Action for specific performance of contract of sale of house with an abatement of the purchase price–House advertised for sale with vacant possession of ground floor but subject to a tenancy of the first floor–Notice under section 19 of Housing Act 1961 that house was to be occupied by one family only–Notice not disclosed to plaintiffs by defendants, but no allegation of concealment or fraud–Meaning of ‘vacant possession’–Not merely vacant physically, but available for occupation and enjoyment–Ground floor not available for occupation owing to Housing Act restriction–Specific performance ordered in purchasers’ action with abatement of £1,000 in purchase price of £3,850
In this action
the plaintiffs, Topfell Ltd, who had contracted to purchase a house at 9 Donald
Road, West Croydon, sought a decree of specific performance subject to an
abatement of the purchase price against the defendants, Galley Properties Ltd,
the vendors.
N B Primost
(instructed by Rayner & Co) appeared on behalf of the plaintiffs; J R Reid
(instructed by Armstrong & Co) represented the defendants.
Giving
judgment, TEMPLEMAN J said: This case revolves round the meaning of the words
‘vacant possession.’
In May 1976 Mr
Firster, a director of the plaintiff company, received auction particulars
relating to the house 9 Donald Road, West Croydon. On inspection, he found a
tenant on the first floor and he found that the ground floor was unoccupied. He
telephoned the local authority and was told that the house was situate in an
improvement area but he was told nothing else. He attended the auction on June
9 1976 but the house was withdrawn; apparently, it did not reach the reserve
price. Mr Firster then attempted to negotiate by private treaty, but what he
thought the place was worth did not accord with what the vendors thought and he
lost interest.
After that, by
a notice dated June 24 1976, the Croydon Council served on the owner of the
house and on the house itself notice under section 19 of the Housing Act 1961
whereby they directed that the house should only be occupied by one household.
I find that the defendants knew about this notice. Subsequently, they never
disclosed it to the plaintiffs when they became interested again, but it is
right to say that there is no allegation of concealment or fraud. Exactly what
happened I do not know and it is immaterial, but it probably was accidental.
In January
1977 Mr Firster noticed that, unusually, the house was up for auction again. He
is a man who is experienced in property dealing and buying and renovating and
exploiting generally. He said that it was unusual for a house to come up a
second time for auction. He read the particulars and went to look at the house
again, but he could not get in because the first-floor tenant was out. But, as
far as he could see, the situation and state and condition of the house were
exactly the same as they had been when he had been there the previous year. He
again took the precaution of telephoning the local authority, but was not told
about the notice under the Housing Act or given any other information which
might have deterred him from buying at auction. He says he did not make a
personal search against the local land registry or make personal inquiries
because, in his experience, it was a waste of time to do so. Either he would
have been given very sparse information or he would have waited a long time to
no good purpose. He did not make a requisition for written searches because
there was no time between the date he received the particulars and the date of
the auction for him to get the replies back. He says he took the precautions
which he usually takes and which usually stand him in good stead.
The second
auction took place on January 27 1977, but the property was again withdrawn,
the reserve price not being reached. After the auction Mr Firster again thought
it worth his while to offer to negotiate by private treaty and he offered
£3,500. The auctioneer, after taking instructions, asked for £3,850. Mr Firster
demurred and thought that was on the high side, but the auctioneer said that it
was good value; where else could you get part possession? Eventually, Mr Firster agreed to pay £3,850
and signed a contract on behalf of the plaintiff company. As is usual in these
matters after the auction, he signed the contract at the back of the auction
brochure which incorporated the particulars which had been distributed for the
purposes of the auction. At that stage, Mr Firster thought that he would have
to spend about £1,400 on the property and then he could do one of two things.
Either he could lease the ground flat for 99 years or, if this was not possible
or desirable through shortage of money or something of that sort, then he would
let the ground floor on a furnished tenancy to students or other persons who in
his judgment, and he was an expert in these matters, were not likely to be
other than temporary occupants. Thus, when the tenant of the first floor, a
lady whom he knew to be about 60 or 65 as he thought, living on her own, left
or died, then or shortly thereafter he hoped to get vacant possession from his
furnished tenants and sell the house with full vacant possession. In that
event, there is no doubt he would have made a handsome profit.
Mr Firster
knew what he was about, gave evidence very clearly and I accept his evidence.
However, after Mr Firster had signed the contract on behalf of the plaintiff
company, he went to see the house again and he found pinned to the inside of
the front door a copy of the notice under the Housing Act. His solicitors at
once took up the matter with the vendors’ solicitors and there the matter lies.
