Second thoughts: Pulling out of a house purchase

21 June 2012

Buying a house is always said to an extremely stressful experience for most people. Being the biggest purchase most people will make, it is inevitable that occasionally, some people might have second thoughts. However, backing out of a property purchase isn’t always possible, or at least not without some major consequences. Depending on the stage of the sale process, it may not even be possible at all.
There are a number of cases which point to this. A case from 2010, involving a group of family members who were purchasing a number of flatted properties in a development by a company called Museum Hall. Between four members of the Snowie family and six flats, they had committed to spending over £1.9 million, paying sizeable deposits in the process. They each decided that they wished to back out of the sale. The reason given was that there were conditions in the title – burdens - that prohibited carrying out trade or business in the flats.  The Snowie’s argued that not only did this place a restriction that was too onerous on any residents of the flats, but it could also prevent the Snowie’s renting the properties out at all, as letting them could be seen as carrying on a business in itself. They said the rules were too unusual and that therefore, they were entitled to resile from the missives - meaning to back out of the contract of sale.
However, the court disagreed. Such conditions are common, and indeed many developments contain such rules, and in this instance it would be difficult to see how the rules would strike at the average homeworker. Generally, there needs to be a clear material detriment to the neighbours in order for such burdens to be enforceable. An example was given where an artist works from home, painting and occasionally taking calls from his agent. This, it was said, would not cause material detriment to the other residents, nor would a professional person taking home a briefcase full of work. It was also not the case that the rules would prohibit commercial letting of the properties, and whilst applying a wide interpretation of the rules could result in commercial letting being caught, the court said that a stricter view needed to be taken and it was unlikely that the wider view would result in the proper construction of the rules. Unfortunately for the Snowie’s, they had to pay up.
Whilst title conditions that at first reading appear vague clearly have to be approached in a common sense manner, servitudes are more definite. Lack of clarity regarding access rights and a potential ongoing dispute may be a valid reason for purchasers to resile. In the case of McLennan v Warner & Co from 1996, the purchasers of an upper flat resiled from missives on the basis of just such a servitude dispute. The flat on the ground floor should have had access to the rear garden; this was provided for by a servitude in their title. However, the access route had been built upon by previous owners of the upper flat who had constructed a garage. The then owners of the ground floor flat had neither agreed nor tried to prevent the construction that had effectively extinguished their servitude right of access. The sellers solicitors had failed to take this into account when acting for the seller. Here, it was decided that the purchasers were entitled to resile, even though missives had been concluded. It would not have been unreasonable to expect the purchasers to go ahead whilst a dispute of this nature was ongoing. When in this circumstance the title to the property is said to be ‘unmarketable’, it is unlikely that a purchase could be forced upon buyers who wish to back out.
What if there is no valid excuse for backing out? A buyer could find that they are financially liable for the amount the seller has lost out on.
If you are looking to buy or sell a property, Inksters are experienced in all aspects of conveyancing and can advise you on the potential issues that could arise. Contact Brian Inkster or Louise King at our Glasgow office.

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