# Pre-Purchase Due Diligence & Buyer Beware # It’s a homebuyer’s worst nightmare … purchasing the dream family home and moving in, only to find out years later it was never really yours. After a six-year legal saga, an Appeal Court unanimously confirmed that The Qld Government should pay $2.7m to the successful bidders at a Mortgagee-In-Possession Auction for its role in registering a Caveat over the property and refusing to transfer Title.
When the buyers went to transfer the property title to their names, they found out the property had previously nother caveat placed on it by its owner who claimed the house had been fraudulently mortgaged.
Nevertheless, they were able to obtain possession. Five years later they were forced to vacate when the Supreme Court subsequently found the property still belonged to the 83-year-old previous owner. This Court also found the multiple mortgagees — described in the documents as “lenders of last resort” — were not entitled to exercise the power of sale over the house and that mortgagees attempts to verify that Ms xxx (the 83 year-old owner) had executed the mortgage on her home before selling her property were “wholly inadequate”.
In appealing the lower Supreme Court decision, the State wanted the compensation order to be set aside and the claim for compensation be dismissed, claiming among other things, the couple “caused” or “contributed to” the loss because of the failure to search the register before signing the contract.
In a 41-page judgement, the Court of Appeal said the fact the relative had forged Ms xxx’s (previous owner’s) signature was the “root cause” of the fraud that led to the buyers losing the house. “The fact that the mortgagees failed to take steps that might have detected the fraud tends to emphasise it,”. “There is nothing unjust in compensation provisions operating in a case like this to protect victims of fraud, such as the purchasers, who paid a purchase price but did not obtain title because of the registrar’s intervention to protect Ms xxxx’ (previous owner’s) interest.”
As at the date of this article, the Qld Government still had not decided to Appeal this matter to the High Court. The issue of legal costs also remains to be settled. We understand there are other litigation proceedings current, concerning several other parties involved in this matter.
Issa v Owens & Ors [2023] QSC 004
State of Queensland v Morecroft & Anor [2024] QCA 11
Remarks :
- Pre-Purchase Due Diligence is essential – Buyer Beware
- Had the Auction ‘buyers’ known of the background disputes, mortgages, caveats, would they have bid in the way they did at the Auction?
- Whilst the buyers have been compensated to some extent, it does not fully cover the loss in potential capital appreciation.
- The local median house price rose 136% from $1.4m when the property was purchased at auction, to $3.3m when the Court of Appeal found in buyers favour.
- The property was sold by its legal original owner June 2023 for $2.66m some eight months prior to the Appeal Courts decision – 111% higher then the auction ‘price’ in June 2018 of $1.265m.
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