A claim in proprietary estoppel requires a promise or encouragement of an expectation of an interest in land, not an expectation that a formal contract will be entered into.
The High Court has considered this issue, rejecting a claim to acquire a hotel in Pathway to Relief and another v Ali and another [2024] EWHC 1284 (Ch).
The case concerned an attempt by members of the Kurdish community in Birmingham to acquire the Farcroft Hotel in Handsworth to convert it for use as a community centre with prayer rooms.
The hotel was owned by the second defendant, Your Best Properties Ltd, and the negotiations were conducted by its sole shareholder and director, the first defendant, Shvan Ali, and by Aram Mohamad Ali on behalf of the community. Pathway to Relief was an unincorporated association formed by Aram with other members of the community to be a focus for charitable purposes.
An oral agreement was reached for the sale of the hotel to the community for £1.65m on 31 March 2021, with completion to take place within 18 months to allow the community time to raise the funds. A deposit of £300,000 was agreed, and two payments totalling £150,000 were subsequently paid in cash and recorded in writing. The keys were released to Aram on 1 April 2021. Subsequently, the claimant company, Pathway to Relief, was incorporated.
Relations quickly soured. The keys were returned on 29 June 2021 and the community excluded from the hotel. The Pathway company subsequently claimed specific performance of the transfer of the hotel by proprietary estoppel.
An oral agreement for the sale of property is ineffective because it falls foul of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires such a contract to be in writing incorporating all agreed terms. The deposit deeds, which merely evidenced the contract, were insufficient.
The claim in proprietary estoppel failed. Aram admitted that in order to acquire an interest in the hotel a formal contract would be required, with the remainder of the deposit payable upon exchange. So the expectation was of getting a contract, not an interest in land. What the claimants really wanted was the benefit of the agreement reached on 31 March 2021 allowing them 18 months to raise the funds to purchase the hotel for £1.65m. They were relying on proprietary estoppel to enforce the terms of an ineffective oral agreement. The identity of the purchaser was also unclear since the claimant company was only incorporated after the oral agreement was made.
Louise Clark is a property law consultant and mediator
