LAWS216 / LAW316 Property Law: Hypothetical Problem Question
Aria and her second husband Bob are the registered proprietors in fee simple under the Real Property Act 1900, NSW of a riverside property near the Hawkesbury river in New South Wales. They hold the property as joint tenants on trust for the benefit of Aria’s son from her first marriage, Ethan. As is the usual situation, no notification of the trust appears on the Register and Ethan, trusting his mother and step-father, has not lodged a caveat noting his interest as beneficiary. The family intends to eventually set up a spa and yoga retreat but, in the meantime they all live in Sydney.
While all the family members are completing their training as yoga and wellness instructors Aria and Bob enter into an oral lease of the property with Grayson. He is going to use it to grow organic vegetables and, eventually, will also supply the venture with healthy food. He has planted seeds and visits the property every couple of days to water them and to remove weeds. The lease is for a period of 2 years and he is paying market rent.
Bob is not really interested in yoga, or in Aria and her son, and so he secretly enters into a contract to sell the property to Caden for $770,000. He signs his own name on the contract and forges Aria’s signature. Just before exchange of contracts Caden inspects the property. He notices the cultivated areas but thinks nothing of it. Caden pays the usual 10% deposit on exchange of contracts.
A few days later Caden meets Ethan in a local bar. Ethan tells Caden about the plans for the yoga and health retreat. Caden says nothing about his contract but immediately contacts Bob and tells him that he is ready to complete his purchase. Once again, Bob signs his own name onto the Transfer, and forges Aria’s signature. At completion he hands this, and the Certificate of Title to the property to Caden, in return for the balance of purchase price of $700,000. Bob then disappears with the money.
After settlement Caden goes to take possession of the property only to find Grayson there looking after his plants. Grayson tells him that he still has 2 years remaining on his lease and that he intends to stay for that long. Caden then immediately lodges his Transfer for registration and he becomes the registered proprietor the next day.
Aria and her sons have now found out what has happened and they want to know whether Caden’s registration as proprietor can be attacked.
Caden wants to know whether he will be subject to Grayson’s lease if their action against him fails.
Advise the parties.