Conveyance remedies when the other party seems reluctant to complete the transaction

REMEDIES

Suppose you are a lawyer acting on behalf of one party in a transfer transaction, but the other party to the contract is markedly reluctant to complete the sale. This could be for a number of reasons, for example the buyer has changed his mind about buying the property or the seller has found a buyer willing to pay much more. What can you do as a lawyer advising the innocent party to compel completion?

1. Force completion of an unwilling party

(a) Specific Performance – This is an order granted by the court and is used against the seller when the seller refuses to execute the deed of purchase. The court has the power to order a third party to execute the deed on its behalf.

A deed for specific performance may be requested as soon as the day set for performance has passed, whether or not time is of the essence and notice to complete has been delivered or not.

Of course, it is not as useful against a penniless buyer since the court cannot force a sale when the buyer has no money.

Specific performance is a discretionary remedy. However, it is virtually available by right when it comes to land due to the unique nature of any property. An applicant denied the decree may receive damages on the spot. Supreme Court Act, 1981 s. fifty

(b) Notice of Termination: This is a notice given after the set date for termination has passed without termination occurring. As long as one of the parties is still ready and able to complete, then that party can send a notice to complete to the other party. Notice makes time of the essence, which means that if there is further default, the innocent party can withdraw from the contract entirely (such recourse is expressly provided in Standard Condition (SC) 7.4 of the Standard Conditions 5th Edition Law Society 2011) . When can the notification be made? Under the standard conditions, the completion of the sale is 20 business days after the exchange of contracts or any other date as stipulated in the contract. The open contract position if time is not of the essence and there is no stipulated completion date is that notice should not be given until there has been unreasonable delay. If time is of the essence, the innocent party can terminate the contract immediately. However, deciding whether time is of the essence or what is unreasonable delay is a matter of fact and therefore subject to uncertainty, so an open contract position should be avoided. Another advantage of the standard conditions is that if the buyer has not paid a deposit upon notice to complete, they must pay 10% immediately, so this provides a broader remedy, as well as certainty as to when can deliver notice. . A notice to complete is generally used by a seller against a buyer when specific performance is not appropriate. The threat of being sued for damages for failure to give a notice to complete will often persuade a reluctant buyer to proceed.

2. Remedies for Delayed Completion

(a) If time is of the essence, then withdraw.

(b) Compensation for delay

(i) The open contract position is that any delay is a breach of contract (though not necessarily one that entitles the innocent party to break the contract). The injured party is entitled to compensation, for example, the cost of finding temporary accommodation. In calculating loss, the rule is that the injured party is entitled to be put in the same position they would have been in if the termination had occurred on time. Thus the seller would have accrued interest on the purchase price and the buyer who has been deprived of occupancy can collect less benefit.

(ii) Open contract rule

– if the delay is the fault of the buyer, then no monthly rent applies

– if the delay is the fault of the seller and the rent exceeds any interest, then the buyer does not have to pay interest

(iii) Generally, however, compensation for delay is covered by a term in the contract. Under SC, the fact that the party has been unable to complete due to a delay by the other party at some earlier stage of the transaction is recognized. Under SC7.2, you look at the stages of the transaction as a whole to determine who caused the delay and how long it lasted, and then the most at-fault party pays interest at the contract rate on the balance of the purchase price, either for the default period or the delay between contract completion and actual completion, whichever is less. Steps are taken to offset contractual damages from any common law damages if such a claim is made or to take the rental in place where the buyer is in occupancy.

(iv) Interest rate

– SC 1.1.l (e) stipulates that, unless otherwise agreed, it is the Law Society rate in force from time to time

– a special condition can alter this

(v) Notice to complete – see above.

However, please also note that SC7.4 deals with remedies available to Seller due to Buyer’s failure to comply with a notice. These include losing the buyers deposit with interest; resell the property; and damages.

SC 7.5 deals with buyers’ remedies when the seller is unable to comply with a notice. The buyer can rescind and get their deposit back plus interest and still retain the right to sue for damages.

3. Reasons for withdrawal from the contract

Rather than force the termination, the innocent party may want to back out entirely. What are the available lands?

(a) Termination of the contract due to a defect in its formation, for example, undue influence. This means that the parties must return to their pre-contract position. So the buyer gets his deposit back and the seller gets the property back. Accompanied by a claim for restitution and compensation, that is, the reimbursement of expenses such as aborted legal costs.

(b) Termination for false statement. If the misrepresentation was not fraudulent, the court may refuse to allow the termination and award damages instead. (Misrepresentation Act 1967 s.2(2)). The open contract position is that termination for misrepresentation may be accompanied by a claim for damages if the misrepresentation was fraudulent or negligent. Termination is still available even after termination, unless a third party has acquired rights or there is trust and it is now impossible to restore the parties to their pre-contract position.

SC 7.1 modifies the open contract position. Only get rescinded if there is misrepresentation. There must be willful intent, recklessness, or obtaining materially differing property before it can be terminated. Otherwise, only get damages and only if there is a material difference in value, description or content.

s.3 The Misrepresentation Act 1967 makes any exclusion clause subject to a reasonableness test.

(c) Termination under a contractual right, eg SC7 for failure to comply with a notice to complete or special condition.

(d) Choose to treat the contract as terminated due to the other party’s breach of contract. This is only possible if the offense is serious,

for example, a major misdescription

-lack of displaying a good title

-existence of an undisclosed lien

-any delay if time is of the essence -failure to give notice of completion.

This may be accompanied by a claim for damages for breach of contract.

4. Damages for breach of contract

Damages are calculated based on the Hadley v. Baxendale, that is, the plaintiff may recover loss which naturally arises from the breach or which was a loss that could reasonably be presumed to have been contemplated by the parties at the time of the contract as a probable result of the breach.

examples

(a) If termination never takes place, due to a serious breach of contract, damages could be

For the buyer (B)

• trading loss, ie the difference between the contract price and the highest market value on the date of default

• Transfer costs and other expenses in the purchase of a new property

• Alternative accommodation in the meantime

• possibly loss of profit, for example, when P knew that B could develop a property

• if there is no trading loss, then handover costs are wasted.

To the seller (S)

• loss of the bargain difference between the price that would have been paid and any lower price actually achieved on resale

• if there is no loss of deal, then the costs of the canceled rollover transaction

b) If completion goes through, there could still be a breach of contract that entitles a party to damages, so that, for example, the buyer could claim a reduced purchase price if they discover an undisclosed lien or misdescription before completion.

An action for damages for breach of contract generally cannot be brought after termination. However, the buyer can sue under an express provision in the contract that entitles him to compensation for misdescription, even after completion. For example, SC 7.3 and don’t forget the right to terminate under the Misrepresentation Act.

5. Loss of deposit

If the lack of completion is due to the seller’s default, the buyer is entitled to a return of the deposit and, if paid to the seller or seller’s agent, has a lien on the land to recover it. If due to the buyer’s default, the seller may lose the deposit, regardless of whether he actually suffers a loss, subject to the discretion of the court to order the return of the deposit under LPA 1925 s.49(2). But if the seller claims damages, the lost deposit is taken into account.

6. An undisclosed lien that only comes to light after completion

(a) Unregistered title only. Compensation can be obtained from the Head of Land Registry if the buyer is adversely affected by a pre-estate land charge.

(b) A share may be under title agreements.