The Court of Appeal has reserved judgment in a case in which legal technicalities concerning vacant possession defeated the successful sale of a property.
Area Estates is seeking to overturn a High Court decision in which purchaser Graham Weir successfully relied on a technicality relating to the title to the Hertford property that enabled him to avoid having to complete the purchase and to recover his deposit.
In January 2008, Weir bought the £400,000 freehold property at auction with vacant possession. He paid a deposit of £40,000.
However, the register of title for the property included an entry relating to a nine-year lease of the property granted in 2004.
The tenant had purportedly surrendered the lease in 2006, when he was made bankrupt, but notice of the lease had not been removed from the register.
A term in the sale contract stated that the lease, although still included on the register, had been determined by operation of law and that the buyer would “accept the position and shall not be entitled to require any further proof of the determination”.
Weir refused to complete the purchase on the ground that the lease had not been validly surrendered and that this was an encumbrance on the title.
He claimed that a bankrupt could not surrender a lease and that in order to achieve an effective termination it, the tenatn’s trustee in bankruptcy had to disclaim any interest in the lease.
Although Area Estates obtained such a disclaimer from the trustee in May 2008, Weir had already given notice to terminate the contract.
In December 2009, Robin Knowles CBE QC ruled that although Area Estates’ case was “commercially persuasive”, the surrender agreed with the bankrupt tenant was void and he accordingly decided in favour of Weir.
Appealing against that decision, Mark Loveday, for Area Estates, said that Weir’s argument was “deeply unattractive… in reality, the respondent simply wants to back out of a sale where (with hindsight) he thinks he paid too much.”
In response, Jane Evans-Gordon, for Weir, said that, in such circumstances, a vendor could not compel a buyer to accept the leasehold encumbrance on the freehold title “because this would be contrary to statute, a breach of the appellant’s covenant to deliver up vacant possession and contrary to principle in that a vendor has an obligation to show good title”.
The Court of Appeal will give its decision at a later date.
