Buyers would be well-advised to ensure that development contracts specify both a target and a long-stop date for completion of construction work
A well-drafted contract for the construction and sale of a building will contain provisions dealing with commencement of the construction work, and its subsequent progress, because English law does not impose any statutory requirements on builders that dictate the pace of construction.
Completion is usually triggered by the service of a notice confirming that construction is complete. Some contracts require the builder to pay liquidated damages if completion has not occurred by a specified date (although most contracts contain provisions relieving builders from liability for delays beyond their control). Another important provision is the “longstop date” – the date by which construction must have been completed, failing which the buyer will be entitled to rescind.
These terms are carefully negotiated in commercial transactions. However, there is less room for negotiation in the residential market place. Most house builders produce standard form contracts, which require them to complete the building work in a good and workmanlike manner and to certain standards. Many such contracts specify that the building work will be completed “within a reasonable time” and do not include any provisions enabling the buyer to withdraw and to recover their deposits when delays become unreasonable.
Urban I (Blonk Street) Ltd v Ayres [2013] EWCA Civ 816; [2013] PLSCS 159 concerned a dispute about the rights of a buyer and seller in relation to an apartment that was sold “off-plan”. The contract did not set a date for completion of the building work. Consequently, it was an implied term of the contract that completion of the construction work, and subsequent completion of the contract for sale, would take place within a reasonable time and, because the contract did not expressly state when that was and what should happen in the event of any delay, the question of whether the buyers were entitled to terminate the contract as a result of the delay that occurred fell to be decided in accordance with the general law of contract.
It was originally envisaged that the development would be finished by December 2008, but it was not completed until 31 July 2009. The buyers wrote to the sellers in March 2009, purporting to terminate the contract for unreasonable delay (without having served any prior notice calling on the seller to finish the work and complete the sale), and then refused to complete in accordance with the seller’s own notice to complete, which was served in September 2009. Which one of the parties was in the wrong?
The Court of Appeal decided that the seller had not been in repudiatory breach of contract in March 2009. It acknowledged that the delay must have been irritating, but applied Ampurius NU Homes Holdings Ltd v Telford Homes (Creekside) Ltd [2013] EWCA Civ 577. The buyers had contracted to take a 125-year lease and the delay had not been sufficient to deprive them of substantially the whole of the benefit of the contract, or even a substantial part of it. It followed that they had not been entitled to terminate the contract when they did. Consequently, the seller was entitled to forfeit their deposit and to claim damages for their breach of contract.
Allyson Colby is a property law consultant
