When one of the parties to a contract for the sale of land is unable to complete the transaction, the parties often blame each other. And the question of who is at fault is extremely important; it governs which of the parties is entitled to rescind and which of them is entitled to pocket the deposit.
Oakley v Harper McKay Developments Ltd [2018] EWHC 3405 (Ch) concerned a property that was ripe for conversion from offices to residential units pursuant to permitted development rights. The sellers contracted to sell the land to a developer for £2,225,000 plus VAT and the parties had agreed that completion would take place on 7 August 2015. However, the developer subsequently asked to defer the completion date to give it more time to secure the funding needed to complete its purchase. The sellers agreed to defer completion by a month in return for a payment of £25,000, which was duly paid. But the transaction was not completed and, following the service of a notice to complete, the sellers rescinded the contract and forfeited both the deposit and the extension fee.
The developer argued that the sellers had not been ready, able and willing to complete when they served their notice to do so, because they were not in a position to assign the copyright in the sellers’ architects’ plans in accordance with the parties’ contract. It also claimed that the sellers had been in breach of contract because they had refused it access to the property, thereby preventing it from securing funding for its purchase.
The court noted that the fact that a completion statement has yet to be prepared will not prevent a seller from being ready, able and willing to complete, because this is an “administrative formality”. But a seller will not be ready if there are matters of substance to be resolved. And an assignment of copyright could not be characterised as an “administrative formality”.
The judge interpreted the obligation requiring the sellers to “assign” the copyright in the plans as requiring them to assign the copyright themselves if they owned it, or to procure the assignment by the copyright owners if they did not. The sellers had sought to comply by supplying letters from their architects granting the developer “a royalty-free, unconditional, irrevocable, non-exclusive license to use and reproduce” their plans and reports. But this was not an “assignment” of the copyright to the developer.
However, the developer had never objected to the grant of a “licence” as opposed to an “assignment”, despite numerous opportunities to do so, and had waived its rights to insist on an assignment, rather than a licence. Furthermore, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 did not prevent the court from giving effect to the waiver: Courtney v Corp [2006] EWCA Civ 518. So the sellers had been ready, able and willing to complete when their notice to complete was served.
Were the sellers in breach of an express or implied contractual term requiring them to grant access to the property to potential funders? The judge ruled that they were not. Furthermore, their refusal to provide access did not cause or contribute to the developer’s failure to complete; the developer had been unable to secure funding on acceptable terms. So the sellers had been entitled to rescind the contract for sale and to retain the developer’s deposit.
Allyson Colby, property law consultant