Property 12

Question 1

What is the only circumstance where delay will give the innocent part the right to cancel the contract outright?

Answer 1

Only where time was of the essence (note, it generally isn’t of the essence under the Standard Conditions of Sale)

Question 2

Under the Standard Conditions, what is required for time to be of the essence in a residential context?

Answer 2

It must be specified in the contract as a special condition (rare)

Question 3

Even if time is not of the essence, what does any delay in completion, however minimal, give rise to?

Answer 3

Damages in the form of an interest penalty for any delay

Question 4

If funds are received after the set time for completion (2pm in the Standard Conditions of Sale), what is the seller entitled to?

Answer 4

Completion is treated as taking place on the next working day. The seller is then entitled to interest at the contract rate on the outstanding balance for the number of days that completion was delayed.

Question 5

What is the interest penalty calculated on?

Answer 5

The outstanding proceeds, i.e. purchase price and contents price minus deposit

Question 6

As long as they notify the delaying party, what other option is available to an innocent buyer where there is a tenant in situ in the property?

Answer 6

They can elect to take the rental income until completion instead of the interest

Question 7

If completion was due to take place on a Friday and instead took place on Monday, how many days of interest is payable?

Answer 7

3 days

Question 8

Where completion is delayed and time is not of the essence, what must the innocent party serve on the breaching party if they want to set the ball in motion toward being able to cancel the contract, and what is the effect of this?

Answer 8

A notice to complete, which makes time of the essence and gives the defaulting party 10 working days, excluding the date of service, to complete

Question 9

From what point can a notice to complete be served, and what three things must be true of the party serving?

Answer 9

Any time after completion was due, and innocent party must be ready, able, and willing to complete.

Question 10

Can the innocent party’s solicitor serve a notice to complete on the defaulting party without express permission?

Answer 10

No. They should first find out the reason for the delay and take instructions from the client. If it seems likely that completion will take place soon, it may not be necessary to serve a notice to complete (e.g. if there is just a delay in sending out the buyer’s mortgage advance from the lender).

Question 11

What renders a seller ready, willing, and able to complete under the Standard Conditions of Sale?

Answer 11

If the sale proceeds will be sufficient to pay off the mortgage

Question 12

What trap should we look out for on the exam regarding a notice to complete?

Answer 12

The innocent party trying to serve a notice to complete in order to cancel the contract in a situation where completion has occurred, albeit late. A notice to complete can only be served if completion has not yet occurred.

Question 13

After service of a notice to complete, how long does the delaying party have to complete?

Answer 13

Ten working days, excluding the date of service

Question 14

Upon receiving a notice to complete, what must the buyer do if they have negotiated and paid a deposit lower than 10% to the seller?

Answer 14

Advance enough funds such that 10% of the purchase price has been paid over

Question 15

Under the Standard Conditions of Sale, what are the seller’s options when the buyer does not comply with a notice to complete?

Answer 15

1. Rescind the contract2. Retain deposit3. Claim damages 4. Resell property and5. Claim compensation as set out in the Standard Conditions for Sale

Question 16

Under the Standard Conditions of Sale, what are the buyer’s options when the seller does not comply with a notice to complete?

Answer 16

1. Rescind the contract2. Reclaim deposit with interest at the contract rate 3. Claim damages and4. Claim compensation as set out in the Standard Conditions for Sale

Question 17

What other remedies are available for pre-completion breaches, depending on the breach?

Answer 17

1. Specific performance2. Compensation by way of damages3. RescissionNote: Specific performance can be sought together with claims for rescission and damages, but the claimant would have to decide which option to pursue by the time of hearing.

Question 18

In the event of delayed completion or failure to complete, what damages may the innocent party make a claim for?

Answer 18

A standard claim for damages based on:* losses flowing naturally from the breach plus * reasonably foreseeable consequential lossesThe innocent party is entitled to be placed, so far as possible, in the position they would have been in had the contract been performed. When calculating damages, credit must be given for any deposit funds forfeited by the seller.

Question 19

Pre-completion, where a seller is claiming damages from a buyer, what is the limit on what can be claimed, and what is the effect of this?

Answer 19

Difference in value between contract price and value on resale, so if the resale value is higher, a claim for damages against the original buyer will not be available

Question 20

What are the two meanings of ‘recission’?

Answer 20

• An order of court to put parties back in a position as if the contract had never existed, which is made when there is fraud, misrepresentation, or mistake and * The innocent party’s acceptance of the repudiation of the contract when the defaulting party breaches a major term of the contract.

Question 21

Under the Standard Conditions, in what two situation is rescission available pre-completion?

Answer 21

1. Misrepresentation because of an error or omission2. Landlord’s consent to assignment is not forthcoming

Question 22

One of what two conditions must be met to rescind a contract for misrepresentation under the Standard Conditions pre-completion?

Answer 22

1. Element of fraud or recklessness2. Party is substantially different from what the innocent party expected to take, to their detriment

Question 23

What is misrepresentation?

Answer 23

A false statement of fact made by one party or their agent that induces the other party to enter into the contract and, as a consequence, suffer loss. * Misrepresentation can arise both before and after completion e.g. lying in PIF* The remedies available for misrepresentation depend on the type of misrepresentation (i.e. fraudulent, negligent or innocent).

Question 24

What is fraudulent misrepresentation?

Answer 24

Fraudulent misrepresentation involves deliberate dishonesty, that is, the statement was made knowingly or recklessly as to whether it was true or false. * The remedy is to sue for damages and rescission of contract. * The party alleging fraudulent misrepresentation must prove the fraud, which is not easy, so these claims are not common.

Question 25

What is negligent misrepresentation?

Answer 25

• Negligent misrepresentation is a careless statement which turns out to be untrue.* The remedy is to sue for damages and/or rescission of contract.

Question 26

What is innocent misrepresentation?

Answer 26

• An innocent misrepresentation is a statement that was a genuine mistake, made innocently. * The remedies are rescission or damages in lieu of rescission, the claimant cannot claim both.

Question 27

What is misdescription?

Answer 27

An error in the property particulars of the contract, e.g. the estate held, or the size of the property* If significant, it will entitle the innocent party to rescind the contract and claim damages. * Example: seller overstating the size of the property by 40%

Question 28

What must be true of the misdescription to allow damages or rescission pre-completion?

Answer 28

It must be significant

Question 29

What claims can be made for remedies after completion?

Answer 29

• Breach of title guarantee (damages is only remedy)* Misrepresentation

Question 30

What are the three classes of title guarantee for freehold property and how might a claim for breach arise?

Answer 30

• Full title (the most common title guarantee)* Limited title (provided to PRs or trustees) and * No title. If seller gave a full title guarantee but after completion a superior title holder contested the buyer’s title, the buyer might be able to claim a breach of the title guarantee.

Question 31

What are the additional title guarantees given by a seller of leasehold property to the buyer?

Answer 31

• That the lease is valid and subsisting and * That there is no breach of covenant rendering the lease liable to forfeiture (although this is commonly modified by the contracting parties).