Less is more: Common sense when raising and answering requisitions

There is an implied obligation, in an open contract, both to show good title and to answer requisitions which might be material to the title. A vendor’s solicitors should try to display candour and common sense when answering requisitions. If there is a blemish and they have no further information or documents to supply then they should simply say so. Inviting the buyer to agree that there is no question to be answered when there clearly is can make matters worse for their client.

In Active Keen Industries Ltd v Fok Chi-Keong ([1994] 1 HKLR 396, CA) F had agreed to sell a flat to A. The occupation permit for the building allowed for seven flats on each floor. The DMC and first assignment divided each floor into nine flats and there were, in fact, nine flats on each floor. A’s solicitor raised a requisition concerning this discrepency and expressed concern that the result was that there were unauthorised structures that might be the subject of enforcement action and that this risk constituted a defect in title. F’s solicitor pointed out that the question affected all of the flats, that the situation had persisted for around thirty years and that the authorities were well aware that there were nine flats and had not expressed concern. The Court of Appeal appeared to indicate that had F’s solicitors left matters there then they might have complied with their duty to answer requisitions. There was in fact no defect in title and they would have done all that they could to deal with the requisition.

Unfortunately, they muddied the waters by, inter alia, producing architect’s certificates, purporting to show that the works complied with Building Regulations. Production of these unhelpful certificates and a failure simply to acknowledge that they understood the reason for the requisition but had no material or information in their possession that could shed any further light on the matter were positively unhelpful. As a result, even though F had good title, he had failed to show it. Litton JA called on conveyancers to show ‘candour and common sense’ in their approach to answering requisitions.

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