When is a property landlord ready, willing and able to settle the sale?

If there are ever any delays with completion (or settlement) of a property sale, the party seeking to recover a remedy against the other party must show that as at the original settlement date, ït was "ready, willing and able" to settle.  If it wasn't, then it cannot seek a remedy against the other party who was not also ready, willing and able.  This issue is further complicated if the vendor is selling "subject to existing tenancies", which requires additional steps with the transfer of bonds and directions to the tenants.

Santangelo v Yates Holdings Victoria Pty Ltd [2022] NSW 397

The Supreme Court considered this issue in relation to the 2021 sale of a block of 6 units (all on a single title) at Lakemba by the Santangelo family to Yates Holdings Victoria Pty Ltd.  The vendors sought orders for specific performance, based on the purchaser's failure to complete on various dates.  The purchaser, in turn, argued that the vendors were not ready, willing and able to complete, arguing that:

• the vendors had failed adequately to answer the purchaser's requisitions; and
• the vendors had not done all things necessary under the contract to transfer the benefit of certain tenancies to the purchaser at or before completion.

The contract for sale was exchanged in July 2021, with a 120 day settlement period (8 November 2021), and subject to existing tenancies - each of the units was already leased.  In addition to the standard contractual clauses, the contract also contained special conditions typically included in contracts such as this, such as the right to serve a notice to complete within 14 days if completion does not take place on the contractual completion date.

Failure to complete

The purchaser failed to complete on 8 November 2021, nor on 10 November 2021 (which was a later date appointed by the vendors), nor on 30 November 2021 (the date appointed after the vendors' issue of a Notice to Complete).  The purchaser failed to complete on any of those days.

The disputes

 Leading up to settlement, disputes arose between the parties regarding a requested deduction in the purchase price and the transfer of bonds.  On the appointed date for settlement, the vendors declared that they were ready, willing and able to settle, and asked the purchaser to urgently attend to finalising the PEXA workspace and sign off, so that settlement could proceed.  When the purchaser's lawyer failed to respond, the vendor's lawyer asked them to advise as a matter of priority their client's intentions.  The purchaser's lawyer argued a breach of the clause regarding the right of access and requested that access be granted.  The vendor's lawyer contested the claim for access to the property, noting that if the purchase had completed on time, the purchaser would already have had access.

When settlement did not happen on the rescheduled date (2 days after the original contractual date), the vendor issued a Notice to Complete.  Again, the purchaser's lawyer's communication with the vendor's lawyer was limited - as noted by the Court, "the pattern of [the purchaser's lawyer]'s earlier professionally discourteous lack of correspondence was repeated on 30 November".  When they finally responded, they again argued that the vendors were not ready, willing and able to perform the contract because of the "subsisting breaches" (of not providing access, and because of an allegedly illegible owners' consent form).

Taking it to Court

The vendor commenced the proceedings on 6 December 2021.

 The vendors argued that the purchaser's failure to complete was a refusal to perform promises for which the time for performance had arrived and therefore sought orders for specific performance.

Issues surrounded:

• the replies to the requisitions attached to the contract - in particular requisition #2 regarding whether anyone was in adverse possession of the property (to which the vendors replied that the purchaser should rely on the contract), and requisition #3 regarding the various tenancies; and
• the purchaser's right of access to the property to undertake "urgent repair works" (the vendors arguing that the works being done were not urgent works as authorised under clause 53 of the contract and were disturbing the tenants, and also suggesting that the purchaser was trying to obtain vacant possession of the units before completion).

 At around this time, the purchaser changed lawyers, the new lawyers then raising issue with the adequacy of the response to certain requisitions including the requisition regarding adverse possession.  Argument in Court then concerned whether the replies to requisitions were sufficient.  The Court referred to previous case authority which noted that:

• it does not follow that if a purchaser does not consider a vendor's answer to a requisition to be satisfactory, that the vendor cannot issue a notice to complete; and
• if the vendor fails to answer a question satisfactorily it is normally for the purchaser to give notice requiring the vendor to answer the question properly within a defined but proper time.

In this instance, the purchaser only raised issue with certain of the answers to requisitions in February 2022, well after the contract was required to be completed.

The adverse possession requisition

The Court rejected the purchaser's arguments, noting that the question regarding adverse possession goes more to who is (rather than who may be) in adverse possession (which may give right to claim an extinguishment of the vendors' title. The only want that the requisition could be answered is by verifying whether a possessory application has been filed in respect of the property, therefore the answer "the purchaser should rely on the contract" was considered sufficient because the contract attached the certificate of title which is part of the contract and which showed no possessory application had been filed.

Matters relating to the existing tenancies

The next argument related to the transfer of the tenancy bonds - and the failure by the vendors to provide a "Notice of Attornment" addressed to the tenants regarding the change in ownership - as mentioned in the relevant requisition, and therefore creating a contractual obligation on the vendors.  The vendors argued that the contract did not require these to be provided on completion, and instead, they had done everything possible to provide these items to the purchaser at completion.  The Court noted that the contract contemplated that those matters were to be attended to as part of completion, with the contractual rights in this respect continuing after completion "for a reasonable time" - and would take priority over any apparent inconsistent requisition.

This issue is now further complicated with the use of electronic workspaces - the Court referred to clause 30.15 which provides that a party is required to deliver documents holds them on completion in escrow for the benefit of the party entitled tot hem, and must immediately after completion deliver the documents as directed by that entitled party.

Specific performance

In conclusion, the Court held that the vendors established that the purchaser had breached the contract and granted a decree of specific performance, with the purchaser paying the vendors' costs of the Court proceedings.