The plaintiffs now sue for specific performance with an abatement of the
purchase price and that action is defended on various grounds. In the
alternative, the plaintiffs ask for damages for breach of contract.
The
particulars of the auction which were incorporated in the contract and which
were seen by Mr Firster and
his visit, after setting out that it was a freehold terraced house, set out the
accommodation which is two rooms, a kitchen and a separate wc on the first
floor and three rooms, a scullery, outside wc and gardens front and rear. It
continues:
The first
floor is let to Mrs E E Hiscock at a rental of £3.70 per week inclusive. . . .
and then, in
bold black typing in capital letters, it says:
WITH VACANT
POSSESSION OF THE GROUND FLOOR.
Then it gives
various other pieces of information which are not material.
In these
circumstances it is rightly conceded that the vendors became contractually
bound to give vacant possession of the ground floor. In the first place, the
particulars say so and, in the second place, the special conditions of the
contract say the property is sold subject to the tenancy mentioned in the
particulars of sale. That, to my mind, reinforces the view that they were
contracting to give vacant possession of the ground floor. One of the present
conflicts is whether the defendants are contractually able to give vacant
possession of the ground floor pursuant to their contract. The defendants say
that all that vacant possession of the ground floor means is that it is empty
and that, physically, there is nothing to stop the plaintiffs from entering it.
The plaintiffs, on their part, say that vacant possession of the ground floor
is a contractual requirement on the vendors which binds the vendors to deliver
the property in a state in which it can be enjoyed. Vacant possession, they
say, is the right to occupy and enjoy the property either by the purchaser
himself or by his tenants or licensees.
In my
judgment, the plaintiffs are right about this. The meaning of the words ‘vacant
possession’ can, I think, vary from context to context, but the background to
this case is that, to all outward appearance, the house consisted of two
separate occupations. To all outward appearance, the ground floor was capable
of being occupied by the owner or his tenants and licensees. When the contract
boasted that vacant possession of the ground floor would be given, it was saying
that the great advantage of this property is that you can occupy the ground
floor. In my judgment, when the vendors said they would give vacant possession
in the context of these particulars in this contract and in the context of this
property, the vendors cannot now say, ‘Oh, no; all we intended and all we
contracted to give was the right to possession in the negative sense. There is
no rubbish on the floor, no other tenants and nobody else was there. It was
vacant.’
I have come to
the conclusion that the vendors were contractually bound, on completion, to
hand over the ground floor in a condition which would allow the plaintiffs to
occupy it. It is quite plain that at the date of the contract and at the date
fixed for completion, the vendors cannot do that because, by reason of the
Housing Act direction, in fact, nobody can occupy the ground floor. The vendors
cannot occupy it themselves, they cannot sell it to somebody who wishes to
purchase it in order to go and live there himself and they cannot let it.
To deal with
the legal points first, Mr Reid submitted that even if the contract and the
particulars did bind the vendors to give possession in the sense of handing
over property which could legally and rightly be occupied, they are excused by
the General Conditions of Sale and by the Special Conditions of Sale. The
General Conditions of Sale on which he relies state in the usual form that the
purchaser shall buy subject to any notices, whether registered or not. General
Condition 9 says that the purchaser shall be deemed to have made local searches
and inquiries and to have knowledge of matters that would be disclosed thereby
and shall purchase subject to such matters. Mr Reid says that if the purchaser
had in fact made local searches and inquiries there would have come to light
the direction imposed under the Housing Act. Special Condition 10(15) provides
that the purchaser shall be deemed to purchase subject to his acknowledgment
that the contract is not entered into in reliance upon any representation
whether written or oral made but not contained in its contract and he says that
the statement in the particulars was a mere representation. Finally, he points
to General Condition 10, which provides that the property is believed to be
correctly described and no difference or discrepancy in the quantity or
description shall entitle the purchaser to be discharged from his purchase nor
shall the vendor or purchaser be allowed any compensation in respect thereof.
In my judgment,
these Special and General Conditions cannot be allowed to contradict the
contractual obligation into which the vendors entered by virtue of the
particulars and the contract, the contractual obligation to give vacant
possession, in the sense in which I have defined it, of the ground floor to the
purchasers.
If there was a
breach of contract, what is the appropriate remedy? The defendants called a valuer who gave
evidence that the property was in 1977, in his view, worth £4,500. He gave
evidence that, in his view, the property was worth about that sum whether it
was subject to a direction under the Housing Act or not. He says that if he had
been advising a purchaser, he would have allowed him to bid on the terms that
he would have to spend a little money in drawing up plans but then he would
have been able to get the Housing Act direction lifted and, at the same time,
to get planning permission for the first floor and the ground floor to be used
as two separate occupations. He says that the plaintiffs have no real
grievance. First of all, they bought a bargain for £3,850 instead of £4,500
and, secondly, the imposition of the Housing Act direction did not make any
difference.
