week fourteen Flashcards
what is an option to purchase
the right to purchase the property at any time
what is a right of first refusal
a personal right to be offered the property first if and when the owner decides to sell
what does an option to purchase give the grantee (person who has it)
an equitable interest in land that is sufficient to support a caveat because it can be exercised at any time during the lease
what does a right of first refusal give a grantee (person who has it)
the landlord will be liable for damages due to breach of contract if they fail to offer the property to the lessee first on those terms on which they are willing to sell before a third party.
a caveat is not supported
what is authority for the grantee of an enforceable option to purchase acquiring an immediate equitable interest in the land capable of supporting a caveat
Bevin v Smith
if an option to purchase is contained in a registered lease, what is the tenant able to do
not only do they have an indefeasible registered leasehold interest by virtue of the registered lease, they also have an equitable interest through their option to purchase sitting within that lease.
Waters v Auckland City Council - if lease is registered, the tenant can caveat the landlord’s title to protect its equitable interest as a grantee of an option to purchase
why lodge a caveat by virtue of your option to purchase when you already have a registered lease?
a registered lease won’t prevent the sale of the property but a caveat stops a transfer going ahead without notification of the tenants equitable interest under its option to purchase
does a right of first refusal impose any obligation on the owner to sell the land
no
what case is authority for a right of first refusal not being a caveatable interest because it is only a personal right against the owner?
Re Rutherford
how could a right of first refusal become an option to purchase
if there is a triggering event
in what case did Tipping J outline the 4 stages in the progression from a mere right of first refusal to a contract?
Motorworks Ltd v Westminister Auto Services
what are Tipping J’s 4 stages in the progression from a mere first right of refusal to a contract
stage 1 - only right of first refusal, no interest in land, no caveatable interest (Re Rutherford)
stage 2 - a triggering event occurs that requires an offer to be made to the person with the right of first refusal - no interest in land or caveatable interest unless the vendor has offered sufficiently certain terms on which he/she is prepared to sell
stage 3 - an offer has been made (where the terms can be ascertained) pursuant to the right of first refusal - an option to purchase is created and there is a caveatable interest in land as control falls to the tenant
stage 4 - a contract results from the acceptance of the offer under the right of first refusal - a contract is in existence and there is a caveatable interest in land
what happened in Botany Land Development Ltd v Auckland Council
Auckland Council lodged a caveat over the title to stop sale and purchase of Botany Land Development going ahead.
The brother and sister which owned the property were happy to sell it to the council for it to become public property. At the time of the agreement, both parties had it in their respective trusts.
Council lodged an encumbrance (restriction/limitation) on the title when the trust agreed in 1998 - giving council right of first refusal as and when the trust was prepared to sell it.
Brothers block had smooth negotiations.
The agreement said that “when certain named persons no longer reside there it is to be offered to the Council for sale.”
Sister wasn’t happy with the council and tried to sell elsewhere - Botany Land Development. They entered into an unconditional ASAP.
Council heard of this and lodged a caveat on the basis of its covenant on the title so the ASAP could not be completed.
The sister and the trust got around the term by not leaving the property until sold at which time Botany Land Development would have an indefeasible registered interest unable to be touched.
CA held that under the terms of the encumbrance the Council would have no caveatable interest until the property was vacated. They would only be able to exercise their right of first refusal when the family left.
Because the council had notice from the trust they were going to sell, there was nothing to stop them from applying for an order for specific performance and they had a reasonably arguable case for an interest which could be completed through specific performance. This ability protected them enough.
Overall - no caveatable interest under the right of first refusal, but can protect the interest through other methods (specific performance)
what happened in McLachlan v Mercury Geotherm Ltd
McLachlan owned land with geothermal activity and entered into a joint venture with other companies to make use of it. They sold their land to these companies and leased the land not required for the power station back for their farming. A right of first refusal was contained in these lease.
The venture failed and the lessors was placed in receivership. The receiver for the lessor advised McLachlan they were looking to sell but entered a contract with Contact Energy, who had a right of first refusal in respect of the land itself that could only be exercised after the McLachlan lease was dealt with (terminated or offer to McLachlan).
HC/CA/PC held: no evidence of terms and conditions of the proposed sale to Contact Energy - no clear terms = lessee’s right of first refusal was not triggered.
Terms and conditions of the sale are essential before the court can become involved by specific performance. Here there were no clear terms on which the receivers were prepared to sell as well as no clear evidence of the receivers’ intention to sell, which both would be needed before the lessee’s right of first refusal was triggered under the Motorworks 4 stage test.
can a conditional ASAP be a caveatable interest? authority?
yes, Bevin v Smith
