Explain Rebecca’s rights.

Question 2

Rebecca owned an aroma therapy centre. She decided to renovate and extend it in order to stay ahead of the competition, moving the south wall to make room for two more studios and a relaxation pool. Rebecca would have to borrow money to achieve her objective but because she had always paid for things in cash she did not have a credit record, successful or otherwise, and in the view of institutional lenders the present value of the centre was too low to serve as a security for the loan she had in mind. Coincidentally, friends of Rebecca’s mother who lived in the next town, Mr and Mrs Armstrong, were looking for an investment but were very wary of institutional investment after losing a lot of money during the Global Financial Crisis. However, they trusted Rebecca implicitly and admired her plans. “Let’s do it this way!” proposed Mr Armstrong, “You transfer to us your registered title to the centre in exchange for the amount of the loan. Then we will rent your centre back to you. The monthly rent you pay will service the loan and also repay the loan by instalments over 20 years. When you have repaid the loan, which you can do at any time, you can exercise an option in the lease to repurchase the centre and we will re-transfer the title to you.” Rebecca saw the proposal as an ideal solution and they implemented it. The arrangement worked perfectly and everyone was very happy. However, after 10 years the elderly mother of Mrs Armstrong needed assistance and she and Mr Armstrong made plans to retire and move to Perth to live with her. Everyone started thinking hard what to do about the arrangement with Rebecca. A business acquaintance of Mr Armstrong, Mr Hooper, expressed interest in buying out the Armstrongs’ interest. The discussion progressed. Mr Armstrong fully explained the right of Rebecca to pay out the loan and get a retransfer of the title. The new arrangement went ahead and they embodied their agreement in a contract of sale. Mr Hooper would pay Mr Armstrong the current outstanding balance of the loan and Mr Armstrong would transfer the shop title to Mr Hooper. Rebecca’s tenancy would continue as before. Five years after Mr Hooper became registered as proprietor of the title to the shop Rebecca won in a rare flutter on the Melbourne Cup enough money to pay out the balance of the loan. She wrote to Mr Hooper explaining her intention to do so. At first Mr Hooper wrote back explaining his calculation of the outstanding balance, with which Rebecca agreed. However he later telephoned Rebecca, explaining that he was now the registered owner and he had his own plans for the centre. Some days later, Rebecca received a notice terminating her tenancy in one month’s time. Explain Rebecca’s rights. (10 Marks) (500 words)

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