The
plaintiffs’ valuer takes a different view. He says that the house was worth what
it was sold for, namely £3,850. I find that it was. The defendants, who I
gather dabble in property and have a manager, who gave evidence, of perhaps
some 26 years’ experience of property, chose to put the property up for auction
not once but twice. They themselves now say through counsel that it would have
been better to have sold by private treaty and they would have got the higher
price which their valuer stated. I am not prepared to disregard the plain
evidence that the defendants, who were not in this business philanthropically
or ignorantly, did what they thought was right to secure the best price and the
best price they could get was £3,850. The plaintiffs’ valuer also says that
there is a very great difference between a property subject to the Housing Act
direction and one that is not, that if the vendors, consistently with their
contract, had been able to deliver vacant possession so that the purchaser
could go into occupation straight away, then the property would have been worth
the sum of £3,850. But, he says, it stands to reason that with a Housing Act
direction, the property was worth a good deal less. In the first place, the
property could not be occupied immediately and, in the second place, the
purchaser would have to spend on repairs and in providing facilities not the
amount that he thought fit or proper or desirable, but the amount which was
necessary to obtain the lifting of the Housing Act direction.
I accept the
evidence of the defendants that it would have been, or it was, possible to get
rid of the Housing Act direction almost certainly–one can never be certain
about these things–and at the same time to get planning permission, but, as the
defendants’ own valuer said, it would require some expenditure and works, which
would in effect be dictated by the local authority instead of being dictated by
the purchaser. The defendants’ valuer says that all that is by the way because
a purchaser would buy and would assess a price on hope value; the hope that the
first floor will fall vacant within the foreseeable future. To get that hope
value, he will have to keep the ground floor vacant anyway.
I do not
accept that view. It seems to me that Mr Firster and other people interested in
property of this sort would want to get some sort of income from the ground
floor in the meantime and that any purchaser would either occupy it himself or
do as Mr Firster planned to do, namely, to set out to tidy up the ground floor
and then either sell it or wait for the upstairs tenant to leave.
It does not
seem to me that it is consistent with commonsense to say that the price which
this property fetched by boasting of vacant possession of the ground floor is
no more than the property would have fetched if, instead, the vendors had
disclosed the existence of the Housing Act direction. The difference between
the two which is the proper measure of abatement is put by the plaintiffs’
valuer at £1,600; it is put by the defendants’ valuer at nil. That poses a
little difficulty because both valuers gave credible evidence; both had some
experience and yet they are poles apart. Because they are poles apart, I have
to make up my mind with very little assistance except the maximum and minimum
figures. £1,600 is a large proportion of the £3,850. In any event, the
plaintiffs knew that they had to spend some money on this property with some
delay while they brought it into reasonable condition and provide facilities.
They might still have to get planning permission and even in what was said to
be a depressed period of 1977 so far as house property is concerned, this is
property in one of the suburbs of outer London.
Whether Mr
Firster would have bought at all, I need not pause to consider. I have to
consider what, he having bought and having wanted to go on with his purchase,
is the sort of price that he might have been willing to pay, or the
hypothetical reasonable purchaser might have been willing to pay, with full
knowledge of the direction under the Housing Act. Having regard to the tenancy
of the upper floor, the fact that it was occupied by one lady of middle age or
more, the fact that the evidence of both sides is that the Housing Act
direction would be lifted or would stand a good chance of being lifted subject
to the expenditure of money, I have come to the conclusion that the
hypothetical purchaser would have paid £1,000 less than Mr Firster did. He
would have been willing to offer £2,850, which is not a great deal of money by
these standards, in the hope of getting vacant possession of the whole in the
long run and in the hope and expectation of being able to make something of the
ground floor even in the short term and even if he might have to spend more
money than he would have otherwise have contemplated. If that is right, £1,000
is the measure of abatement and on the plaintiffs’ alternative submission that
they ought to have had damages for misrepresentation, £1,000 would represent
the damages which would be attributable to any misrepresentation. But, in my
judgment, the plaintiffs satisfy me that the defendants are in breach of
contract, that this is a proper case in which specific performance ought to be
ordered with abatement and that the proper sum for the abatement is £1,000.
The plaintiffs were granted an order for specific
performance of the contract of sale subject to an abatement of £1,000 in the
purchase price and were awarded the costs of the action.
