Contracts to purchase land may be conditional upon providing proof that the buyer has in place all the requisite finance to fund the acquisition. What exactly does this mean – especially in the context of a potential subsale?
The answer will, of course, depend upon the precise wording of the contract in question and the amounts involved, but the decision in Beasant v Lexicon Holdings Ltd [2006] EWHC 3160 (Ch) provides us with valuable guidance that will assist practitioners in such cases.
A letter from a firm of solicitors confirming that they hold the requisite funds might well suffice, as might a banker’s letter confirming that sufficient funds are available to finance the transaction; the judge would have been satisfied with either in Beasant. However, a letter from a firm of solicitors confirming that they have been instructed by a company that has “reserved funding to purchase the site” is unlikely to satisfy a contractual requirement for proof of funding. It did not satisfy the judge in Beasant, even though the letter was written by a reputable firm of solicitors and the company concerned was known to have millions of pounds at its disposal.
Interestingly, the judge went on to say, although he did not need to decide the point, that he could readily understand that the initial purchase might be a component in a back-to-back transaction, and that the proof of funds required in the case of a subsale to a third party would have been proof of the funds available to the ultimate purchaser.
Allyson Colby is a property law consultant
Contracts to purchase land may be conditional upon providing proof that the buyer has in place all the requisite finance to fund the acquisition. What exactly does this mean – especially in the context of a potential subsale? The answer will, of course, depend upon the precise wording of the contract in question and the amounts involved, but the decision in Beasant v Lexicon Holdings Ltd [2006] EWHC 3160 (Ch) provides us with valuable guidance that will assist practitioners in such cases. A letter from a firm of solicitors confirming that they hold the requisite funds might well suffice, as might a banker’s letter confirming that sufficient funds are available to finance the transaction; the judge would have been satisfied with either in Beasant. However, a letter from a firm of solicitors confirming that they have been instructed by a company that has “reserved funding to purchase the site” is unlikely to satisfy a contractual requirement for proof of funding. It did not satisfy the judge in Beasant, even though the letter was written by a reputable firm of solicitors and the company concerned was known to have millions of pounds at its disposal. Interestingly, the judge went on to say, although he did not need to decide the point, that he could readily understand that the initial purchase might be a component in a back-to-back transaction, and that the proof of funds required in the case of a subsale to a third party would have been proof of the funds available to the ultimate purchaser. Allyson Colby is a property law consultant
