Property Practice - Delay and Remedies

Question 1

Delayed Completion

Answer 1

• Any delay in the date or time of completion is a breach of contract
• Under standard conditions of sale time is not of the essence unless expressly specified (therefore, a delayed completiion in a usual transaction will not give innocent party the right to rescind the contract)
• Innocent party has right to interest on the outstanding balance calculated at the contract rate (penalty rate of interest inserted into contract) for the number of days that completion was delayed
• Interest is calculated on the purchase price and contents price less any deposit paid
• If property being sold/purchased has tenant in situ the innocent party can elect to take the rental income until completion
• If time is of the essence then the innocent party has the right to rescind the contract (would have to be in the special conditions)
• If completion occurs on the agreed completion date but after the agreed time completion is deemed to have occured on the next working day
• Innocent party also entitled to compensation under the Standard Conditions for Sale
• Notice to Complete

Question 2

Notice to Complete

Answer 2

• Makes time of the essence
• Can be served at any time after completion by a party who is ready, willing and able to complete
• Requires defaulting party to complete within 10 working days of service of the notice (excluding day of service)
• If defaulting party completes in this time frame the innocent party is entitled to interest
• If defaulting party does not complete in this time frame the innocent party has the right to rescind the contract
• If the defaulting party is the buyer and has paid a reduced deposit, on receiving the notice to complete, the buyer must bring the deposit up to the full 10%

Question 3

Non-Compliance with Notice to Complete

Answer 3

If defaulting party is the BUYER

• Seller can rescind the contract
• Re-sell the property
• Keep 10% deposit
• Claim damages for losses

If defaulting party is the SELLER

• Buyer can rescind the contract
• Re-claim deposit with interest at contract rate
• Claim damages

Question 4

Deposit held as Agent

Answer 4

Typical when buyer purchasing a new-build property

Question 5

Deposit held as Stakeholder

Answer 5

Makes it easier for seller to re-claim deposit if buyer defaults on completion

Question 6

Remedies: Before Completion

Answer 6

If completion date has been missed and has not yet taken place:

• Specific performance: compels defaulting party to complete (not available unless damages would be insufficient, in transactions for land damages are unlikely to be sufficent due to the uniqueness of land)
• Damages: if innocent party has incurred losses due to breach (e.g. incurring additional legal fees, alternative accommodation)
• Rescission: permitted when there has been a misrepresentation because of an error or omission and when a licence to assign is not forthcoming

Question 7

Remedies: After Completion

Answer 7

Completion has taken place but there is a breach afterwards

After (or before) completion

• Misrepresentation: rescission
• Misdescription: error in property particulars in the contract (e.g. saying property is freehold when it is actually leasehold) - innocent party has right to rescind contract

After completion:

• Breach of title guarantee covenants: remedy is damages (additional title guarantees given on the sale of a lease - lease is valid and substisting and there is no breach of covenant rendering lease liable to forfeiture)

Question 8

Damages: Before Completion

Answer 8

• Based on losses flowing naturally from the breach and reasonably foreseeable consequential losses
• To put innocent party in position had contract been performed

Calculating damages:

• Credit given for any deposit funds forfeited by the seller
• Innocent seller limited to recovering the difference in value between the contract price and price on re-sale (if re-sale price is higher solicitor should advise seller to retain buyer’s deposit rather than seek damages)

Question 9

Recission: Before Completion

Answer 9

Misrepresentation because of an error or omission:

• There must be an element of fraud or recklesssness; or
• If the innocent party took the property it would be substantially different to the property they expected to take (to their prejudice)

Question 10

Misrepresentation

Answer 10

• Fraudulent Misrepresentation: involves deliberate dishonesty - remedy is to sue for damages and rescind contract (innocent party must prove the fraud)
• Negligent: a careless statement that turns out to be untrue - remedy is to sue for damages and/or rescind contract
• Innocent: a mistake made innocently - remedies are rescission or damages in lieu of rescission, claimant cannot claim both
• Misdescription: error in the property particulars - if this is significant the innocent party can rescind the contract and claim damages