Purchaser challenging validity of vendors’ notice to complete – Purchaser relying on undischarged local land charge and alleged presence of squatters on premises – Vendors claiming that they were able and willing to remove both impediments before completion – Whether contract terms varied covenant otherwise to be implied by Law of Property (Miscellaneous Provisions) Act 1994
At an auction held on 23 October 1995, the claimant bought for £255,000 a council-owned property with the benefit of planning permission for conversion into five self-contained flats. The auction particulars had advised bidders that the site was open and that the property could not be secured. The contract specified 20 November 1995 as the completion date and incorporated the national conditions of sale (20th edition) and various general and special conditions. By special conditions 3 and 4, the vendor sold with full title guarantee and with vacant possession on completion. Special condition 12 warned the purchaser that the property might be subject to unlawful occupation, and provided that in such case the vendor would commence possession proceedings and effect completion within four working days of being able to give vacant possession. By general condition 11, the purchaser took subject to all matters discoverable on making local searches and inquiries.
In a letter to the council dated 6 November 1995, the claimant’s solicitors called for evidence of the removal of a local land charge that had been entered in 1987 to secure £437.74 (plus interest) expended on local authority works.
The claimant was unable to complete on the completion date. On 24 November, while the council were considering certain proposals for a delayed completion, the claimant’s solicitors informed the council that the claimant had found squatters on the property, and commented that the council would presumably be taking eviction proceedings. In January 1996, following a report from its officers that there was no sign of squatters, the council, believing the squatter allegation to be a device to avoid completion, served a notice pursuant to national condition 22 requiring the claimant to complete within 16 working days. During the notice period, the council took further steps to ascertain that no squatters were present. The notice expired on 8 February 1996. On the following day the council rescinded the contract and declared the deposit to be forfeited. The property was resold on 20 February 1996 for £230,000.
In January 1998 the claimant brought proceedings for the recovery of his deposit and damages for wasted expenditure, contending that the council had been in no position to serve a notice to complete because they: (i) were unable to give vacant possession; (ii) had failed to answer the claimant’s requisition relating to the charge; and (iii) had failed, by reason of the charge, to show good title. As regards the charge, it was argued that the council were, in effect, seeking to use general condition 11 as a means of obliging the claimant to take the property with the charge. The council counterclaimed for damages amounting to the difference between the two prices obtained at auction.
Held: The claim failed and the counterclaim succeeded.
1. The presence of the charge did not disentitle the council from serving their notice to complete. General condition 11 had to give way to the full title guarantee given by special condition 3, which, by virtue of section 3 of the Law of Property (Miscellaneous Provisions) Act 1994, contained an implied covenant that the property was free from all charges and incumbrances. The evidence left no doubt that the council intended to convey free from local land charges and would have done so had the matter proceeded to completion. The removal of the charge was, accordingly, not a matter going to title, but a conveyancing matter which would be dealt with in the normal course of practice on or before completion: see Emmet on Title (19th edition) paras 5.001E, 5.0077, 5.078, 7.008.
2. Even if proved, the presence of squatters would not have disabled the council from serving the notice, as a breach on the council’s part would only have occurred if they had failed to give vacant possession on completion: see Emmet (supra) para 8.011. In this respect, it was necessary to distinguish a legal impediment (for example an undisclosed tenancy) from a potential physical impediment capable of remedy on or before the completion date.
Peter Kirby (instructed by Armstrong & Co) appeared for the claimant; Alan Tunkel (instructed by Steele & Co) appeared for the defendant.
Alan Cooklin, barrister
