June 24, 2015

Buyers beware – two things you need to know when buying a property

There have been a number of cases recently where a party to the sale has, for one reason or another, not completed on time. In these cases, the Law Society’s Standard Conditions of Sale incorporated into the Sale Agreements set out the ramifications of this for the non-completing party. These can, however, be varied by agreement between the parties.

The Standard ramifications include:

1. a right to interest calculated by reference to the purchase price,
2. a claim in damages for breach of contract designed to put the innocent party back into the position as if the breach had not occurred,
3. the right for a notice to complete to be served giving the defaulting party 10 days to complete;
4. failing which, there is an option for the innocent party to accept the breach, rescind the contract and retain the deposit paid as well as claiming 1. and 2. above.

The forfeiture of the deposit can be challenged but in very limited circumstances. There may be other options available which may be more appropriate for example if there is a chain.

The case of Hardy v Griffiths [2014] EWHC 3947 (Ch) is a clear reminder to buyers of the risks of failing to complete, but also for failing to get a full survey before exchange of contracts and properly considering replies to pre-contract enquiries.


Here, Mr and Mrs Hardy accepted an offer of £3.6m from Mr and Mrs Griffiths. Contracts were exchanged very quickly and a deposit of £150,000 was paid. The Standard Conditions of Sale were amended to allow for 10% of the purchase price to become payable if the buyer failed to complete on the agreed date.

The date was missed. By agreement it was extended but then missed again.

The seller served a notice to complete but the buyers again failed to complete and the sellers rescinded the contract and claimed the balance of the deposit.

The buyers refused to pay and counterclaimed that the sellers had recklessly misrepresented to them as to the condition of the property (there was damage due to rising damp and dry rot costing over £500,000 to rectify) and as a result they had suffered loss and damage.

The Court applied the ‘buyer beware’ principle meaning that the buyers accepted the property in the condition that it was in at the date of the contract and reiterated that there was no onus on the seller to disclose any physical defects but for the buyer to find them.

The buyers had chosen not to get a full survey before exchange. Had they done so, the terms of the sale could have been renegotiated to reflect the defects or they could have pulled out of the sale.

The Court also found that having stated that they were not aware of any issues relating to rot or rising damp in the pre-contract enquiries that this was a true answer and there was no evidence that the buyers had even read the replies, therefore no misrepresentation or detrimental reliance.

Consequently, the Court found in favour of the sellers and upheld the contractual terms ordering that the contract was rescinded, the deposit was forfeited with a further sum of £210,000 required to be paid under the agreed default provisions contained in the contract.

This case is a real warning to buyers who choose not get a full survey before exchange, but also a real reminder of the ramifications of failing to complete on time.

A fairly limited outlay could have prevented significant losses being suffered.

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