In troubled times, a purchase ‘off plan’ can be risky, as a recent case that arose after a contractor went into administration illustrates.
In 2007, a developer contracted with a number of people to sell flats that it was building in Birmingham. The flats were due to be completed by the end of April 2009. The prospective buyers paid deposits in the usual way. However, in 2008 the contractor retained by the developer went into administration and work on the development ceased.
Work recommenced later, but the necessary ground works and other enabling works were not completed until April 2010, by which time the prospective purchasers had already notified the developer of their intention to withdraw from their purchases. The development was eventually finished in April 2011.
The developer refused to refund the deposits and served notices to complete their purchases on the putative buyers.
The matter reached court, where the decision turned on whether or not the prospective purchasers were entitled to treat their contracts as having been repudiated by the developer, allowing them to reclaim their deposits.
The claim that the contracts were repudiated was based on the implied term that the flats would be ready for occupation within a reasonable time and the express term in the contracts requiring the developer to use ‘all due diligence’ to arrange the completion of the flats.
The court decided that the time taken to complete the work was not reasonable. The failure to progress was the fault of the developer, which had procrastinated over recommencing the work when the original contractor went into administration. This was a breach of the requirement to use all due diligence to complete the project.
For most contracts, time is not ‘of the essence’ unless specifically stated to be so. However, this does not mean that an unreasonable delay in completion of a contract will not be regarded as breaching it.
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