The Gazette 1992

GAZETTE

JULY/AUGUST 1992

Law Reform Commission Reports

on Land Law and Conveyancing

Law (LCR 39, 40 -1991) £6.00

As part of the Law Reform

Commission's ongoing formulation

of proposals for reform in

conveyancing law and practice two

further Reports have now been

submitted to the Attorney General

and have been published.

1. Passing of Risk from Vendor to

Purchaser

The first report deals with the

passing of risk from vendor to

purchaser. As a lawyer one never felt

comfortable advising a purchaser

that if the property was destroyed

between contract and completion the

law was that he was bound to buy

the charred remains. As the

Commission states in its report "it is

unsatisfactory that the law as to the

passing of risk does not accord with

the reasonable expectations of the

ordinary person."

A few years ago the Conveyancing

Committee of the Law Society did

attempt to address the issue by

providing in general condition 43 of

the Incorporated Law Society

Conditions of Sale that the vendor

would be liable for any loss or

damage to property between the date

of sale and actual completion save

where the purchaser had gone into

possession prior to actual

completion.

While the Commission applauds the

general thrust of these provisions in

the Law Society's Contract it

recognises that all sales of land are

not governed by clause 43 of the

Law Society's Contract and that the

law should be changed by legislation.

Briefly the Commission recommends

that:-

(i) the risk will pass to the purchaser

in all situations where the

purchaser goes into possession of

the premises or on completion of

the purchase whichever is the

earlier;

(ii) where the purchaser does not go

into possession prior to

completion the risk will remain

with the vendor:

(a) in the case of substantial

damage the vendor must give

notice of the damage to the

purchaser whereupon the

purchaser will have the right

to rescind the contract within

10 days. If the purchaser

elects not to rescind, or fails

to do so, he will be entitled to

an abatement of the purchase

price to be assessed on the

basis of the reduction in the

value of the property. If the

purchaser elects not to

rescind, or fails to do so, the

vendor will still be entitled to

seek specific performance

with an abatement of the

purchase price;

(b) where the purchaser accepts

that the damage is substantial,

or it is found on arbitration

to be such, and agrees to

complete or where it is agreed

or held that the damage is

non-substantial the purchaser

is to pay interest to the

vendor on the balance of the

abated purchase price from

the date of the damage or the

agreed completion date,

whichever is the later, up to

the date of actual completion

at a rate equivalent to the

yield on the latest long dated

government security ("the

lower rate");

damage to the property the

purchaser will be bound to

complete but shall be entitled

to damages only on the basis

of reduction in value;

(d) where the purchaser claims

that the damage is substantial

and it is subsequently agreed

or determined on arbitration

to be non-substantial the

purchaser shall pay interest at

4% above the lower rate;

(iii)the vendor would not be liable

for consequential damage arising

from reasonable wear and tear

not materially affecting

value;

(iv) there would also be special

provisions for charging of interest

in the event of damage occurring

after a valid completion notice

had been served by the

vendor;

(v) parties would not be entitled to

contract out of the legislation in

the case of any sale of residential

property where vacant possession

is to be given on closing.

These proposals are to be welcomed

and will hopefully be speedily

implemented. They go further than

the Law Society Contract in that

they spell out the circumstances in

which a purchaser may rescind. At

present one cannot clearly advise a

client as to his rights under contract

in the event of damage. Is he still

bound to complete after the vendor

has made good the damage,

complete subject to abatement of

price or is the contract frustrated

allowing him to rescind? These are

questions which are never easy to

answer. Under the Commission's

proposals there would still be room

for argument as to whether the

damage is substantial or

insubstantial. However, the

provisions regarding interest may

compel the parties to reach a fair

and quick settlement of the matter

on the hopefully rare occasion

damage is caused to the property

between contract and

completion.

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