Auction of leasehold house – Last minute amendment to catalogue affecting nature of title to be transferred – Seller’s landlord taking misconceived forfeiture proceedings – Seller serving notice to complete – Seller rescinding on expiry of notice period – Buyer claiming that seller disabled from serving notice by reason of threat from landlord and other matters relating to title
The claimant council were leasehold proprietors of a dilapidated house in London SE27, the registered title being shown as a good leasehold title. The council put the house up for auction in February 1996, at which time the lease had 32 years unexpired. The auction was attended by the defendant who, before bidding, took note from a sheet attached to the catalogue that the property was leasehold and not freehold as had been printed. The defendant bought the house for £44,500 and paid a 10% deposit. The contract incorporated the standard conditions of sale (3rd ed) in so far as these were not at variance with the general conditions, which in turn gave way to the special conditions. Addenda to the catalogue prevailed over conditions of every description. Special condition 3 declared that the vendor would sell with full title guarantee. Special condition 2 stated (incorrectly) that the title was freehold registered with “title absolute”. The completion date was 19 March 1996.
In a letter to the defendant’s solicitor dated 20 March 1996 the council agreed to postpone completion to 29 March 1996; however that date passed without further progress. On 4 April 1996 the freeholder served on the
council a schedule of dilapidations requiring remedial work estimated to cost more than £40,000. Having received a copy of the schedule, the defendant made various attempts to negotiate a reduction in the purchase price. On 14 August 1996 the freeholder served a notice under section 146 of the Law of Property Act 1925 calling for the disrepair to be remedied. On 18 September 1996 the council wrote to the defendant, communicating their refusal to lower the price, and informing the defendant (correctly) that the freeholder’s notice was invalid for failure to comply with the requirements of the Leasehold Property (Repairs) Act 1938. The letter invited the defendant to approve an enclosed a draft form of transfer which purported (incorrectly) to convey the property “with Limited Title Guarantee”. On 16 October 1996 the freeholder issued a writ claiming possession and damages. On 11 November 1966 the council served a notice under Standard condition 6.8
requiring the defendant to complete within 10 working days. On 18 November the freeholder, accepting that its earlier proceedings were misconceived, served a fresh section 146 notice in the proper form. The defendant again attempted to negotiate a price reduction; however, on 3 February 1997 the council wrote to say that the contract was rescinded and the deposit forfeited.
In subsequent High Court proceedings the defendant, claiming that the contract remained on foot, challenged the validity of the completion notice on the ground that the council was itself not ready able and willing to complete at any material time. The defendant relied, inter alia on the threat posed by the landlord,and further contended that the note attached to the catalogue had not operated to remove the word “absolute” from Special condition 2, with the result that the council was committed to furnishing a grade of title higher than that shown on the register.
Held: The council were entitled to rescind.
1. The validity of the notice had to be judged at the date when it was served: see Lee v Olancastle unreported 8 July 1987 per Millet J. By Standard condition 3.2.2, a leasehold property was sold subject to any subsisting breach relating to its physical state which rendered the lease liable to forfeiture; accordingly the defendant could not complain about the state of repair as such. Nor could the defendant complain about the landlord’s writ, because without prior compliance with the statutory formalities it could not operate as a forfeiture.
2. The defendant could not rely on the incorrect reference to the council’s title contained in the draft transfer, as the the responsibility for drafting the transfer lay on the defendant (standard condition 4.1.2). In any event nothing had occurred to prevent the council from honouring its full title guarantee on completion.
3. The amendment to the catalogue had left it unclear as to how special condition 2 was intended to operate. In those circumstances there was nothing to disturb general condition 5, whereby the buyer was deemed to buy with full notice of the contents of the register.
4. If the freeholder’s action had been properly commenced , it would disabled the council from completing in accordance with the contract, regardless of its chances of obtaining relief from forfeiture: see Re Stirrup’s Contract [1961] 1 WLR 449; Pips (Leisure Productions) Ltd v Walton [1980] 2 EGLR 172. Nor would the council have derived any assistance from Ivory Gate Ltd v Spetale [1988] 2 EGLR 43.
Robert Hantusch (instructed by Steele & Co) appeared for the claimant; Elizabeth Ovey (instructed by Anthony Gold Lerman & Muirhead) appeared for the first defendant.
Alan Cooklin, barrister
