LAW ON DOUBLE SALES IN ZIMBABWE (IMMOVABLE PROPERTY)
WHAT IS A DOUBLE SALE?
- A double sale occurs where a seller has fraudulently sold his/her immovable property to two different buyers and both buyers paid the full purchase price for the property.
“A sells a house to B and thereafter sells the same house to C”
HOW DOES THE LAW RESOLVE SUCH A MATTER FOR THE AFFECTED PARTIES IF TRANSFER HAS NOT YET PASSED?
The correct legal position in double says was stated by McNally JA in Guga vs. Moyo & Others 2000 (2) ZLR 458 at 459 had this to say,
“The basic rule in double sales where transfer has not been passed to either party is that the first purchaser should succeed. The first in time is the stronger in law. The second purchaser is left with a claim for damages from the seller, which is usually small comfort. But the rule applies only ‘in the absence of special circumstances affecting the balance of equities.”
What if the third party/second purchaser did not know that another party had interests or acquired the property?
- When the second purchaser is entirely ignorant of the claims of the first purchaser, and takes transfer in good faith and for value, his real right cannot be disturbed.
What if the third party was given notice or knew that the property had been sold to another?
- Where a double sale has occurred and the second buyer has obtained transfer of the property, the first buyer may seek an order for the second buyer to transfer the property to him/her on the grounds that the second buyer had knowledge of the first sale before transfer of the property was registered in the second buyer’s name. The second purchaser’s real right can and normally will be overturned subject to considerations of practicality.
- The crux of the matter is not whether the first purchaser can prove that the second purchaser had acted fraudulently in regard to its purchase of the property but whether, after agreeing to purchase the property but before the property was transferred to it, the second purchaser had notice or knowledge of the prior existing sale of the property to the first purchaser. If the first purchaser is able to prove that the second purchaser had such notice or knowledge, then this would favour the first purchaser’s claim to the property in the absence of special circumstances affecting the balance of equities.
SPECIAL CIRCUMSTANCES AFFECTING BALANCE OF EQUITY
- Special circumstances affecting the balance of equity will include mortgage bonds, caveats or other encumbrances registered against the property by the second purchaser. Whether the second purchaser has spent money repairing or making improvements to the property. Whether complete transfer of the property has occurred and so forth. In deciding whether there are special circumstances affecting the balance of equities, the court bears in mind that the primary right of the wronged buyer is the remedy of specific performance which will be granted unless there is some equitable reason disqualifying him from obtaining such relief.
There are two instances where parties to a double sale may face criminal charges:-
- A seller who receives money from two purchasers whether he has informed one of the parties or not commits the crime of fraud. The fact that the seller has misrepresented facts to one of the parties is enough for him to be charged with fraud.
- A second purchaser who knowingly and with intent to defraud the first purchaser takes transfer. His real right can and normally will be overturned subject to considerations of practicality. In effect, the second purchaser is bound by the rights of the first purchaser in the property, and it is a species of fraud on his part if he attempts to defeat those rights. It is not necessary to prove any intention to frustrate the rights of the first purchaser. The mere fact that the second purchaser is aware of the existing rights and nevertheless continues to enforce his own rights, and thereby defeats or infringes the earlier rights, constitutes a species of fraud upon the first purchaser.
What is Fraud?
- When a person makes a misrepresentation and the misrepresentation causes prejudice to another or is potentially prejudicial to another, they commit an act of fraud. Fraud is also to cause another person to act upon the misrepresentation to his or her prejudice, or acting while knowing there is a real risk that another person may act upon the misrepresentation to his or her prejudice.
- Fraud is regarded as a crime under s135 of the Criminal Law (Codification and Reform) Act.
HOW TO AVOID SUCH A SITUATION
- The purchase of immovable property no matter how desperate one is, should never be done hurriedly. Careful investigation of the intentions of sellers, as well as the records and documents in relation to the property must be carried out.
- A patient and diligent Deeds search with the assistance of lawyers who are knowledgeable about property transfers will assist in revealing the status of the property vis-à-vis ownership and encumbrances.
- It is always advisable to engage from the onset, the services of a lawyer who is knowledgeable about property transfers so that one is properly guided and advised throughout the transaction.
While care has been taken to ensure that this publication is accurate, Kanokanga & Partners accepts no liability for any prejudice, loss or, damage of whatsoever nature which may arise from reliance on any of the information published herein. The contents of this publication are for general information purposes only. The purpose of this publication does NOT constitute our legal or professional advice. Readers are advised not to act on the basis of the information contained herein alone. Every situation depends on its own facts and circumstances.
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