House of Lords ends three-year battle over homes development near Harrods
The old adage “my word is my bond” could become a thing of the past in property after the House of Lords ruled that deals are not fixed until a written contract is in place.
On Wednesday, the House of Lords overruled the Court of Appeal at the final stage of a three-year dispute between Irish property developer James Cobbe and Yeoman’s Row Management – the owner of a block of flats close to department store Harrods, SW3.
The pair were battling over a £5m compensation award made to Cobbe by the high court in 2005, and upheld by the Court of Appeal in 2006, on the basis of a verbal agreement.
Cobbe had agreed in 2002 to pay Yeoman’s owners, Robert and Zipporah Lisle-Mainwaring, £12m for the property. He also pledged to pay half the uplift in value achieved once he had won consent to demolish the 11-flat block and replace it with six terraced houses. However, Yeoman’s reneged on the deal after consent had been won.
The Lords ruled that although the actions of Yeoman’s were “unattractive”, the gentleman’s agreement was non-binding.
Nicholas Cheffings, head of property litigation at Lovells – which was not involved in the case – said: “The message that comes out of this is that people in the industry need to be very wary about entering into commitments on the basis of a handshake. If terms are not properly documented, the courts may be reluctant to step in and stop one of the parties from walking away. In the present climate, those who have such deals would be advised to check whether they are sufficiently protected.”
Cobbe will now only receive a sum – to be assessed by the high court – for the time and effort that he put into securing consent.
