In this article, we will explore the meaning of "vacant possession" during the sale and purchase of property in NSW and highlight its significance to both buyers and sellers by examining two relevant case studies.

The Contract for the Sale of Land includes two options on the first page that affect the possession given to the buyer upon settlement: vacant possession and subject to existing tenancies. If the box for "vacant possession" is ticked, the seller must ensure the following at settlement:

1. The property is free of occupants.

2. The property is clear of rubbish.

3. No one else has the right or ability to occupy or possess the property except the buyer.

4. The property is devoid of chattels, such as furniture.

Consequently, it is crucial for the buyer to inspect the property before taking possession. If there are items left on the property that are not included in the contract, the conditions for vacant possession have not been met. This would constitute a breach of contract by the seller, and the buyer may no longer be obligated to purchase the property or may pursue legal action for specific performance.

Case Study: Berrell v Combines Pastoral Pty Ltd [2015] NSWSC 1334

In the case of Berrell v Combines Pastoral Pty Ltd [2015] NSWSC 1334, Lindsay J analysed the fundamental principles surrounding the transfer of "vacant possession." The court assessed whether the presence of rubbish on the sold land impeded the buyer's unrestricted physical enjoyment of the property.

Facts:

In this case, the sellers (plaintiffs) and buyers (defendants) agreed to a contract for the sale of a property at an auction. The contract specified that the property would be sold with vacant possession. The property included a pool containing building waste and marked with safety tape. A special condition in the contract stated that the buyer acknowledged and agreed not to raise objections or claims regarding the physical condition and state of repair of the property and its improvements.

During settlement, the buyers refused to complete the transaction due to their dissatisfaction with the garbage in the swimming pool. As a result, the sellers terminated the contract. The buyers argued that the sellers were unable to fulfill their obligation to provide "vacant possession" on the completion date since they had not cleaned the building waste in the pool, which the sellers used as a dumping ground. The buyers further contended that the sellers' failure to provide vacant possession invalidated their right to terminate the contract.

In response, the sellers claimed that they had no obligation to clean the pool due to the aforementioned special condition and that the building waste in the pool did not significantly impede or interfere with the buyers' enjoyment of the property.

Judgment:

The court concluded that the sellers validly terminated the contract, and the buyers' claim for specific performance was unsuccessful by considering the following factors:

-       The pool contained waste during the auction, and the buyers accepted its condition at that time; and

-       The pool's condition aligned with the overall nature and character of the property.

Lori Ann Nelson v Lynette Marie Bellamy [2000] NSWSC 182: What Constitutes “Substantial Impediment”?

When a vendor promises to provide vacant possession to the purchaser, it generally means they must remove all items that are not part of the sale, including any rubbish, before the settlement. However, in the case of Lori Ann Nelson v Lynette Marie Bellamy [2000] NSWSC 182, the vendor left various building materials on the property: 1 large wooden pallet, 3 wooden brick pallets, quantity of concrete blocks, quantity of pine board flooring off cuts, quantity of timber off cuts, 1 circular pole, broken concrete blocks, quantity of loose dried cement, quantity of other builder's rubble and used materials and two for sale' sign boards[1]. The purchaser was dissatisfied with this and attempted to terminate the contract.

Despite the significant number of items left behind, the Supreme Court of NSW ruled that these items did not create a "substantial impediment," and therefore, the purchaser did not have the right to terminate the contract due to the failure to provide vacant possession. The court agreed with the seller's argument that these items did not affect the living areas, including the courtyard, nor did they substantially hinder the use of the undercroft or side alleys, which were not considered a "substantial part of the property[2]."

If you have any further questions around "vacant possession," please feel free to reach out to us for further information.

[1] Lori Ann Nelson v Lynette Marie Bellamy [2000] NSWSC 182 at [24].

[2] Lori Ann Nelson v Lynette Marie Bellamy [2000] NSWSC 182 at [32].

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*