North Eastern Properties Ltd v Coleman & Anor

A contract for the sale of land is not rendered void under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 merely because a separate arrangement was not included, where the parties intended that arrangement to stand outside the contract. An express completion mechanism governs when the contractual completion date arises. Until the seller has served the specified notice that the property is complete and ready for occupation, the buyer cannot invoke the contractual notice-to-complete machinery. Delay may nevertheless amount to repudiatory breach at common law if it goes to the root of the contract, but the breach must be sufficiently serious. A notice expressing an intention to rescind if a future breach occurs does not itself constitute a valid election to rescind.

The claimant agreed to sell the defendants 11 flats under contracts providing for completion within ten working days after notice that the flats were complete and ready for occupation. The contracts recorded an 8% discount, while the parties had separately discussed a further 2% payment described as a finder’s fee.

The defendants served notices to complete before the claimant had served the contractual completion notice and later contended that the claimant’s delay entitled them to rescind. They also argued that omission of the 2% arrangement breached section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The claimant sought specific performance.

1. Section 2 challenge. The 2% finder’s fee arrangement was not a term of the sale contracts. The defendants had expressly instructed that it should be dealt with separately, and the contracts contained an entire agreement clause. The omission therefore did not make the contracts void under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The court applied the reasoning in Inntrepreneur Pub Co v East Crown Ltd [2000] 3 EGLR 31 and Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] EWCA Civ 622 ([52]–[57]).

2. Completion and delay. The claimant had breached its obligation to construct the flats with all due dispatch. However, the contracts were not open contracts. Clause 1.12 expressly defined completion by reference to the claimant’s notice that the property was complete and ready for occupation. Since no such notice had been served by 23 May 2008, the defendants were not entitled to serve contractual notices to complete on that date ([59]–[65]).

3. The delay did not amount to repudiatory breach. There had been no earlier complaint about delay, and the claimant had indicated that completion was expected within about four weeks. The defendants therefore had no right to terminate on that basis ([65]–[68]).

4. Obiter, if a valid notice to complete had been served, the amendment to condition 7.6.2 would not have excluded rescission for a repudiatory breach. Failure to complete within the ten-day period would make time of the essence, and condition 7.6.3 preserved the buyer’s other remedies ([70]–[76]). The defendants had in any event not validly elected to rescind: their letter stated only what they would do if a future breach occurred ([77]–[80]).

5. The contracts remained in force. Judgment was given for the claimant, which was entitled to specific performance ([80]–[81]).