left, the harder it will most likely be to find a resolution.

Can you please clarify... are you saying that the tenant has already moved into the Property, prior to settlement?

Next, is to understand how the Property was leased without any communication to, or approval by the owner. This will require a review of the management agreement.

Did your client sign this agreement, without first seeking legal advice? Was the management agreement sent to the lawyer, or directly to your client?

Kind regards

 

[Renee sun]

Yes, the tenant has already moved into the property prior to the settlement date. The management agreement is signed as part of the condition of the contract of sale so basically, an agent like us are selling Meriton property are not allowed to leased out the same property for the buyer.

The management agreement is inside the contract of sales. And I believe the buyer's solicitor has given her the advice at this stage that its ok to go the court with this matter with the Meriton, and I believe her solicitor is trying to put the responsibility on us while as a matter of fact they should have pick up this clause and advise the buyer and also solicitor from Meriton that the buyer would like this property to be owner-occupied.

I am just wondering who is responsible in this case as the buyer is acting very irrational at the moment and we want our agency protected if we have to go to court.

 

[James D. Ford - Solicitor]

Hi Renee sun

Based on what you have advised, the situation is complicated... and I would need to see all of the relevant documents, and be apprised of any representations made by your agency to the Buyer, before venturing any legal opinion.

At this stage, the only help I can provide is to deny any liability, and if you are accused of anything by the lawyer... correspond on a "without prejudice" basis, and request full particulars so you can understand and seek legal advice regarding why they consider you responsible, and therefore, liable.


Kind regards

 

[Tim W]

I am just wondering who is responsible in this case as the buyer is acting very irrational at the moment and we want our agency protected if we have to go to court.

So far as helping the tenant is concerned, I agree with @James D. Ford - Solicitor above.

So far as you/ your agency is concerned, I'll add that if you are the selling agent,
then the buyer seems to have very good grounds to be very cross with you indeed.

1. Properly understanding the nature of the property you are dealing with is the first duty of the selling agent.
   (for example, what does "for investment purposes only" even mean?)
   
   
2. Properly and accurately describing it to a prospective buyer is the second duty of the selling agent.
   
   I suggest that this includes expressly bringing to their attention any aspect of the property or the deal
   which may be relevant to what you know (or reasonably should know) about be their reason for purchasing.
   I further suggest that you have a duty to the buyer not just to mention it, but to actively ensure that they understand it.
   
   You knew (or reasonably should have known) that the buyer wanted a place to live in themselves,
   but you sold them a lot with a tenant in place, or set to go in? Shame on you.
   
   
3. For a selling agent to rely on the buyer's lawyer to pick up any of the selling agent's mistakes and failings is a failure of professional conduct of the first order by the selling agent.
   
   
4. As to making a management agreement a special condition of the sale contract...
   You might reasonably make a separate, concurrent contract for property management,
   but you seem to be suggesting that the management agreement was a term of the Contract For Sale - for a lot you knew was being bought to be for owner occupancy...?

 

[Renee sun]

Hi guys, thank you for your response and help. As I am just a junior property management assistant and have been the third person so I don't think I expressed the whole situation fully and correctly.

What I found out was that we had to correspond with Meriton and informed them verbally. I am not sure if we have emailed them as well that buyer wishes the property to be owner occupied, but it is written clearly on the sales advice. And we have talked to the solicitor who is a friend of the buyer and he is aware that he needs to write a letter to the Meriton solicitor about this, however, he has delayed his action.

Also, I am aware now that he had a buyer who was interested at the time as well for the same unit. My colleague has called Law Access and they have suggested and have given her the number for the office of legal service commissioner so she can submit a complaint about the misconduct of the solicitor. My boss did not want the situation to escalate to the court and I was really hoping I could find a way for everyone as my boss does wish to maintain a good relationship with Meriton and our client as we are a relatively new business.

The good thing is thaat things have been resolved with the minimal damage now.

And your information really opened my eyes and gave me some insight. I can use it for gaining my own knowledge for the property industry. This forum is so useful, I think it's pretty amazing this exists. I just took a chance and registered to see if anyone would respond, and I seriously did not expect I would get an response so soon yesterday.

I am excited to tell people about this if others need some opinion regarding properties.

Cheerio. Have a fabulous Christmas, all!!

 

[Tim W]

1. You're welcome
   
   
2. Not that I speak for others, but it was pretty clear that you were new-ish and fairly junior,
   and that's not a problem.
   
   
3. I hope your take-away from this event is that helping people with
   the largest single personal transaction that most of them will ever undertake,
   a transaction which, for most of them, will define their financial being
   for the bulk of the working lives, requires rather more ethics,
   and far more simple competence, than you may have realised up to now.
   Someday, when you are an agent yourself, you will now be better at your job,
   and that is to the greater good.
   
   
4. Feel free to ask any question about any topic at any time.