07.03.13

Purchaser for Value, not Registered Transferee

A buyer, Bella, and a seller, Steadman, enter into an agreement to transfer a plot of land that is registered under the Registration of Titles Act. Bella pays over the full purchase price and takes possession of the property. However, the parties do not register the transfer on the title and Steadman continues to be the registered owner of the land.

Registration of the transfer may be delayed for any number of reasons. Or perhaps, Bella is unsophisticated and believes that she is fully protected by the Agreement for Sale of the land or a receipt showing that she paid the full purchase price and feels comforted by the fact that she is in possession of the land.

In either circumstance, Bella remains very vulnerable to third parties who may be able to claim a superior legal interest in the land that Bella has paid full value for. Among the parties who may be capable of defeating her interest in the land are (i) a subsequent mortgagee who registers a mortgage on the title, (ii) a subsequent registered purchaser, should Steadman sells the land again and (iii) Steadman's executor and/or heirs should Steadman die before the land is formally transferred to Bella before and her name is registered on the title.

Bella's agreement for sale or receipt from Steadman will only protect her vis-à-vis Steadman. When third parties are involved, the law will favour registered interests in almost all circumstances. Therefore, in all but the very rarest of cases (e.g. involving fraud) a third party would not be deemed to know about Bella's interest in the land. A subsequent registered mortgagee or purchaser will defeat Bella's interest in the land. Bella's only recourse would likely be to sue Steadman personally for money damages.

It is a crucial step in the process of purchasing land that the purchaser secures her interest by ensuring that the transfer is done and that the balance purchase price is paid in exchange for the title registered in her name. Therefore, Bella's best protection is to ensure that the transfer is registered as soon as possible. In the interim, particularly where is clear that the transfer process is being dragged out or taking far longer than is usual, Bella may put the world on notice that she is claiming an interest to the land by lodging a caveat against the title in protection of her interest in the land.

After Bella lodges a caveat, she will receive a notification from the Registrar of Titles of any attempt to transfer the title or to register a mortgage on the title. She will be given an opportunity to attend court to prove her right in the property within a short period of time. Similarly, should Steadman die before the transfer is registered on the title, she will be given notice of any transfer of the land that is to occur in the administration of Steadman's estate and she will have an opportunity to assert her interest in the land.