A purchaser registers a transfer and later learns the vendor's attorney signed under a power of attorney that had already been revoked. What protection does the Land Transfer Act 2017 offer?
Correct Answer
B) The purchaser's registered title may be protected by indefeasibility
Under section 51 of the Land Transfer Act 2017, the registered purchaser obtains a title that cannot be set aside, even if the power of attorney had been revoked. The original owner can apply to the court within 6 months of learning of the registration, but the court can cancel the registration only if it would be manifestly unjust not to and compensation would not do (ss 54-55). Section 20 of the Property Law Act 2007 also keeps a power of attorney in force until the attorney receives notice of the revocation.
Why This Is the Correct Answer
Section 51 of the Land Transfer Act 2017 gives a registered owner a title that cannot be set aside, even where the instrument was void or voidable. The deprived owner may apply to the court, which can alter the register only if leaving the purchaser registered would be manifestly unjust (ss 54-55), and otherwise may claim compensation.
Why the Other Options Are Wrong
Option A: None, and the purchaser must hand the property back to the original owner
Registration gives the purchaser a title that cannot be set aside (s 51). The original owner has no automatic right to recover the land.
Option C: The transfer is void automatically and the register must be reversed
Registration cures the defect for the registered owner unless the court orders alteration under section 55 for manifest injustice, so the transfer is not automatically reversed.
Option D: The purchaser can recover damages but can never keep the property
The purchaser's registered title is the starting point; the register is altered only in exceptional cases, and the original owner may instead be compensated.
Deep Analysis of This Property Law Question
This question tests understanding of the indefeasibility provisions under the Land Transfer Act 2017, a cornerstone principle of New Zealand's Torrens system. The scenario involves a defective power of attorney that was revoked before the sale, creating a fundamental defect in the vendor's authority to sell. However, the Land Transfer Act protects bona fide purchasers who acquire registered interests for valuable consideration without notice of defects. This protection is crucial for maintaining confidence in the land transfer system and ensuring that innocent purchasers aren't penalized for defects they couldn't reasonably know about. The indefeasibility principle balances the need to protect property rights with the practical necessity of secure transactions. This connects to broader concepts of good faith dealing, the mirror principle of the Torrens system, and the policy objective of facilitating reliable property transactions in New Zealand's economy.
Background Knowledge for Property Law
Indefeasibility under the Land Transfer Act 2017 is found in section 51, with exceptions in section 52 (the equivalent provisions in the repealed 1952 Act were ss 62-64). Sections 54 to 56 give a limited court power to alter the register where someone was deprived by a void or voidable instrument, but only in cases of manifest injustice, and never against a good-faith third person who has since acquired the land.
Memory Technique
Think of indefeasibility as a SHIELD that protects innocent purchasers: S-Secure registration, H-Honest dealing, I-Innocent of defects, E-Exchange for value, L-Legal protection, D-Defends against prior claims. Once you're registered and behind the shield, you're generally protected from having to give up the property.
When you see questions about defective authority, revoked powers, or title problems, remember the SHIELD. Ask: Is the purchaser registered? Did they pay value? Were they innocent of the defect? If yes to all, the shield likely protects them.
Exam Tip for Property Law
Look for key phrases like 'registered proprietor,' 'valuable consideration,' and 'without knowledge.' These signal potential indefeasibility protection. Don't assume defects in authority automatically void transactions - the Land Transfer Act often protects innocent purchasers.
Real World Application in Property Law
An elderly property owner grants power of attorney to their adult child to handle property sales. The owner later revokes this power due to a family dispute but doesn't notify the solicitor. The child proceeds to sell the property to an unsuspecting buyer who pays market value and registers the title. Despite the revoked authority, the buyer's registered title may be protected under indefeasibility provisions, as they acted in good faith without knowledge of the revocation and completed proper registration procedures.
Common Mistakes to Avoid on Property Law Questions
- •Assuming all defects in authority automatically void property transactions
- •Forgetting that registration can cure defects for innocent purchasers
- •Confusing indefeasibility protection with automatic transaction reversal
Related Topics & Key Terms
Key Terms:
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