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Rushing Into Property Purchase Proves Costly

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

People often complain about the length of time it takes to complete property deals. However, one Court of Appeal case, in which a contract for sale was signed on the spot after only brief consideration, strikingly shows why property purchase is a serious business which warrants careful deliberation. 

A couple attended a ‘sales fair’ in respect of a large hotel development in which long leases of individual rooms were being marketed. Whilst the woman was looking after their children, the man signed a contract to purchase one of the rooms for £315,000 and paid a £1,000 deposit. Over the following two years, he paid a total of £78,500. However, the sale fell through because he could not raise a mortgage to complete the transaction. The seller retained the sums paid on account. 

The couple launched proceedings to recover the money and, finding in their favour, a judge ruled that the contract was invalid. Although the man had purported to sign it on the woman’s behalf, he had done so without her explicit or implied authority and she had in fact had no knowledge of the transaction. 

In ruling on the seller’s challenge to that decision, the Court agreed that the woman had neither agreed to, nor impliedly ratified, the man’s conduct in purporting to sign the contract on her behalf. However, in upholding the appeal, the Court found that the contract was binding as against the man. It was expressed to place joint and several obligations on the couple and the man’s agreement to execute it was not conditional on the woman likewise signing it. 

Mark Brown, head of property at DFA Law, commented that “It is seldom wise to enter into a contract to purchase a property without having done the appropriate legal searches and other due diligence work and without ensuring that any necessary finance is in place.”

 

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