Contracts for the sale and purchase of land—who is the owner pursuant to section 11

A owns a block of land for which a plan of subdivision has been created but not yet registered. The land has been pegged out into four smaller lots (Lots 1 to 4) and A proceeds to offer the lots for sale. In May 2010, B enters into negotiations with A to purchase Lot 1 for a consideration of $50,000. B wishes to take possession as soon as possible, however, as Council approval for the subdivision has not yet been received no definite date for completion of the contract of sale can be given. A contract is executed which states that completion is to be 14 days after a Certificate of Approval is issued by the Local Council. The contract provides that upon payment of a deposit of $5,000, B will have possession immediately and will pay monthly instalments of $500 with the balance payable upon completion. B pays the deposit on 10 June 2010. B then clears and levels the land in preparation for building a home. Council approval of the subdivision is granted in early September 2010 and the plan and transfer of Lot 1 are soon after registered. Settlement occurs in mid September.

At 30 June 2010, A is the registered proprietor of the land, however B has possession of the land and is the owner for land tax purposes from 10 June 2010. Possession by B was established by the fact that the agreement gave B possession in the capacity of a purchaser and that B had carried out, on her own behalf, certain work on the land which can be considered to be an act of possession.

X subdivides a vacant parcel of land with the intention of selling all the subdivided lots. Z, a builder, wishes to purchase three of the vacant lots for $40,000 each in order to build ‘spec’ homes on them. As is normally the case in developer-builder transactions, Z needs to build the homes and on-sell the properties before the full initial purchase price can be paid to X. In February 2010, contracts for each lot are entered into. The contracts provide that Z is to pay to X deposits of $10,000 for each lot with the balance in relation to each lot to be paid to X upon Z selling each property to a third party or after six months has elapsed whichever comes first. Z is to obtain immediate possession. The contracts also stipulate that the homes must be of a certain standard in keeping with covenants relating to the standard of development for the subdivision. X is to retain access to the land in order to keep check on the size and quality of the homes. By 30 June 2010, Z has constructed houses on two of the lots however has not completed the sale of either property. The third lot is still vacant. None of the contracts have been completed.

At 30 June 2010, X is still the registered proprietor of the three lots, however Z has possession of each lot and is the owner for land tax purposes. Although early possession was given to Z under the terms of the contract to allow Z to commence building homes, Z obtained that possession as a purchaser. Z is entitled to the rents and profits from the land and has freedom to sell to anyone for whatever price can be obtained. Through the contracts, X has placed some limitations upon Z in relation to building standards and X still has right of access to the land. This does not amount to occupation or possession.

Same as Example 2 except that rather than execute contracts, X and Z enter into separate joint venture agreements for each lot. Each agreement provides that Z is to pay a bond of $5,000 to X and obtain immediate possession to construct houses on each lot. Z is to find the buyers and arrange the sale of the lots at a price mutually agreed upon by Z and X. When a buyer is found, the contract of sale is to state that X is the vendor. All sale proceeds are to go to X. After deducting the value of the land and legal expenses, X pays to Z the balance of the sale proceeds. If Z has not found a buyer after six months, a contract for the sale of the land from X to Z is to be executed. At 30 June 2010, Z has been unable to find any buyers, however is still within the six month ‘cut-off’ period.

At 30 June 2010, X has possession of the land and is the owner for land tax purposes. Although the joint venture agreement stated that Z was to have immediate possession, that possession was no more than a licence to occupy for the purpose of constructing a house and arranging its sale. It can not be considered that Z has possession in the nature of a purchaser. The agreement does not constitute an agreement for sale since such an agreement does not come into existence unless a condition precedent is met, that is, unless Z can not find a buyer within six months. X is still entitled to receive rents and profits from the land and maintains some control over the sale price of the land. On the other hand, any profits that Z receives come from the joint venture agreement itself and not from the land.