Over Taylor Biggs

When this was discovered in June 2008, the seller insisted that he would only transfer the property to the buyer.  The sub-buyer then withdrew, as there had been no exchange of contracts for the sub-sale.  The buyer was then not able to complete the purchase.

The buyer complained that the seller had improperly refused to transfer the title directly to the sub-buyer.  The seller served a notice to complete and the buyer rescinded the contract because of the seller's breach.  The seller then in turn rescinded the contract because the buyer had failed to complete and forfeited the buyer's deposit. 

The buyer sued to recover his deposit.  The seller claimed he was entitled to refuse to transfer to the sub-buyer because it was in breach of the standard conditions for sale.

The Court held that in the absence of a contractual provision otherwise, the buyer was entitled to require his seller to transfer the property to a third party of the buyer's choosing.  The buyer could therefore ask for the property to be transferred directly to the sub-buyer.  The standard conditions in this case did not alter that position. 

The Court noted that the standard commercial property conditions for sale contain an additional clause expressly prohibiting sub-sales.  The Court concluded that in drafting commercial standard terms, it was commonplace for the seller of commercial property to want to exclude the possibility of a sub-sale.  However, those preparing the conditions for residential property had not reached the same conclusion.  The residential conditions contain no express prohibition.

It is still open to a seller, even if the non-commercial or standard terms are adopted, explicitly to exclude a sub-sale and therefore bring it in line with the commercial conditions of sale.

On this basis, the buyer had been entitled to rescind the contract because of the seller's refusal to transfer the property to the sub-buyer.

In addition, the seller had failed to obtain a written licence for the assignment of the lease to the original buyer within three working days before completion (again to accord with the standard conditions of sale).  Therefore the buyer, additionally, had been entitled to rescind the contract.  The buyer was therefore entitled to the return of his deposit.

If, therefore, the possibility of your buyer sub-selling the property is of concern, the important lesson is to proscribe that.  To do so expressly is probably best but if not to ensure that the relevant provisions of the commercial standard conditions of sale are imposed rather than the residential.

Pittack v Naviede (High Court June 2010)