Parties often enter into contracts subject to the satisfaction of certain conditions. In property transactions, such conditions often relate to physical investigations, or to certificates or approvals that must be obtained before a transaction proceeds.
The standard conditions of sale incorporated into most contracts for the sale of property provide that, if landlord’s consent is required for the assignment of a leasehold title, the date fixed for completion will be postponed in the event of any delay in obtaining a licence to assign (and incorporate a right for either party to rescind if consent is not forthcoming by a long stop date). However, parties sometimes find it necessary to insert additional conditions to deal with other eventualities and there are many different ways of drafting such provisions.
British Overseas Bank Nominees Ltd v Analytical Properties Ltd [2015] EWCA Civ 43; [2015] PLSCS 38 concerned the sale of a shopping centre. The parties exchanged contracts three days before the date fixed for completion, conditionally upon obtaining licences to assign in respect of the leasehold titles. However, the buyer also required emergency lighting certificates, confirming that the emergency lighting in the shopping centre was in good working order. Consequently, the contract included a clause requiring the seller to produce such certificates “as a pre-condition to completion … as soon as practicable … and in any event prior to the date of actual completion”. Actual completion was defined to mean completion of the sale and purchase, whether or not this took place on the contractual completion date.
It took the seller almost a month to test the lighting, and provide the certificates, and the buyer claimed damages for late completion. The buyer argued that the “pre-condition to completion” had been inserted for its sole benefit and made its obligation to complete conditional on the provision of the requisite certificates. The clause was quite separate from the provisions dealing with the postponement of the completion date in the event of any delay in obtaining landlords’ consent. It was not another fault-free circumstance in which completion could be delayed and did not affect the seller’s obligation to provide the lighting certificates and complete on the contractual completion date.
The High Court upheld the buyer’s claim. However, the Court of Appeal has reversed the decision. The pre-condition had been imposed for the buyer’s benefit and it alone could choose whether to waive or enforce the provision. However, unless waived, the condition continued to operate in accordance with its terms.
The clause operated as a general pre-condition to completion. In addition, the requirement to produce the certificates before “actual completion” was consistent only with it being contemplated that this date might be later than the contractual completion date. Therefore, the pre-condition affected both parties’ obligation to complete and not just the buyer’s. Consequently, the seller would be liable in damages only if it had failed to provide the certificates as soon as was practicable, which was an issue that had yet to be tried.
Allyson Colby is a property law consultant
