In the January edition of Property Update we considered the case of Chinnock v Hocaoglu.
In that case, the buyer of a property failed to complete on the contractual completion date. The seller therefore served a notice to complete. The buyer tendered the completion monies on the last day for completion under the notice. However, the monies did not include an amount in respect of the seller's legal costs, which the buyer was obliged to pay under the contract.
The High Court held that the buyer had not tendered the correct amount and that the seller was not obliged to complete. Since time was now of the essence, and the deadline for completion had expired without the buyer re-tendering the right amount, the seller was entitled to rescind the contract and forfeit the deposit.
This decision has now been overturned by the Court of Appeal. On construing the contract, it found that it was not a condition of completion that the legal costs be paid as part of the completion monies. Under the contract, various sums were payable in addition to the balance of the purchase price. In relation to most of these sums, it was specified that they were payable "upon completion". However, the clause in respect of legal fees simply said: "The purchaser will be responsible for the legal costs incurred by the vendor… being £500 plus VAT …".
The Court of Appeal ruled that the difference in the language of the two provisions meant that the buyer did not have to pay the legal fees as a condition of completion. If the relevant clause was to have that effect, it should have done so clearly, rather than leaving the timing of payment open to doubt. It would have been easy to do this, following the precedent of the other clause.
Things to consider
The buyer in this case had a lucky escape, based on some loose drafting. It is essential that completion statements are carefully checked by both parties to the transaction as well as by the lawyers involved, to ensure that nothing is overlooked. This is particularly important where completion is late, with the result that compensation is payable. Where time has become of the essence for completion, the consequences of remitting insufficient funds, coupled with the time taken to transfer monies through the banking system, could mean that the other party is entitled to rescind the contract.