Defendant tenant exercised right to buy — Purchase price provided by plaintiff in return for tenant’s agreement to sell property to him at same price — Completion to be five years later — Tenant refusing to complete — High Court making order for specific performance — Judgment for plaintiff
In 1977 the defendant moved into 4 Chichester Road, London NW6, which was owned by Brent LBC. He was a secure tenant. The Housing Act 1980 conferred on him the “right to buy” the freehold at a discount price. It also provided that the discount had to be repaid if the property was resold within five years. On July 30 1984 the freehold was transferred to the defendant for £22,500. The money was provided by the plaintiff and it was agreed that upon the defendant’s acquisition of the freehold, he would then contract to sell the property to the plaintiff at the same price (ie £22,500). Completion of the sale to the plaintiff was to take place five years later in 1989. In the meantime the defendant was to continue to occupy the house rent free. The defendant refused to complete the sale agreement and remained in possession. The plaintiff commenced proceedings for specific performance of the agreement. The defendant joined as third party the firm of A Nicolaou & Co, who acted for both plaintiff and defendant in the transaction.
Held The order for specific performance was made.
1. On the evidence it was clear that from the outset the defendant had agreed to sell the property to the plaintiff. The sale agreement which the defendant signed properly reflected the essentials of that agreement; the solicitor explained to the defendant the essential nature of the sale agreement before he signed it; and the defendant understood its nature when he signed it.
2. On the evidence the allegations of fraudulent misrepresentation also failed.
3. The defendant was not strictly in a like position as the owner, and proposing vendor, of a freehold property: he was only in a position in which he had an opportunity to exploit his right to buy. In the circumstances it was not appropriate to view such right as giving the defendant the commercial equivalent of the bargaining power which he would have had if he had been the owner of the property and were looking for a purchaser. It was not appropriate to attempt to assess the relative merits of the bargain by reference to whether the defendant sold the property to the plaintiff at an undervalue.
4. The appropriate approach was to consider what the defendant was trying to achieve and what it was he did achieve. His objective was to trade his right to buy in exchange for accommodation. He duly achieved that object and it was far from manifest that the particular arrangement he made was to his material disadvantage. The claim of undue influence failed.
5. There was no implicit context in the 1980 Act which justified the court in holding that it was contrary to the policy of the Act and illegal for a tenant who exercised his right to buy immediately thereafter to settle the house on trusts which gave an immediate beneficial interest in the house to others. The Act said no such thing expressly and, in the absence of the clearest indication in the Act, that a transaction of this nature was illegal, there was no warrant for holding that it was.
6. The court made the order for specific performance, but would order that no transfer should be executed until the plaintiff granted the defendant a written license for life to occupy a designated room, rent and expenses free.
Anthony Radevsky (instructed by Judge Sykes & Harrison) appeared for the plaintiff; Patrick Talbot QC and Glenn Campbell (instructed by WR Bennett Emanuel & Co) appeared for the defendant; Patrick Lawrence (instructed by Wansbroughs Willey Hargrave) appeared for A Nicolaou & Co, third party.