The dilemma of delayed completion - .PDF file.
By Edward Glass and Teresa Edmund
A contract for the sale of commercial property will stipulate a completion date at which point the buyer is contractually obliged to transfer the balance of the purchase price, and in turn the seller is required to deliver the executed transfer deed. There is, however, no guarantee to a seller that the buyer (or vice versa) will complete on that date. The risk of default has been evidenced in the economic downturn where some buyers have sought to avoid meeting their contractual obligations. In the main, it is the buyer who is the defaulting party, although not always, and for the purposes of this article, we assume that the seller is not at fault. What are the options available to a seller in such circumstances? This will depend in part on how the contract is drafted and the individual circumstances of the case.
If a buyer fails to complete on the completion date, this will amount to a breach of contract, entitling the seller to bring a damages claim for any loss suffered as a result of the delay. Furthermore, if completion is delayed, and the contract incorporates provision 9.3 of the Standard Commercial Property Conditions, the seller is entitled to compensation from a defaulting buyer. This sum is calculated at the ‘contractual rate’ on the purchase price less the deposit, without the need to first make a claim in court. These remedies are not mutually exclusive. However, if damages are awarded as well, any previous compensation received is likely to be set off against that amount…
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