Tuesday, September 15, 2009

Selling of Property

Selling of Property
By: Bhag Singh

When a landed property carries the joint namesof husband and wife, there is no unilateral right on the husband's part to sell it without his wife's concent.

It is often the case that a property is purchased in the joint names of the husband and wife. The reasons for this are varied. In some cases, the husband and wife contribute equally to the purchase.

However, there are instances where there is no direct monetary contribution by the wife. Yet for different reasons, the name of the wife is included as co-owner of the property. This is not do deny contribution by the wife in a broad sense.

In many such cases, there is a tendency by the husband to think that he is the de facto owner of the property. And with this mindset, he may enter into an agreement to sell the property with both parties assuming that the wife’s signing of the agreement, if any, will be but a mere formality.

However, when the time comes for the document to be signed, the wife may refuse to do so. The refusal is on the basis that being co-owner of the property, she does not agree to the sale.

Should this happen, the question that arises is whether the wife can be compelled to sell her share. And if as a result of her refusal, the transaction cannot be completed, what are the remedies available to the buyer?

Wife’s rights

With regard to the rights of the wife to refuse to sign any document to part with her share, little need to be said. If she is the registered owner of the property, it is she who must agree and not anyone else.

It would be different if she had authorized her husband, in which case he would have been acting as her agent. However, in the absence of cogent evidence, it cannot be assumed that the husband is authorized to sell her part of the property just because he is her husband.

The fact that the wife did not contribute even a sen to the purchase of the property is irrelevant. Even if she did not contribute in looking after the home and family directly, it also would not matter. The property is hers in law.

The position could be different if the wife were not the beneficial owner. This can come about by reason of her holding the property in trust. In such case, it would belong to the beneficiary of the trust who would be the owner. Different considerations would apply.

The buyer

Where does this leave the buyer? He may have paid the deposit and be looking forward to ownership of the property. The transaction is stalled and there is refusal on the part of the wife, leading to the transaction becoming abortive.

Of course, the buyer could file an action for specific performance of the contract. However, the likelihood of the court allowing specific performance of the entire contract where the wife is half owner would appear at the best of times to be unlikely.

It may be asked whether it would be an option for the husband to offer at least to go ahead and transfer his half share of the property to the buyer. This would no doubt show an element of bona fide in the matter where it is inability rather than unwillingness on his part.

Such an approach would have its limitations.

It could work where the subject matter is a big piece of land of which parts could be separately used and at the appropriate time capable of being partitioned.

However, it would be impracticable if it were a family residence. The buyer may have wanted to have the property as a whole and dividing the property into two parts may not necessarily mean that the market value of each part is the same.

In the absence of such willingness, the buyer would be left without the property he has agreed to buy. His remedy will be in monetary compensation. The question that rises is: to what extent is the buyer entitled to damages for the property he is unable to acquire?

Measure of damages

He would no doubt be entitled to a refund of any deposit paid.

However, the damages may not stop there. An example is the Court of Appeal case of Malhotra v Choudhury. The plaintiff and defendant, partners in a medical practice, agreed that the defendant buy the property on which the medical practice was carried on.

It was also agreed that if for any reason the partnership was terminated, the plaintiff would have the option to buy back the property at a certain price that was capable of being fixed in the absence of the agreement.

In the course of the conveyance, however, the transfer was to the defendant and his wife.

At the point of time, no significance was seen. However, when differences led to termination of the partnership, the exercise of the option was challenged.

The court held that the defendant was in breach of his contractual undertaking, and not only was he liable to refund the deposit but also to pay damages on the basis of loss of income from the practice which could have been carried on.

A question that arose was whether the defendant ought to be made liable, when in fact he had sincerely wanted to allow the option to be exercised but for his wife’s refusal.

This could be in mitigation of damages though not relevant to the question of liability.

However, in this case, the court referred to the evidence available which showed that it was not the inability but the unwillingness on the part of the defendant to hanour his obligation.

Source: Articles of Law, StarTwo, September 8, 2009

1 comment:

Philippines properties said...

This is a great. Thanks for the post. Like the Wife’s rights.

Paula M