Failing to give full details of a defect in title to a property is not a ‘technicality’, even if it is temporary, according to the Court of Appeal.
The case arose because a property, which was sold at auction, had a defect in its title. The buyer had contracted to acquire the property with vacant possession. The sale documentation referred to there being a lease connected with the property, but stated that it had been surrendered under common law. There was also a condition in the sale document that prevented the buyer from insisting on proof of the surrender of the lease.
In the event, the lease had not been validly surrendered and the buyer sought to rescind the contract for purchase on the ground that there was an encumbrance to the title and no guarantee of full title was available.
However, by the time the buyer had taken steps to rescind the contract, the vendor had in fact obtained the termination of the lease. The buyer still refused to complete and demanded the return of his deposit.
The Court took the view that while the contract prevented the buyer from confirming the surrender, there was nothing which stopped the buyer from taking issue with the fact that the vendor was unable to give an unencumbered title at the completion date. This was not a technicality, as the vendor argued.
The buyer was therefore within his rights to rescind the contract.
Says <<CONTACT DETAILS>>, “The case would probably have been differently decided had the vendor made clear in the special conditions of contract the nature of the defect in the title. It is important to make sure that contracts are drafted to ensure that the disclosure in them is sufficient to prevent them being set aside.”
Partner Note
Area Estates Ltd. v Weir [2010] EWCA Civ 801.