0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

sale and purchase of land - can I get out of this contract?

11 December 2008

A seller in 2007

In Chinnock v. Hocaoglu, the Court of Appeal ruled that a Buyer could still proceed to enforce the contract to purchase a property even though it had not strictly complied with the timescale imposed in the contract.

The Contract provided for the sale for £120,000 plus the sellers legal costs of £500 plus VAT and disbursements. The contractual date for completion was the 12 February 2007. Following notice to complete, completion was due on or before the 26 February 2007. On that date the buyers solicitors sent the balance of the purchase price plus some apportioned service charges but did not include the sum of £500 plus VAT plus £12 disbursements.

The money did not arrive until 2:45pm and under the terms of the contract it should have been paid by 1pm.

The seller refused to complete on the basis that (1) the completion money had been delivered after the deadline of 1pm, and (2) that it did not include the sum of £599.50 for the sellers legal costs.

The buyer sued and the seller won at the first instance - the Judge held that not paying the sellers legal costs along with the remainder of the completion money entitled the Seller to rescind the contract.

The Court of Appeal overruled the decision as the wording in the contract was "the Purchaser will be responsible for the legal costs incurred by the Vendor in relation to the sale of the above being £500 plus VAT plus office entries of £12". There was nothing in the contract which obliged the buyer to pay these as part of the completion monies. The buyer did not dispute that they were responsible for them and provided they were paid together with an extra days interest because the completion monies arrived after 1pm, the buyer was entitled to specific performance of the contract.

A buyer in 2008

Alchemy Estates Limited v. Astor concerned a contract for the sale of a leasehold house in Kensington, dated 15 January 2008 for a price of £1,265,525. The buyer paid a deposit of £126,152.50.

The seller was entitled to purchase the freehold under the Leasehold Reform Act 1967 provided they served the correct enfranchisement notices on the Landlord. The sale was also conditional on the landlord granting a Licence to Assign.

Completion due on the 13 March 2008. If three working days before the completion date (or before a later date on which the parties had agreed to complete the contract) no Licence to Assign had been obtained, either party could rescind the contract by notice to the other party.

The seller, having agreed the format of the enfranchisement notice with the buyer, served the notice of the claim on the landlords solicitors. Unfortunately, neither the buyers nor the sellers solicitors applied for a Licence to Assign - each thought the other was dealing with it and it only became apparent on the 6 March that it had not been dealt with.

Completion did not take place on the 13 March but by the 7 May 2008, the landlords solicitors had issued an engrossment Licence to Assign for signing by the buyer and seller. On the 19 May, the buyer served notice of rescission stating that on the 19 May 2008, the seller was not in a position to comply with the requirements for the landlords consent - i.e. that the Licence to Assign had not been completed and therefore they had the right to rescind.

Unsurprisingly the notice was accompanied by an offer to buy at reduced price of £1,072,296. On the 21 May 2008, the sellers solicitors sent the buyers solicitors the Licence to Assign executed by the seller but on the 27 May, the sellers solicitors returned the Licence to Assign, unsigned, saying that the matter was not proceeding. On the 6 June 2008 the buyers solicitors requested the return of the deposit. The seller counterclaimed maintaining there had been no effective rescission of the contract and claiming specific performance.

The court ruled that the Buyer had no right to rescind because between the 10 March and the 19 May it had not given any indication that it did not intend to proceed. It had encouraged the seller to take steps to obtain the landlords consent to the assignment and to serve the notice of enfranchisement at considerable expense to the seller.

The Court ordered specific performance. As one of the reasons the buyer gave for rescinding the contract and trying to buy at a lower price was that funding arrangements had been called in for review, it will be interesting to see whether or not the buyer found the funds to complete the purchase.

Conclusion

These cases do reflect the changes in the market. Early in 2007, a frustrated buyer considered it worthwhile to sue to enforce a Contract to buy a freehold reversion for £120,000. By May 2008 a buyer was struggling hard to get out of a commitment to buy a property for £1,265,525 which by then he rated as only being worth £1,072,296.

If there is any conditional element in a contract, it is always worthwhile checking the small print to see if there are any get out provisions should either party be regretting their earlier decision to enter into a contract. However, the time limit for exercising such rights is very limited.

focus on...

Richard Nicholas provides a data protection update

As part of our regular updates for in-house lawyers, Richard takes a look at what has changed in data protection law over the last six months

View

Employment law updates - hear from Harry Taylor

As part of our regular updates for in-house lawyers, Harry looks at some topics that frequently arise in Employment Tribunal claims.

View

IR35 Tax update - hear from Andrew Noble

Andrew discusses changes to IR35 tax rules which are due to be implemented in April 2020

View

Care Quality Commission and health & care regulatory update 7 November

Carl May-Smith provides an update on CQC & Competitions & Markets Authority enforcement.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up



Select which mailings you would like to receive from us.

Sign up